blockworks.co
Cross-chain swaps are getting a boost with the latest version of Squid, launched today.
Squid 2.0 introduces a new architecture that abstracts away chains to simplify even complex transaction flows with multiple hops.
The update includes performance and cost improvements, and expands Squid 2.0’s functionality into new areas such as 1:1 stablecoin transfers, real-world asset (RWA) transactions and advanced routing.
This new approach goes far beyond finding the most efficient bridge routes, according to Fig, Squid’s co-founder.
“We are a bridging tool in a certain way, but we think that we can change the way that swaps are also done,” Fig told Blockworks.
Read more: Squid enables one-click cross-chain swaps on Cosmos
A key innovation in Squid 2.0 is its graph-based architecture, which enables intelligent routing through over 110 liquidity sources across 77 chains. This ensures that swaps are executed using the most efficient paths, reducing costs and increasing execution speed.
“In Squid v1, it was a very simple routing algorithm — we would just always swap via wETH into USDC, and then we bridge and swap out on the other side. But with Squid v2, we’ve upped the infrastructure a lot.”
Squid’s new algorithm compares liquidity across multiple dexes and liquidity pools, automatically choosing the most cost-effective route. This feature allows sub-20-second swaps — a feature called Squid Boost — with real-time quotes delivered in under half a second, the team says.
“There’s so much variation happening in cross-chain that we had to build a system which was able to adapt to all of the change in liquidity, of new technology, instantly and without us having to do anything manually on our side,” Fig explained.
Competition is heating up in the cross-chain space. Just this week, Osmosis debuted its latest product. Polaris, a cross-chain token portal, aggregates DEXs and leverages the Inter-Blockchain Communication (IBC) protocol.
Osmosis co-founder Sunny Aggarwal pitched Polaris as a bid to tackle what he calls, “the Great Chain Divide.”
“Liquidity is fragmented and sticky on its native chain, driven by both inertia and incentives (everyone’s trying to build their own internal DeFi ecosystems!),” Aggarwal wrote on X.
Squid similarly integrates liquidity from Osmosis, Astroport and other dex, not only in Cosmos but across multiple Ethereum layer-2s, Bitcoin (via the Chainflip cross-chain dex) and soon Solana as well.
ZeroDev also demoed a Magic Account, showcasing wallet abstraction with a user-centric design, including social login with passkeys and gasless transactions.
Read more: Vitalik rallies support for temporary smart wallets on Ethereum
Squid is also advocating for a “token-first” approach that lets users interact seamlessly with their digital assets, regardless of which chain they reside on. For example, a user can see an aggregated USDC balance across chains, and have Squid automatically choose the most cost-efficient way to complete a transaction — say, swapping into a memecoin.
The interface will also address the problem of multiple wrapped versions of stablecoins that proliferate as a result of cross-chain bridging, Fig said. This solves a major UX pain point.
“We work with stablecoin providers directly, and then they will use Axelar [Interchain Token Service], or even if they don’t use it, we can swap the stablecoin on the other side,” he said.
This level of chain abstraction is a major milestone in creating a fully noncustodial, multichain environment.
“We can start to move to the world where you don’t see the chain ever,” Fig said. “We can move this ‘Coinbase experience’ — which is really what 99% of crypto in the world use — into a fully self-custodial environment with decentralized liquidity as well.”