Deeper Dive

Smoke is built on a cross-chain lending protocol underneath. To make it feasible, it has the following characteristics:

1. Off-Chain Tracking

To Prevent Double Spending

In order to offer instant cross-chain loans, we facilitate borrowing from an off-chain issuer. An off-chain issuer will have a birds-eye view of a user's position across chains and is incentivised to not approve loans exceeding a user's credit as it would be their own capital.

2. Passive Lending

To Maximize Returns

Issuers are required to manage their cross-chain inventory but are not required to lock unused capital into Smoke contracts at all times. For example, if there is low demand to borrow on a chain, they can park their capital on AAVE to keep earning yield, but should do it on the same chain for instant lending.

3. Locked Collateral with Forced Withdrawal

To Prevent Users from Rugging with Debt

A user shouldn't be allowed to withdraw their collateral while having debt on other chains. So the user needs the issuer's approval to withdraw their collateral or they can withdraw by proving that they haven't borrowed above limits on other chains via cross-chain messaging.

4. No Messaging While Borrowing

To Offer Low Latency

One of the reasons why Smoke is instant and cheap is because there's no need for cross-chain messaging when users are spending. Cross-chain messaging is only required during forced withdrawals or during liquidations.

5. Accounts Managed on One Chain

To Manage Spenders & Limits

Base acts as a place where users can manage credit limits on different chains with an account ID that is used to borrow on different chains.

6. Repay From Any Chain

Because Otherwise Smoke Doesn’t Make Sense

A user must repay on the chain they borrowed by using solutions like Socket that allow batched repayments in a chain abstracted manner. Or a CEX can make repayments really easy if they're the issuers.