SEP 23, 2021

Exploring Wrapped Filecoin (EFIL) and Chainlink Proof of Reserve

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We launched Wrapped Filecoin (EFIL) to provide Gemini users with a bridge to use Filecoin (FIL) across the ever-expanding DeFi ecosystem. Gemini users who hold FIL can convert their assets 1:1 into EFIL through the Gemini mobile app and website and seamlessly withdraw it to any Ethereum wallet.

At Gemini, we are dedicated to keeping your assets secure, and we’ve implemented on-chain assurances throughout our EFIL minting process to establish confidence in the system. The wrapping system we built employs an open-source smart contract to convert FIL into an ERC-20 token — EFIL. The smart contract mints and burns EFIL, and we transparently and trustlessly confirm the amount of available EFIL is equal to the amount of FIL held in Gemini Custody, our institutional-grade storage system.

To drive trust in our EFIL wrapping system, we provide on-chain proof of what the EFIL smart contract receives and generates. There are two main prongs to our approach:

  1. Integrating Chainlink’s well-established Proof of Reserve data feed, and
  2. using the hashing function SHA256, allowing anyone to track what happens in the EFIL smart contract.

Chainlink Proof of Reserve: Working With Trusted Oracle Infrastructure

We are thrilled to collaborate with Chainlink to ensure the transparency of our EFIL wrapping system. By using the Chainlink Proof of Reserve (PoR) data feed, which is powered by a Chainlink decentralized oracle network, anyone can consistently check the balances of our FIL custody wallet. Should a deviation be spotted beyond a predefined threshold (e.g. 1%), Chainlink oracles will push an on-chain update to a specific reference contract that stores the EFIL reserve balance.

DeFi platforms can also call the Chainlink PoR reference contract for current EFIL reserves and compare it to the circulating supply of EFIL on Ethereum to immediately verify the collateralization of EFIL. If EFIL is found to be under-collateralized, DeFi platforms can incorporate customized logic for handling such situations.

Our collaboration with Chainlink brings additional protection to DeFi users of EFIL, preventing situations like black swan events and fractional reserve practices.

Ensuring Trust and Transparency

By using Chainlink’s decentralized infrastructure, users interacting with EFIL can have confidence in an accurate, highly available, tamper-resistant, and transparent source of information regarding current EFIL reserves. The result is a reliable form of collateral and payment throughout DeFi and other smart contract verticals on Ethereum.

Beyond our collaboration with Chainlink, our engineers have built another level of transparency into the EFIL system by encoding on-chain the Filecoin content identifiers (CID) that correspond to each transaction using the SHA256 hashing function. Blog Inline - #EFIL 01 Blog Inline - #EFIL 02

The above process shows that every transaction that increases or decreases the supply of EFIL on the Ethereum network can be tied to a corresponding transaction on the Filecoin network. We believe that for observers of both chains this approach provides further proof that EFIL always wraps and unwraps on both chains and no excess EFIL is minted or burned.

We are excited to provide FIL holders with a transparent pathway onto the Ethereum network as we continue to empower the individual through crypto.

Onward and Upward!

Team Gemini

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