Benefits of Cross-Chain Projects
- Eases the Use of Multi-Chain Tokens
There are multiple reasons behind the increasing demand for cross-chain projects. Today, there are over 7000 cryptocurrencies across different blockchains. There are also many multi-currency wallet options available to hold & manage them. But the issue of switching between chains while accessing different protocols is still prevalent. With Cross-chain projects, there won't be such issues.
- Remove Third-party Involvement From the DeFi Space
Cross-chain projects will have a deep impact on the DeFi space where no centralized entities are controlling the flow of shared data. As we said in the beginning, DeFi space has been growing at a very rapid pace since the beginning. It has crossed the threshold of $100 billion
in locked value, all within 14 months. The world of DeFi applications made a journey of $1 billion
to $100 billion in locked value at a breakneck speed.
But there is a significant roadblock when it comes to moving liquidity from one blockchain to another. Within the DeFi space, moving to a different blockchain, the fees for verification of user and transactions puts a dent on the user's earnings from the liquidity pool. The cross-chain functionality can remove this obstacle and let users across different blockchains transact freely without the need for a third party. It will lead to a reduction in transactional costs.
We know that cross-chain projects make frictionless interaction between various blockchain projects a reality. It also makes the flow of information between blockchain hassle-free. There are multiple benefits of it. For example, the need for third-party verification is eliminated. It also secures the shared data in a better way by preserving its integrity. Thus, only those with decryption keys would be able to access the shared information. Such a benefit will lead to further mainstream adoption of blockchain technology.
- Improved Interoperability & Scalability
The developers leveraging cross-chain functionalities to build decentralized applications will benefit from improved scalability. It would not have been possible if they had opted for a single blockchain to build their dApp. Another benefit of cross-chain dApps would be better speed as cross-chain decentralized applications leverage multiple blockchains to become even more scalable. A Comparison of Top Cross-chain Projects Polkaswitch
The increase in the growth of DeFi applications has stressed the Ethereum blockchain, which is affecting its performance now. Thus, Polkaswitch aims to leverage purpose-built blockchain like Polkadot to aid decentralized applications to improve the speed of transactions and reduce costs. With Polkaswitch, anyone using Metamask can exchange Ethereum, Polkadot, and ERC20 assets from a single interface.
By building a cross-chain bridge between Polkadot and Ethereum, Polkaswitch has opened a new page in the world of decentralized exchanges where there is no lack of liquidity, and the system does not suffer because of the congested Ethereum network. Combining the benefits of Ethereum & Polkadot, Polkaswitch offers its users access to crypto assets at the lowest fees.
To provide the best prices to its users, Polkaswitch uses smart contracts to fetch information from multiple decentralized exchanges. Their partnership with Moonbeam enables Polkaswitch to easily maintain cross-chain communication, which is a must for the smooth functioning of their system. ThorChain
Another leading cross-chain project is Thorchain, which makes it easier for users to swap tokens across chains. Thus, users do not have to rely on wrapped or pegged tokens. It is a cross-chain platform that facilitates communication between multiple blockchains to access liquidity. So, how does ThorChain facilitate cross-chain token swap? It builds a bidirectional bridge between two blockchains for it.
Multiple technologies are powering ThorChain transactions. These are automated market maker technology making it possible to facilitate automatic token swap via smart contracts. ThorChain also uses a Tendermint-based network. It makes it possible for anyone with technical chops to build custom decentralized applications.
Another key technology that ThorChain uses is Byzantine Fault Tolerance (BFT) consensus. It enables a scenario where any failure or attack will be addressed by a specific set of people. To address the challenges of the Sybil attack, ThorChain also uses the Proof-of-Stake mechanism. Anyswap
Similar to Polkaswitch and ThorChain, Anyswap, too, allows its users to swap tokens across multiple blockchains. Powered by Fusion's Decentralized Control Rights Management (DCRM) technology, Anyswap makes swapping tokens across chains hassle-free.
For the security of assets, Anyswap uses private key sharding. It means that the private keys are distributed across multiple nodes in bits. Thus, any transactions within the network require the signature of all the participating nodes.
Another good thing about Anyswap is that its smart contracts are open source. Thus, anyone can audit it, which makes Anyswap more secure. As for the key features of Anyswap, they are distributed inter-blockchain bridge, inter-chain swaps, and programmed liquidity. Summary
The number of DeFi users currently stands at 1.75 million
, whereas the number of unique Ethereum addresses is 150 million. It shows that there is still a long way ahead. To support further growth, features like better accessibility, ease of use, and improved liquidity, interoperability, and scalability are a necessity. Thus, it is about time that cross-chain projects become a norm rather than an exception. If Cross-chain adoption picks pace, it will be a good indication for the entire crypto space. With more & more cross-chain projects launching in coming times, we will see a new age of blockchain projects.