Currently, cross-chain exchange of crypto assets is mainly achieved through off-chain matching third parties, which has provided sufficient liquidity at the cost of trust issues and considerable risk for traders: As they effectively control the liquidity created by a community, it is easy for third parties to set artificial thresholds such as fees only payable in mainstream currencies (BTC, ETH, USDT). This leads to a value outflow during the process, so that other types of crypto assets cannot take advantage of the liquidity created by their own communities. Due to opaque processes and sometimes even carefully designed fraudulent schemes, user assets are effectively consumed by the third party. Moreover, these assets are eventually likely to be stolen by hackers due to security flaws, resulting in periodic depletions in market liquidity.
A limited Turing-based clearing system is clearly needed. It can allow assets with disparate consensus mechanisms to be efficiently traded without having to pass through any trusted third party. The Liquidity Sharing Protocol (LSP) guarantees the democratization of liquidity, while the collateral matching trading system decouples transaction costs and prices, effectively eliminating counterparty risks. Additionally, the cross-chain escrow system also enables assets with different consensus mechanisms to be issued easily and without the need for trusted third parties. Either the user or custodial organizations can manage these assets safely and as they see fit, creating a matching process that is completely transparent.