Interoperability protocol Axelar has enabled Sommelier, a yield optimization protocol on Cosmos, to become a cross-chain application by connecting it with Ethereum Layer 2 network Arbitrum One.
Sommelier's DeFi vaults automatically rotate capital across different assets and let users optimize yields on their crypto assets through lending and trading services. These DeFi vaults operate on Sommelier's own blockchain in the Cosmos ecosystem and Ethereum, and now they will be available on Arbitrum, a Layer 2 blockchain developed by Offchain Labs.
"At Offchain Labs, we are delighted to welcome high-caliber protocols such as Sommelier who focus on finding innovative ways to improve capital efficiency in DeFi on Arbitrum One," said Peter Haymond, senior partnership manager at Offchain Labs.
Sommelier leverages Axelar's GMP protocol
Sommelier will utilize Axelar's General Message Passing (GMP) protocol. This is a general-purpose communication protocol between the Cosmos ecosystem and blockchains that support Ethereum-based smart contracts, like Arbitrum.
"Sommelier has pioneered the architecture for non-custodial access to sophisticated DeFi strategies. Axelar GMP enables Sommelier to pass strategy instructions to vaults on Arbitrum One, unlocking its strategies' potential," said Sergey Gorbunov, co-founder of Axelar.
The communication protocol enables data and assets to move between the two ecosystems, making it possible for cross-chain apps to operate. Typically, interoperability protocols focus on allowing users to send assets between chains using mechanisms like wrapping; however, passing data can remain a challenge.
Axelar, with its own computing environment called the Axelar Virtual Machine, facilitates more complex activities, such as transmitting data and commands between smart contracts on two different chains.
In October 2021, Zaki Manian, who is a former lead developer for Cosmos and Tendermint, raised $23 million for Sommelier in a Series A funding round led by Polychain Capital.
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