The Ethereum network has many scaling solutions, each with its governance token.
However, there is a second problem related to transferring all tokens from Layer 1 to Layer 2.
The Hop Protocol represents a solution to this problem through a token exchange mechanism between Ethereum solutions.
So in this guide, we will explain Hop Protocol and its features.
What is Hop Protocol?
Hop Protocol is a solution for transferring tokens from blockchain Layer 1 to Layer 2.
It is a bridge for customers to facilitate the movement of the token and its passing between the two networks.
The protocol also aims to create a community-oriented DAO that promotes the idea of scalability at Layer 2.
How does the hop protocol work?
The protocol works efficiently based on investment promotion through guarantors who provide liquidity in exchange for earning fees.
The user sends a token amount to them through the chain from which the original was sent.
After completing this process, the guarantor sends the asset to the user instance in the intended chain.
The protocol has an important role in ensuring that the guarantors send the tokens, but this process, of course, does not please any investor who sends his token to someone else.
However, this solution enables it to access the intended blockchain. In addition, the system uses unique hTokens that serve as a guarantee to record transactions accurately.
Escrow tokens choose many chains such as Ethereum protocols and Layer 2 solutions.
But the token transfer time takes longer which causes some concern to the users so the guarantors provide liquidity to the customers so that they can get the tokens simultaneously while they wait for the network to complete the hTokens transfer which is a shadow of the original token.
What’s special about Hop Protocol?
There are some advantages to the protocol that generally uses ERC-20 token pegs:
- The protocol provides the scalability of token bridging through automated market makers and swapping the token for its corresponding base token in each transaction, in addition to dynamically pooling liquidity and stimulating the rebalancing of liquidity across the network.
- Using the protocol for a high level of security; means that users will not suffer from the theft or loss of assets, but the worst case is that the guarantors will not be contacted, in which case users will face a time delay equivalent to the entire exit time.
- The protocol ramps up its strategy of creating tokens across networks and by using an automated market maker it can carry out transactions with priority and efficiency.
- Support for a wide range of network chains and thus excellent connectivity but these chains are only limited to Ethereum and its Layer 2 solutions.
- Current restrictions on asset transfer as the protocol only supports 9 different asset types.
What are hTokens?
hTokens are tokens that can travel across networks.
They can be transferred by users as payments and are requested by Layer 2 of the underlying asset. They also act as intermediate assets within the Hop Protocol and represent a bridge for trustless swaps.
End users interact not with it but with the appropriate underlying token for assembly.
The layer 2 hop bridge currency is deposited in the layer 2 hop contract.
As an example, investing 4 Ether in a Layer 2 Hop Bridge contract enables users to mint 4 Ether Hop and redeem Hop Bridge tokens for the underlying Layer 2 assets.
After that, the hop bridge token is retrieved on the second layer, so that the token can be burned and then transferred and minted on another network.
What are Canonical tokens?
Canonical token means the Layer 1 token that is linked within the Layer 2 protocol. For example, this token expresses the DAI token in the second layer that is linked to the DAI token in Layer 1.
Using the Layer 2 token core bridge, users can send and receive Layer 1 tokens and Layer 2 token instances.
It provides users with the option to convert to the current instance of Layer 2, and if there are many models for the token of Layer 2 to represent Layer 1, it is often applied to the token instance from Layer 1.
It is in the interest of the protocol to be compatible with all other types of applications.
The Canonical token model (canonical ETH/canonical DAI) is widely popular.
This token is created using the native token bridge or by choosing the bridge created via the application bridge in the absence of the native token bridge.
What is HOP token?
To fully understand the protocol, we need to know how the layer 2 solutions that sit on top of the blockchain mainnet, or layer 1, work.
These solutions are used to enhance transaction throughput, reduce transaction costs, maintain Layer 1 chain security, and have the ability to process additional transactions.
When the protocol is used to transfer tokens, hTokens are produced that are transferred cheaply across chains and are then exchanged on the appropriate chain and delivered to the sender.
The protocol also provides token pooling and storage of several layer 2 solutions so users receive rewards without transferring tokens to the mainnet.
HOP Token
Hop Protocol (HOP)
HOP token represents a governance token on the blockchain, giving users the ability to vote on each token they own.
These votes are used to comment on ideas such as token trading, adding a Layer 2, or managing treasury funds.
The current exchange price for the token is $0.03, with approximately one billion coins on offer, and the tokens are distributed as follows:
- 60.5% inside the treasury.
- 22.45% for the team.
- 8% airdrop (drop token as a gift).
- 6.25% for shareholders.
- 2.8% for the next crypto community.
How to buy Hop Token?
The token is available on decentralized exchanges such as Uniswap and Sushiswap. Where the user can search for the symbol and trade the assets he owns.
It only takes a small amount of Ether to pay the cost of gas fees and some assets to start trading within the wallet.
The superior ability of the HOP token
The Hop Protocol solves the scaling problem of the Ethereum network and simplifies the use of solutions.
This enhances the user experience, and there are some ideas that this protocol is working on over time.
This project is worth pursuing for its benefit in the crypto industry as Ethereum scaling is an issue in DeFi markets.
For more information about the protocol, you can follow the BitcoSAT channel on Telegram, benefit from the crypto community’s information from experts, and answer all inquiries related to the project.