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Introduction

LI.FI is a multi-chain liquidity aggregation platform that connects decentralized applications (dApps) with various liquidity sources, including bridges, decentralized exchanges (DEXs), and solvers. This architecture enables seamless cross-chain and same-chain trading by facilitating price discovery, smart order routing, and efficient execution.

LI.FI Overview

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Key Components of LI.FI Architecture

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1. dApp Interface (Integrators)

  • Function: What the end-user interacts with. dApps initiate quote requests and route selection to LI.FI’s backend (BE).
  • Process: A user sends a request from the dApp for the best trading route or quote, which is forwarded to LI.FI BE for processing. Once the optimal route is selected, the dApp submits a transaction to execute the trade.

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2. LI.FI Backend (BE) - Aggregation and Routing Layer

  • Purpose: This off-chain layer performs core price discovery and smart order routing by interfacing with various liquidity sources.
  • Functionality:
    • Fetch Pricing: LI.FI BE retrieves quotes from multiple sources, including bridges, DEXs, and solvers, to determine the best price and route.
    • Return Quote: Once the optimal route is identified, LI.FI BE returns the quote to the dApp.
    • Order Routing: The dApp submits the transaction with the selected route, which LI.FI BE processes by routing it to the LI.FI Diamond Contract on-chain.

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3. LI.FI Diamond Contract

  • Function: Acts as the primary on-chain entry point, handling the execution of transactions based on the chosen route from LI.FI BE.
  • Role:
    • Routes the transaction to the appropriate facet contract (bridge, DEX, or solver) based on the chosen liquidity source.
    • Acts as the router for on-chain executions, allowing modular connections to different liquidity sources.

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4. LI.FI Facet Contracts

Specialized on-chain contracts that interface with respective liquidity sources:

  • Bridge Facet Contracts

    • Route transactions to specific bridge contracts (e.g., Bridge A or Bridge B) for cross-chain transfers.
    • Ensure bridge compatibility and secure asset transfer across blockchains.

  • DEX Facet Contracts

    • Route transactions to specific DEX contracts for same-chain swaps.
    • Optimize execution based on DEX-specific parameters for efficient liquidity utilization.

  • Solver Facet Contracts

    • Route transactions to solver contracts for accessing extended liquidity sources.
    • Enable advanced routing and pricing calculations based on solver protocols.

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5. Bridge/DEX/Solver Contracts

Final execution of trades occurs on the blockchain network through interactions with selected liquidity providers (bridge, DEX, or solver contracts).

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End-to-End Order Flow

  1. Initiate Request

    • A user initiates a quote request from the dApp for a multi-chain or same-chain trade.

  2. Quote and Route Discovery

    • LI.FI BE receives the request and queries bridges, DEX aggregators, and solvers to gather pricing data and route options.
    • The optimal route is determined and returned to the dApp.

  3. Transaction Submission

    • The user selects the best route in the dApp, which submits the transaction to LI.FI Diamond contract with the selected quote data.

  4. On-Chain Execution

    • LI.FI Diamond contract forwards the transaction to the respective LI.FI Facet contract for execution.
    • The facet contract executes the transaction with the specific bridge, DEX, or solver on-chain contract, finalizing the trade or transfer.

  5. Output Return

    • Once the transaction is complete, the resulting assets are returned to the user.