What is Omnichain Fungible Token ? Omnichain Fungible Token is a product in Omnichain, the concept was born to solve all limitations of communication and interaction between Blockchains. From there, products such as Blockchain Omnichain, dApp Omnichain, Token Omnichain, Non-Fungible Token Omnichain were born.
In this article, I will introduce to you the Omnichain Token standard called Omnichain Fungible Token (OFT).
What is Omnichain Fungible Token ?
OFT, fully written as Omnichain Fungible Token, is an Omnichain Token standard released by LayerZero . With this Omnichain Token standard, the Token will be compatible with all chain other Off-Chain .
Because LayerZero is not a separate Blockchain but it is just a communication protocol, the dApp's Token will be issued on a root chain and can use the Omnichain Fungible Token standard to bring it to all Chains.
New projects can Token Issuance under the Omnichain Fungible Token standard to send Token to Omnichain. Especially Stablecoins or Multichain Governance Token are using this standard a lot. Stablecoin projects like Lybra also integrate the OFT standard for Stablecoin peUSD or Liquid Staking projects like Swell bring swETH to Omnichain.
Old projects that have Token Issuance on an original Blockchain can still use this OFT standard to put Token on other chain . This case is very useful for Governance Token of Multichain development projects. With products on multiple Chains, in order to bring users on sub-Chains to participate in Voting, administration on the original chain is too complicated. So projects can use this Token standard to easily Token Migration between Chains or DAO accepts Token on many Chains, meaning Token on any chain can participate in Voting.
LayerZero's OFT Token standard has 2 versions: version V1 and version V2. With version V1, Token are only moved and supported on EVM Chains and this version will have no usage fees. But there will be a Token transfer fee for version V2, this version allows Token Migration on all Chains, including non-EVM.
Mechanism of Action
Token using the Omnichain Fungible Token (OFT) standard will be compatible with connected chain and can only be transferred between Chains. When moving, Token will be burned on the source chain and new Mint on the destination chain . This is very convenient because there is no need for liquidation, the fees are very cheap and the original Token of the project is used, significantly reducing the problem of liquidation Shard .
Advantage
- Multi- chain issuance: Omnichain Token are compatible with multiple chain , helping Multichain development projects easily operate and be able to bring assets in the source chain to the destination chain for use.
- Moving between chains without connection: Token will be moved across chain quickly and simply without liquidation or price slippage.
- Original assets: Assets issued on chain are original assets so there is no liquidation Shard .
- Cheap fees: Thanks to using the Mint-burn mechanism and LayerZero's infrastructure, Token transfers only cost very cheap network fees.
Defect
- Security: Security is the biggest risk because this Token standard uses a bridge. If the bridge is hacked and a lot of these Token are Mint , the Token will no longer be valid and the project will collapse.
- Liquidation Shard : Although not using wrappers, it will reduce liquidation Shard . But when sending a Token to multiple chain , the original amount of Token is divided across the chain.
Summary
The Omnichain Fungible Token (OFT) standard is the most used Omnichain Token standard at the present time. This Token standard helps increase the applicability of multi- chain dApps and opens up the development of many new products for the market.
So, I have clarified about Omnichain Fungible Token (OFT). Hope the article brings a lot of useful information!
The post What is Omnichain Fungible Token (OFT)? New Standard for Chain Token appeared first on HakResearch .
