Celsius integrates Chainlink Proof of Reserve

Celsius is integrating Chainlink PoR (Proof of Reserve) in collaboration with its DeFi engineering arm CelsiusX to create highly secure and auditable wrapped tokens that unlock cross-chain liquidity, according to a press release exclusively shared with Invezz.

This integration will be one of the first cases of using Chainlink (LINK/USD) PoR live to help audit and secure the on-chain minting, redeeming, and burning of wrapped cross-chain tokens.

Bridging wrapped ADA, DOGE, ETH to Polygon

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The integration enables Celsius to bridge wrapped versions of Cardano (ADA/USD), Dogecoin (DOGE/USD), and Ethereum (ETH/USD) to Polygon (MATIC/USD) mainnet. Cardano, Dogecoin, and Ethereum community members will have access to DeFi ecosystems on non-native blockchains and more advanced cross-chain token utility.

Carl Hua, Chief Architect of Celsius and Head of CelsiusX, exclusively told Invezz:

The CelsiusX wrapped token infrastructure enables the creation of tokens on a target chain that are collateralized on the native blockchain. While this infrastructure does exist through other providers (wrapped.com, centralized exchanges), the CelsiusX implementation differs from other wrapped collateralized tokens in one key way: our key actions such as minting are functionally controlled by utilizing Chainlink Proof of Reserve, eliminating the need for trusting a centralized third party. Chainlink’s POR allow verifiability and transparency in the wrapping process showing that wrapped tokens minted will match the amount of tokens available. It will also enable real-time 1:1 redemption of wrapped tokens in a trustless manner.

Celsius Network Founder and CEO Alex Mashinsky added:

Celsius’ integration of Chainlink PoR will mark another large leap towards creating hybrid CeDeFi systems that combine CeFi’s functionality and performance with DeFi’s decentralization and transparency guarantees. Celsius has a long history of leveraging Chainlink’s industry-leading oracle network because it provides tamper-proof real-world data and off-chain computation that creates an unrivaled user experience for our community. We also look forward to our near-term integration of CCIP to unlock even greater cross-chain functionality that will power more advanced smart contract applications.

How Chainlink PoR secures wrapped tokens

To secure wrapped ADA (cxADA), you deposit ADA tokens to a Celsius wallet on Cardano. This launches the minting process. A Chainlink PoR data feed verifies the wallet’s balance. Then, a smart contract can mint cxADA depending on how many newly deposited ADA tokens there are. After that, new cxADA is deposited within a secure vault.

Verification mechanism

The token balance is verified by Chainlink PoR smart contracts. A smart contract can mint a corresponding amount of cxADA tokens on Polygon to ensure 1:1 collateralization when PoR shows vaults are overcollateralized. To redeem cxADA tokens back to ADA, the former must be burned before you can withdraw ADA to prevent undercollateralization.