Native Asset Settlement for Safer Trading

[umair]

The article argues that native asset settlement — not bridges or wrapped tokens — is the foundation for safer cross-chain crypto trading and that structural choices in how assets are moved and settled fundamentally determine risk levels in decentralized finance (DeFi).

Most cross-chain trades today rely on bridges, wrapped assets, or off-chain relayers that abstract complexity from users but push it into hidden layers. This introduces infrastructure risk — vulnerabilities in smart contracts, custodial control, governance, and peg mechanisms — which has historically resulted in major losses for DeFi users. In 2022 alone, bridge exploits drained over $2 billion due to flaws in how assets move between chains.

Bridges typically work using a lock-and-mint model: a user locks a native asset on one chain and receives a wrapped version on another. The wrapped token depends on someone holding the real asset, creating counterparty risk. If the custodian or validator is compromised, the backing can break, leaving users with an asset that no longer represents the original value.

The article highlights THORChain as a protocol that rejects wrapped assets entirely and instead enables native asset swaps across chains. It uses continuous liquidity pools (CLPs) with a hub token (RUNE) to route trades, so users send and receive native coins without third-party custody. This design eliminates wrapped representations and reduces systemic risk by keeping settlement at the protocol level.

For example, a BTC-to-ETH swap on THORChain involves sending BTC to a vault, converting to RUNE, then swapping to ETH — all while retaining native asset status throughout the process.

Because Bitcoin remains challenging to integrate into DeFi without wrappers, THORChain’s model allows BTC holders to maintain sovereignty and trustlessness, a key factor for safer trading as crypto markets grow.