Understand the basic infrastructure of cross-chain lending Soul Protocol in one article.

With cross-chain communication integration, can Soul Protocol break the DeFi lending islands?

Written by: Scof, ChainCatcher

What is Soul Protocol?

Soul Protocol is a cross-chain lending protocol aimed at bridging the gap between existing DeFi lending protocols and different public chains, helping users to more flexibly lend and borrow assets across multiple chains and protocols. Users can perform lending operations across chains using mainstream lending protocols such as Aave, Compound, and Venus on multiple chains like Ethereum, Arbitrum, Optimism, and Avalanche.

The characteristic of Soul is that it does not rely on asset bridging or the issuance of synthetic assets, but instead allows users to directly use native assets for lending through cross-chain communication protocols like LayerZero. This design reduces the risks and costs for users when transferring assets between different chains, while also enhancing the liquidity and efficiency of asset usage.

Currently, Soul is still in the testing phase, open to users for functionality testing, feedback, and experience.

How can Soul break the borrowing barriers?

Currently, the DeFi lending market has several common issues:

Lending Protocol Decentralized

Most existing lending protocols only support a single public chain. If users want to lend and borrow between protocols on different chains, they often need to manually switch chains and bridge assets, which is a cumbersome process.

Cross-chain lending costs are high and the speed is slow

Traditional cross-chain lending usually requires bridging assets, which not only adds extra operational steps but also introduces costs and risks related to asset security. The bridging process itself is also not efficient enough to meet arbitrage or flexible lending needs.

Lending capacity is limited

Due to the fragmentation of assets and borrowing capabilities across different chains and protocols, users often struggle to consolidate all their assets for lending, resulting in reduced capital utilization efficiency.

Soul Protocol attempts to solve the above problems through a unified cross-chain lending infrastructure:

• Users can deposit assets on any supported chain and lend or borrow on other chains or protocols without bridging assets.
• It can automatically match interest rates across different protocols and chains, helping users find lower borrowing rates or higher deposit yields.
• In the lending process, users' assets and collateral capabilities are no longer limited to a single chain and protocol, thus improving overall capital efficiency.
• Supports cross-chain arbitrage, leverage, and other strategies without the need for cumbersome asset movement.

During the entire process, users only need to operate on the Soul interface, while the underlying asset and data synchronization is implemented by cross-chain communication protocols such as LayerZero. To enhance the robustness of the system, Soul also integrates Wormhole, Axelar, and Chainlink's CCIP as backup channels in case of communication disruptions.

Team Background and Current Progress

Soul Protocol is developed by Soul Labs, and the team founder Ahmed S previously developed Hatom. The project has maintained a low profile over the past year and is currently live on the testnet, supporting mainstream chains and lending protocols, and is open for testing and feedback.

The operation of Soul Protocol adopts a community participation and testing incentive model. During the testnet phase, users can earn points (Seeds) by using the dApp and completing designated tasks. These points will be exchanged for the native token $SO of Soul upon the mainnet launch.

Currently, the project has not publicly disclosed external financing information, but is promoting testing and product optimization through community participation. Users can participate in testing to help identify issues, provide suggestions, and receive corresponding rewards.