Chainflip’s token, FLIP, has surged 73.8% in the last 24 hours, making it one of the biggest gainers in the market.
The sudden rise has caught attention, but before buying into the hype, it’s worth understanding what Chainflip is.
What problem does it solve? How does it work? What’s behind its growing interest? Rather than just chasing price movement, let’s take a proper look at the project and what it brings to the table.
What is Chainflip?
Chainflip is a decentralised exchange (DEX) that allows users to swap tokens between different blockchains without relying on wrapped assets, synthetic tokens, or centralised exchanges.
Source: Chainflip
Unlike most DEXs that operate within a single blockchain, Chainflip enables direct trades between Layer 1 (L1) networks like Bitcoin, Ethereum, and others.
Cross-chain trading has always been a challenge. Most existing solutions use bridges or wrapped tokens, which add complexity, security risks, and extra fees.
Chainflip removes these issues by offering true native swaps, users receive the exact token they want on its original blockchain, with no intermediaries.
To achieve this, Chainflip operates on a Proof-of-Stake (PoS) validator network, where independent validators manage trades without requiring trust in a central authority.
These validators use Threshold Signature Schemes (TSS), a cryptographic method that allows them to collectively control funds securely across multiple chains.
Instead of an exchange holding user funds, control is distributed among validators, ensuring decentralisation and security.
Chainflip is designed to be fast, efficient, and easy to use, eliminating slow confirmation times, liquidity fragmentation, and complicated cross-chain processes.
The goal is to make swapping assets between different blockchains as simple as trading on Uniswap, with accurate pricing and minimal slippage.
Another key aspect is integration, as Chainflip is not just built for individual traders. Wallets, aggregators, and other platforms can easily connect to its system, allowing users to swap assets without even realising they’re using Chainflip.
By solving the fundamental problems of cross-chain trading, Chainflip aims to provide a seamless and decentralised alternative to centralised exchanges. But what makes it all work? That’s where its State Chain Validator Network comes in, which powers every trade behind the scenes.
What is its Core Infrastructure?
At the core of Chainflip is the State Chain Validator Network, which ensures that cross-chain swaps happen securely without relying on centralised exchanges or wrapped assets.
The State Chain is a dedicated blockchain built specifically to track transactions, coordinate validators, and manage liquidity, making Chainflip independent from external networks.
Every swap begins when a user deposits funds. Validators continuously monitor external blockchains to detect these deposits, a process called witnessing.
Once a deposit is confirmed on its native blockchain, validators record it on the State Chain, ensuring transparency and security. More than two-thirds of validators must agree before a transaction is final, preventing fraud or errors.
Once confirmed, the system executes the swap and distributes the output funds to the user on their chosen blockchain, a process known as egress. This eliminates the need for manual bridging or token wrapping.
The State Chain also manages validator operations, including staking, governance, and penalties. Validators must stake FLIP tokens as collateral, which keeps them accountable. If a validator fails to perform its duties or acts dishonestly, it loses part of its stake through slashing penalties.
Unlike general-purpose blockchains, the State Chain is optimised for Chainflip’s specific needs, reducing transaction costs and improving efficiency.
Since all liquidity and transactions are managed within its system, there is no reliance on external smart contracts or third-party protocols.
This infrastructure enables seamless, decentralised cross-chain swaps while maintaining security and efficiency.
With the foundation in place, the next key component of Chainflip’s design is its native swap system and Automated Market Maker (AMM), which ensures smooth trading between assets.
The Native Swap and AMM Feature
Chainflip’s Just-In-Time (JIT) AMM is a different approach to liquidity and price discovery. Instead of relying on passive liquidity pools like traditional AMMs, it allows market makers to compete in real-time to offer the best possible price for swaps.
Source: Chainflip
This means users can trade assets across chains without suffering from high slippage or delayed price adjustments.
When a user deposits funds to swap, the network monitors the transaction, waits for confirmations, and then executes the trade at the best available rate.
Unlike most AMMs, where liquidity is always present in the pool, Chainflip’s JIT AMM lets liquidity providers adjust their positions right before a swap is executed, ensuring that trades happen at market price.
This prevents frontrunning and MEV attacks, which are common issues in traditional AMMs. This is because all swaps are processed together within a block, no trader can jump ahead to manipulate prices.
Instead, market makers compete to provide liquidity at the best possible rates, ensuring users consistently get fair pricing.
The AMM supports limit and range orders, giving liquidity providers control over their capital and allowing them to react dynamically to market conditions. This flexibility helps keep prices competitive while minimising risk.
To optimise liquidity, Chainflip uses USDC as the base pair. This approach consolidates trading volume into a single pool, reducing fragmentation and ensuring deep liquidity across all supported assets. Users never have to interact with USDC unless they want to—it’s just used in the background to improve swap efficiency.
With this system, Chainflip delivers native, cross-chain swaps that are efficient, transparent, and immune to common DEX inefficiencies.
Supporting Components
Chainflip’s architecture relies on several key components that ensure secure, decentralised, and efficient cross-chain transactions.
This section explains the FROST Signature Scheme, Vault System, and Governance & Security mechanisms, which work together to maintain trustless execution, high performance, and robust security.
FROST Signature Scheme: Enabling Secure & Scalable Signing
For Chainflip to sign transactions across multiple blockchains, it needs a secure and scalable threshold signature scheme. The protocol originally considered GG20, but its high computational cost and slow signing speed made it impractical for large validator sets.
Instead, Chainflip adopted FROST (Flexible Round-Optimized Schnorr Threshold Signatures), which offers:
- Faster signing times – Signatures can be generated in one second, even with 150 validators.
- Greater scalability – Allows large validator sets without slowing down.
- Stronger security – Prevents private keys from being fully reconstructed, reducing attack risks.
How FROST Works in Chainflip
- Key Generation – Validators create individual key shares and distribute them securely.
- Aggregate Key Formation – The system combines these partial shares into a single shared public key.
- Transaction Signing – A subset of validators sign transactions using their key shares.
- Consistent Broadcast – Validators verify all messages to prevent inconsistencies and manipulation.
This setup ensures that Chainflip remains decentralised, fast, and secure, making it possible to handle high transaction volumes efficiently.
Vault System: Secure Fund Management Across Blockchains
To facilitate trustless asset transfers, Chainflip operates a multi-chain vault system tailored for each blockchain. These vaults ensure that no individual validator has control over funds, and all transactions require collective validation.
Bitcoin Vault
Bitcoin does not support smart contracts, so Chainflip relies on Taproot Schnorr signatures to manage funds securely.
Key Features:
- Unique deposit addresses – Each user gets a dedicated Bitcoin address, controlled by the validator set.
- Efficient fund sweeping – Deposits from multiple addresses are merged into a single transaction, reducing fees.
- Key rotation with handover – When validators change, control of old addresses is transferred, ensuring no funds are lost.
Ethereum & EVM Vaults
Ethereum requires on-chain verification, so Chainflip uses smart contracts to manage assets securely.
Key Features:
- Smart contract-controlled funds – Validators sign transactions that are verified on-chain.
- Reusable deposit channels – Reduces gas costs by reusing existing deposit addresses.
- Batch processing – Groups multiple transactions into one, significantly lowering fees.
- Seamless key rotation – Instead of moving funds, only the validator key is updated.
Polkadot Vault
Polkadot provides built-in proxy accounts and derivative addresses, simplifying decentralised fund management.
Key Features:
- Proxy-controlled vaults – Only the validator set can authorise transactions, eliminating single points of failure.
- Derivative deposit addresses – Ensures efficient fund movement from deposits to vaults.
- Batch transactions – Multiple transfers can be executed in a single atomic operation.
- On-chain key rotation – Validators update their signing key without moving funds.
Solana Vault
Solana’s high-speed blockchain allows Chainflip to process transactions quickly and cost-effectively.
Key Features:
- Native FROST support – Solana allows validators to sign transactions directly using Schnorr signatures.
- Precomputed deposit channels – Addresses are generated before deposits, reducing setup time.
- Batch processing – Transactions are grouped to minimise costs.
- Seamless key rotation – Validators update their signing key without affecting existing deposit addresses.
This vault system ensures secure, low-cost fund management across all supported blockchains.
Governance & Security Mechanisms
A decentralised protocol must continuously evolve while ensuring no single party has control over funds. Chainflip achieves this through a dual-key governance system and strict security measures.
Governance Model: Preventing Centralised Control
Chainflip operates with two governance keys to prevent any single group from gaining control:
- Governance Key – Managed by core developers or an elected group, responsible for protocol upgrades and security measures.
- Community Key – Acts as a check-and-balance, preventing the Governance Key from making unilateral changes.
Governance changes require a 2/3 majority vote, and key rotations come with a 14-day delay, allowing users time to withdraw funds if necessary.
Security Measures: Preventing Attacks & Fraud
- State Chain Safe Mode – If an attack is detected, validators can pause transactions to prevent further damage.
- Security Ratio Enforcement – The total assets in vaults cannot exceed two-thirds of validator stakes, making attacks financially unfeasible.
- Delayed Withdrawals – Large withdrawals require a waiting period, allowing time to detect fraudulent transactions.
- Contract Vault Freezes – If an exploit is detected, governance can halt all transactions from affected vaults.
Supermajority Attack Prevention
A supermajority attack occurs when two-thirds of validators collude to steal funds.
To prevent this:
- Security Ratio Enforcement ensures stealing funds isn’t financially viable.
- Compromised validators lose all staked FLIP tokens, discouraging collusion.
- Validator keys remain secure, making mass compromise unlikely.
While no decentralised system is completely immune to collusion, Chainflip’s governance model and security mechanisms make such an attack highly improbable.
FLIP Token Economics
FLIP is the native token of Chainflip, designed to secure the network, incentivise participation, and ensure the long-term sustainability of the protocol.
Source: Chainflip
With an elastic supply model, it incorporates both emissions and burning mechanisms, similar to Ethereum’s post-EIP-1559 structure.
Validators and liquidity providers earn FLIP rewards, while swap fees contribute to a buy-and-burn mechanism, gradually reducing supply. Below is an overview of its allocation, utility, and vesting.
Token Allocation
- Strategic Investors: 18.88 million tokens allocated to early backers from 2020-2021, with different lockup options.
- Oxen Foundation: 4.2 million tokens reserved for research, development, and validator staking.
- Contributors: 13 million tokens allocated to team members, unlocking gradually after the product launch.
- Node Operators: 4.75 million tokens distributed to testnet participants securing the network.
- Token Sale: 2.07 million tokens allocated for the public sale, primarily for liquidity.
- Liquid Treasury: 4.97 million tokens held by Chainflip for development, community programs, and future funding.
- Treasury Reserves: 22 million tokens locked indefinitely to maintain protocol stability.
Utility
FLIP is essential for securing the Chainflip protocol. Validators must stake FLIP to participate in network security and earn rewards. Liquidity providers use it to facilitate swaps, improving trading efficiency.
Additionally, swap fees collected in USDC are used to buy and burn FLIP, reducing its circulating supply and supporting its long-term value.
Vesting
Validator tokens are locked for one year but can be staked immediately. Strategic investors unlock 20% at launch, with the rest vesting over twelve months.
Contributors’ tokens vest over two to three years after the protocol goes live, ensuring sustained network development. Treasury-held tokens remain locked indefinitely to support long-term growth.
Recent Progress and Upcoming Plans
Chainflip has made steady progress in increasing swap volume, integrating new partners, and refining its liquidity provision model.
Source: Chainflip
The team remains focused on scaling up to daily volumes of $50 million and beyond, ensuring Chainflip competes with top decentralised exchanges and cross-chain bridges.
In the past few months, new liquidity providers have strengthened swap reliability, with automated stablecoin liquidity bots making it easier for passive LPs to participate.
The introduction of Solana-based assets boosted engagement, while DCA swaps significantly improved pricing efficiency.
Looking ahead, two key areas of focus are expanding integrations and increasing liquidity. The upcoming 1.8 update will streamline integrations, allowing partners to leverage Chainflip without deposit channels, making onboarding easier.
At the same time, improved tools for LPs will enhance capital efficiency and encourage broader participation.
With all investor unlocks completed, the impact of buy-and-burn mechanisms will become more pronounced as swap volume rises. If inflows reach $50 million per day, FLIP’s supply reduction could be substantial over the next year.
The roadmap includes expanding liquidity strategies, integrating new chains like Polkadot’s Asset Hub, and launching a revamped website to improve user engagement. Chainflip is on track for significant growth in 2025, with a clear focus on adoption and scalability.
Conclusion
Chainflip is steadily improving its cross-chain swapping capabilities by expanding integrations, refining liquidity strategies, and increasing user accessibility.
With investor unlocks completed, the focus is now on growing daily swap volumes and making the buy-and-burn mechanism more effective.
Upcoming updates, including better tools for liquidity providers and support for Polkadot’s Asset Hub, aim to strengthen adoption.
Looking ahead, Chainflip’s development remains focused on improving efficiency and usability, ensuring it can scale effectively in the decentralised trading space.