Road To Full Decentralization
In order for users to have confidence in the value of a wrapped asset, there should be a high level of verifiable certainty that at any point in time they will be able to trade the token they are holding with the collateral in a reserve.
In the first step towards decentralization, the end user will have to place some trust in Celsius to not undercollateralize a wrapped token. However, any such actions would have full visibility to the community by the nature of Blockchain, meaning even without built-in safeguards, all such actions are auditable.
Moving beyond this step, an Oracle service will then be implemented which publishes reserve data between the target and native chains. With this information stream, overminting and withdrawing without burning sufficient tokens, even by Celsius, will be prevented. At this step, all minting and burning will also be automated, where each action is triggered by deposit and withdrawal conditions on the native chain. In this way, all guards relying on keys will be removed. However, fully decentralized minting and burning still isn't possible in this phase, with all actions needing to be done through some designated address until message passing is implemented.
The end goal for wrapped assets is decentralized access, where a user can deposit and withdraw on the native chain and would have tokens minted and burned on target chains. This process requires the target chains to know which address to mint for, which Chainlink will provide with their Cross Chain Interoperatibility Protocol (CCIP).
Copy link