Tokens vs Currencies

At this point, you may be wondering how Nucleo's AMM can access ETH/USDC liqudiity on Ethereum when conducting a swap from a chain like Polygon or Solana. Unlike some Layer 2 networks which use $ETH as their gas token, most tokens on most chains do not have a direct 1:1 relationship like that and rely on bridges.

For example:

1. $ETH on Ethereum is distinct from $WETH on Polygon
2. $USDC on Base is distinct from $USDC on Solana
3. $MOVE on Ethereum is distinct from $MOVE on Movement

A crucial innovation of our AMM's design is the introduction of the concept of a Currency.

A token, as we know, refers to either the native token or a smart-contract based token on a given blockchain. For example, $ETH on Ethereum and $SOL on Solana are native tokens, and $WETH on Polygon and $WIF on Solana are smart-contract based tokens.

A currency, then, is defined as the canonical representation of an asset that can exist across various chains. For example, ETH (the currency) exists on Ethereum, Polygon, Base, Arbitrum, Solana, and many more chains - but in the form of different tokens.

But not all tokens are created the same. Some tokens are easier to classify as the same currency than others, and come with different risks.

Consider ETH as an example currency we wish to define. There are different types of ETH tokens on different chains:

1. $ETH on L2 chains like Optimism and Arbitrum are exact 1:1 representations of $ETH on Ethereum, and are also used as the native token on the L2s. These are the simplest to define as being the same currency.
2. $WETH on Polygon or Avalanche is a wrapped version of $ETH on Ethereum. These are also 1:1 representations of $ETH on Ethereum, but are wrapped tokens that exist on EVM-compatible sidechains. However, we can still define them as the same currency.
3. $WETH on Solana or Aptos is a wrapped version of $ETH on Ethereum. These are also 1:1 representations of $ETH on Ethereum, but are wrapped tokens that exist in a completely different VM and rely on third-party bridge providers like Wormhole for moving them cross-chain. These can still be defined as the same currency, but have different risks than the previous two options.

Creating a Token -> Currency Relationship

A single token can only be associated with a single currency. However, a currency can be associated with multiple tokens. For example, the currency ETH can be represented by the following tokens:

1. $ETH on Ethereum
2. $ETH on Optimism/Base/Arbitrum
3. $WETH on Polygon/Avalanche
4. $WETH on Solana/Aptos

So how do we define these relationships?

As part of the Satellite Contracts on each chain, Nucleo's shared liquidity layer maintains a public record of Currencies and their associated Tokens per chain in a contract called the Token Registry. When Nucleo is deployed to a new chain, the Token Registry is updated to include tokens on that chain that map to a currency - and the AMM can automatically treat those as equivalent for the purposes of cross-chain swaps.

If Nucleo wants to support new currencies as well, the Token Registry needs to be updated to create a new currency and associate it with all its distinct token representations across chains. This process will be delegated to the Nucleo Governance DAO to ensure that the process is secure and transparent.