What is ColorTrace? ColorTrace is a new technology shared by the LayerZero platform with many extremely potential applications. So let’s find out if there’s anything interesting about ColorTrace in the article below.
To better understand ColorTrace, people can refer to some of the articles below:
- What is LayerZero (ZRO)? LayerZero Cryptocurrency Overview
- Series 3: Crypto Unlock | LayerZero And Omnichain Trends
- LayerZero vs ChainLink: Omnichain Battle Between Two Giants
- What is Omnichain Fungible Token (OFT)? New Standard for Multi-Chain Tokens
ColorTrace Overview
The reason for the birth of ColorTrace
Look at a typical example in today’s market of USDC. Circle, the issuer of USDC, has signed an adjustable agreement with Coinbase to share USDC profits based on Coinbase’s contributions to the success of USDC. With this factor, Coinbase has earned nearly $1B per lien thanks to the success and popularity of USDC.
However, the success of USDC is not only the hand of Coinbase but also the participation of Uniswap, Curve, Balancer and Binance. However, we do not have a solution to know how much other parties like Uniswap, Curve or Binance contribute to the success of USDC?
This is why ColorTrace was born.
What is ColorTrace?
ColorTrace allows the protocol to mark the color of each token printed by a certain party. That means that each token minted and put into circulation by an organization, protocol, or even user will be marked with a color representing the issuer.
Basically, with the example of USDC, when Binance mints USDC, it will be “colored” yellow, Coinbase “colored” blue, Curve “colored” white or Uniswap “colored” pink. Based on this color we can observe:
- Which unit issues the most Stablecoins?
- Which unit’s stablecoin is most active such as participating in AMM, Lending & Borrowing, Bridge,…
From there we can balance the benefits of the participating parties. The clearer the benefits, the stronger the way the party will participate, thereby creating a huge source of revenue, which continues to be shared based on the correct contribution, thereby creating a great flyweel.
ColorTrace’s journey
In fact, there have been many solutions proposed before. The oldest is Colored Coins – however the problem initially thought to be easy is actually extremely complicated. Until LayerZero offers 4 solutions to choose from including:
- ColorFloat.
- ColorTrace.
- rho.
- ColorAge.
However, with the research of the Verified USD Foundation, the chosen solution for their Stablecoin USDV will be ColorTrace.
Verified USD Foundation uses ColorTrace technology
Verified USD Foundation has used ColorTrace technology to build and develop a main Stablecoin USDV that is 100% backed by real world assets. Some assets supporting USDV include:
- Cash.
- Overnight Repo – short loan that only takes place within 1 day.
- Short-term bonds.
By using ColorTrace technology, Verified USD Foundation can easily identify the units participating in support and the level of support for USDV and then have appropriate incentive programs.
Summary
Is LayerZero ambitious to build its own Stablecoin when they already have the full infrastructure?
Hopefully through this article everyone can understand more about what ColorTrace is?
