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A Deep Dive Into Clover Finance

Published date: April 6 2021
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What is Clover?

If you are used to playing around with DeFi, you might notice that DeFi a.k.a Decentralized Finance is not “Decentralized” yet. If you are using the Ethereum network, you can only participate in the platform which is built on the Ethereum network. If you are using the Polkadot network, you can only participate in the platforms inside the Polkadot network. The problem is you can’t move your asset or join with other people on the other network. What happens if you are holding your ETH tokens in your wallet on the network of Ethereum then you realize something big, something huge is coming to the Polkadot network. Let me show you what you have to do to participate in the Polkadot network:

  1. Move your assets to Centralized Exchanges.
  2. Click on the trading pair of ETH/DOT. Trade your ETH token in return of DOT token.
  3. Withdrawn your DOT token to your wallet so that you can have some fun with DeFi on DOT network.

Let’s do some math! The first step will cost you about 10-20$ on Gas fee. The second one will cost you ~1% of your total asset. The third one will cost you another 5-10$ for withdrawn. Now can you see how expensive it is?

So… to fix this problem. We will need a technology called a two-way peg (2WP) between blockchain. This is how two-way peg works: 

  1. Your token in blockchain A got locked.
  2. Your wallet in blockchain B receives an amount of token equal to the amount of your locked token on blockchain A.
  3. If you want to move back to blockchain A. Use a two-way peg to lock your token on blockchain B so that your token on blockchain A will be released.

Sounds amazing, right? But there is one big problem. This two-way peg technology is based on “TRUST”. What happens if a two-way beg system on the blockchain B got dishonest or hacked? This can happen because sometimes the hash rate of blockchain B is not as strong as blockchain A. If this thing happens, it will be a huge domino collapse. To make Web3.0 dream come true, things should be based on logic and computing, not “TRUST”.

Clover is building a foundation layer for DeFi applications to seamlessly operate. Clover aims to reduce the development threshold for upper-layer applications, facilitate a gasless transaction layer to simplify user experience for non-crypto users, and provide a wide range of developer tools from identity-based scripting capabilities to built-in cross-chain interoperability. Clover will put together a large user base and different projects into a one-stop open and integrated financial service platform on Polkadot, using the Substrate framework. Clover will compete to join as a parachain for Polkadot to achieve a high level of interoperability, and to become a digital finance portal and DeFi service provider on Polkadot. Apart from the foundational layer itself, Clover is building various cross-chain wallet implementations from desktop to mobile, allowing users to interact with DeFi applications from various front ends.

Problems that Clover solves: 

Skyrocketing Gas Fee:

With its $47.54 billion total value locked until now, representing a year-to-date growth of more than 65x, decentralized finance (DeFi) has become a mainstay in the crypto world, and a whole new industry in itself. However, the Ethereum DeFi frenzy is seemingly cooling down recently. According to CoinTelegraph, most ETH DeFi tokens are corrected by anywhere between 15% to 85%. Meanwhile, the total TVL increase rate of Ethereum DeFi projects is gradually falling.

In terms of the reasons, most potential retail users are scared off by the skyrocketing Gas fee on Ethereum whereas existing users are often frustrated by the low network efficiency. According to Glassnode, despite fluctuations, the daily transaction fees on ETH is demonstrating an overall climbing trend since early July. On Sep 17, the daily transaction fee volume recorded All Time High at around $17 million at that day’s price.

While the cost of making a simple Ether transaction multiplied, interacting with DeFi contracts requires jaw-dropping handling fees, sometimes even higher than the transaction amount itself. As of the time of writing, making an ETH to DAI swap requires $10 in Gas fee on Uniswap, $12 on SushiSwap, and $14 on Balancer.

Ethereum 2.0 & Polkadot:

As pointed out by many industry insiders, even with a complete upgrade and PoW to PoS mechanism migration, Ethereum 2.0 may not be the ultimate answer to the high Gas fees and congestion problems. Hence, Clover looked for the perfect solution and found the answer in Polkadot. To tackle the current challenges in the Ethereum DeFi ecosystem, Clover is developed based on Substrate, the foundation of the Polkadot network.

As a sharded multichain network, Polkadot is able to process many transactions on several chains in parallel, eliminating the bottlenecks that occurred on legacy networks that processed transactions one-by-one. This parallel processing power significantly improves scalability and creates the right conditions for increased adoption and future growth. With Polkadot and Substrate, Clover is able to realize low gas fees and high-speed trading experience for its users.

Meanwhile, the Substrate framework and Polkadot parachain technology facilitates anonymity and makes the seamless verification process a reality. Clover also implements oracles, which are used to fetch trusted off-chain data to be included in the on-chain state and enable lending, borrowing and more.

The Most Characteristic Features of Clover:

Clover has one core feature that makes Clover really “Clover”. It is SPV Simulation Technology.

1. Clover’s SPV Simulation Technology:

To achieve a new-level of a trustless 2WP system, Clover created a model called built-in SPV chain simulation technology to enable trustless two-ways pegs between turing-complete and non-turing-complete blockchains.

Contrary to popular belief, an EVM can verify Bitcoin transactions directly, by enforcing some standards and dissecting Bitcoin transactions and block headers.

Clover is building advanced tools and opcodes to simplify the overall process for third-party developers. This is so that Clover can natively inspect a Bitcoin or Ether transaction without storing/checking the entire external blockchain history, allowing trustless two-way pegs for Bitcoin and Ether. Bitcoin and Ethereum transactions are both included in a Merkle tree, whose block header contains the root of the Merkle tree for that block’s transactions. Given a header and a transaction, Clover can validate a merkle path from the root to the leaf that holds the transaction, which is called the Merkle-based inclusion proof. This means that Clover only needs the base layer block header, transaction, and its inclusion proof to be stored in the Clover contract.

This is how SPV works: 

  • A user willing to peg-out some BTC or ETH sends funds to a predetermined covenant/contract address that escrows funds for further peg-ins, along with any respective proof data Clover needs for verification.
  • Clover verifies an outside transaction inside a smart contract. This part is a quick run-through of transaction components, to ensure the caller isn’t trying to sneak through fake content.
  • Clover then can verify that the transaction is included in a block by checking a Merkle proof of inclusion, then checking each block references the previous one, and then calculate the total Proof of Work spent to make that chain.

 

2. Other features of Clover:

Beside SPV Simulation Technology, Clover has other 4 features:

EVM Compatibility:

Clover is a powerful smart contract platform that enables Ethereum developers and projects to migrate their contracts onto Polkadot. By minimizing the changes required to run existing Solidity smart contracts on the new network, Ethereum projects can simply replicate their dApp and deploy it to Clover using MetaMask, Truffle, Remix, and other familiar developer tools. Clover EVM is based on Frontier, but the development team of Clover made a lot of changes to support Clover features. Such as:

a. New Gas Estimation Feature:

Clover EVM is based on Frontier, Clover team found out that the gas fee estimation under some cases may fail, such as nested smart contract calls. Clover provides a binary search based solution to solve the problem. 

b. New EVM Economic Incentives:

In order to make developers easily do the development on Clover.  Clover EVM supports new economic incentives. The smart contract owner will receive partial of the transaction fee once their contracts are called. Details are:

  • Up to 40% of the transaction fee will be sent to the smart contract owner.
  • Up to 60% of the transaction fee will be sent to the miner.

C. Other EVM Configurations:

Clover changes the create_contract_limit from 0x6000 to 0xc000,  trying to reduce the chances that smart contract deployers have to split their big contract for deployment.

Gas-fee Distribution:

Clover incentivizes dApp builders by automatically sharing a percentage of the transaction fees with them. The redistribution will ensure a vibrant developer community and foster an innovative DeFi ecosystem on Sakura and Clover.

Cross-chain Interactions:

Clover comes with various open-source wallet implementations for interacting with cross-chain dApps without navigating between Polkadot based and Ethereum based networks. Users can seamlessly send, receive, wrap and unwrap cross-chain assets across Ethereum and Polkadot trustlessly.

Cross-chain Explorer:

Clover offers seamless multi-chain indexing across Bitcoin, Ethereum, Binance Smart Chain, and Polkadot. Users can search through blocks, transactions, and accounts in all-in one streamlined environment.

Utilities Of CLV Tokens:

The native token of Clover platform is CLV token. This is what you can do with CLV token:

  • Stake to run nodes
  • Participate in consensus and earn rewards
  • Transact on exchanges and marketplaces
  • Earn rewards from platform usage
  • Participate in governance activities for a predetermined set of parameters
  • Elect, vote and gover Clover platform.

Governance

As an open platform, the future of Clover is collectively decided by the whole community. The community can propose, vote, and implement changes through governance smart contracts.

The governance structure is as follows:

  • Proposals: There will implement a proposal mechanism to update system parameters.
  • Voting policy: One token represents one voting power in the voting system. Only token holders can participate in the voting process and they can get rewards once the proposal is successfully complete.
  • Governing parameters: Token holders can vote to set and change parameters in the DeFi environment. The parameters include the percentage of tokens for burning, the percentage of tokens for staking, the number of tokens that a new listing needs to pay, and incentive token release schedule, etc.
  • Contract developments: This involves structural changes in DeFi environments. For example: implementing new functionalities, deploying the protocol on additional smart contract blockchains, and introducing more DeFi elements.

Token Distribution:

Roadmap:

Partner and Cooperator of Clover:

Clover has made some strategic partnerships with other projects to spread their newly 2WP technology all over the crypto industry, The list of strategic partner of Clover until now including: Polkadot, The Graph, Chainlink, Prosper, Dodo, Polygon, Litentry, Advanca, BoringDAO, Injective Protocol, Crust, Showcase, Hedget, Snowswap, ETHA Lend, Bella, Dego, Manta Network, Easyfi, UniLend.

 

Funds and Peoples that invested in Clover:

Team:

Conclusion:

The biggest advantage that technology and internet or social networks like Facebook, Twitter, Telegram or even your smartphone brings to mankind is to help every single human being connect to each other in the fastest, easiest way, even if they are far from each other. So why in the blockchain industry - a new tech industry, we still got separated? Clover is obviously a missing piece to fill in this gap in the crypto industry.