Unlock cross-chain capital efficiency

Introduction

DeFi lending has surpassed $41.6B in TVL, yet most of that capital remains trapped within individual chains. This fragmentation leads to duplicated infrastructure, fractured liquidity, and capital that can't be moved or reused across ecosystems.

Despite the promise of composability, ~80% of Aave users lend or borrow on only one chain. That means better rates, deeper liquidity, and strategic opportunities elsewhere are largely inaccessible to them.

Cross-chain lending can change this. By enabling users to borrow against assets held on other chains, liquidity can be unified, the UX simplified, and capital efficiency radically improved across DeFi.

Problems with current lending landscape

DeFi lending protocols have matured, but they’ve done so in isolation. This resulted in a landscape with:

• Capital inefficiency: a majority of user funds remain siloed or idle. Overcollateralization requirements, combined with fragmented liquidity, lead to sub-optimal capital use

• Bridge dependence: moving assets across chains requires trusted intermediaries, exposing users to centralization risks, custody loss, and additional trust assumptions

• Limited composability across chains: only ~21% of users interact with lending protocols on more than one chain. UX friction, poor tooling, and technical barriers all contribute to that.

  
  

What cross-chain lending unlocks

Cross-chain lending changes the capital flow equation. Instead of being locked to a single network, users can deposit assets on one chain and borrow or compose with them on another, without ever needing to bridge or move the original asset.

This unlocks:

• Native deposits: assets deposited on a source chain can be securely represented on destination chains via synthetic abstractions.

• Composable capital: the same deposited asset can serve multiple roles — collateral for lending, participation in governance, or part of complex strategies across chains — all without duplication.

• Support for diverse assets: as long as an asset’s state can be verified, it becomes usable anywhere.

  
  

These outcomes call for a new primitive — one that can verify, compose, and move capital without moving assets. Diffuse Collateral provides that layer: a proof-based protocol for abstracting deposits into verifiable collateral usable across chains

Cross-chain lending via Diffuse Collateral

Collateral Abstraction introduced by Symbiotic is a model for making assets a collateral portable across chains, unlocking liquidity locked on other chains. That it exactly what was missing for a truly chain-agnostic lending protocol—unlocking capital efficiency, composability, and security at scale.

This is how our implementation, Diffuse Collateral can serve as a foundation for a cross-chain borrowing.

How it will work

• Deposit: user deposits ETH or any ERC20 token on a source chain A

• Proof generation: the protocol produces a cryptographic proof verifying the deposit

• Synthetic minting: on the destination chain B, a synthetic asset is minted, backed by the locked collateral

• Borrow: user can access liquidity on the destination chain B using synthetic collateral backed by the original deposit.

  
  

All interactions, including liquidations and repayments, are secured by cryptographic proofs and hardware attestations (SGX), ensuring trustlessness and composability across chains. Multi-step strategies across chains with re-depositing and re-borrowing assets open the way to dynamic leverage profiles - 2×, 3× or more.

Why this works

Cross-chain lending is more than a UX improvement — it realigns incentives, unlocks trapped liquidity, and expands what DeFi can do. Diffuse Collateral solves the trust and UX barriers that have long constrained cross-chain capital movement:

Trustless by design

All interactions are secure and verifiable thanks to:

• zkTLS: secures HTTPS/TLS handshakes inside Intel SGX enclaves (TEEs), enabling trustless Web2/Web3 data fetches (e.g., CEX prices, bank balances) with cryptographic attestations that responses match the source's true state

• zkRPC: applies the same zkTLS protocol applied to node RPC calls, fetching and attesting to blockchain data (e.g., balances, storage proofs).

  
  

Composable across chains

• Unified liquidity: deposits on one chain can collateralize loans, governance, or strategies elsewhere.

• Dynamic leverage: multi-chain re-depositing/borrowing enables adjustable leverage (2–3×+) via programmable risk parameters.

  
  

Supports diverse collateral types

Any ERC-20 token with verifiable liquidity or state can be used:

• Stablecoins: USDC, USDT, sUSDe, USD0++, lvlUSD

• Liquid Staking Tokens: EtherFi, Renzo, KelpDAO

• BTC Assets: wBTC, Solv BTC LRTs, Lombard

• Yield-Bearing Tokens: Pendle PTs, Curve LPs, Resolv USR/stUSR/RLP

• Others: any verifiable ERC-20

  
  

Unified UX via account abstraction

• Atomic Bundles: Deposit → Prove → Mint → Borrow — all in one user action.

• Universal Vault Address: One AA vault per user across chains via zkRPC routing.

• Fee Abstraction: Vault pays gas in supported tokens (e.g., Pendle PT), auto-swapped from liquidity hubs

  
  

Conclusion

Traditional lending remains locked within individual chains, leaving trillions in potential liquidity stranded. As users demand better UX and yields, cross-chain lending becomes inevitable.

Diffuse’s Collateral Abstraction, zkRPC and zkTLS with TEE attestation lay the groundwork for a truly chain-agnostic lending protocol—unlocking capital efficiency, composability, and security at scale.

• Check out the Diffuse Collateral demo https://x.com/DiffuseFi/status/1913208238880731317

• Our tech - zkTLS open-source repo GitHub and trustless Data Feeds oracle GitBook

• Follow us on X to stay updated on the latest developments: @DiffuseFi