Why Are Multichain Projects Gaining Popularity?
With the development of the blockchain space and cryptocurrencies, a significant problem emerged - the lack of communication between networks. Most platforms are designed as individual systems that cannot interact with each other. This puts certain boundaries into the system as a whole and means that in most situations you can use your digital assets only within platforms with the same blockchain.
It was clear that, especially in the world of DeFi, some sort of bridge needed to be established. It was necessary for the users to be able to use their tokens across different blockchains. This is what, essentially, cross-chain technology came to solve.
This technology gives you access to different ecosystems. It literally acts like a bridge between totally unrelated blockchain networks. By using bridges these networks can interact with each other. Most of them have the following protocol: they wrap tokens in smart contracts and then issue them on other chains. Your assets are locked or burned on the original chain, and then unlocked or minted on a new chain. All through the power of smart contracts.
Another approach for cross-chain bridge transfers is a liquidity pool that works as an inventory of various coins and enables the exchange.
Since the birth of cross-chain technology, there have been and still are many cross-chain solutions. However, there is one that is definitely the most popular - multichain.
Multichain is an open-source, decentralized cross-chain ecosystem. It allows easy communication and interaction between the blockchains so that users can utilize their projects across different networks.
The project using multichain needs to be based on at least two blockchains. The underlying blockchain is separated into different layers. One of them keeps the whole system secure. This consensus layer is the base for the entire network and keeps all of the blockchains within the system secure.
There is also a network’s application layer on the top. It is characterized by being programmable, which makes it possible for other individual blockchains to communicate and co-exist. It is like having many different ecosystems within an ecosystem of its own.
Benefits of using multichain and cross-chain technologies
Multichain and cross-chain technologies solve the problem of interoperability in the blockchain world. But what it essentially means for users is that their assets can seamlessly flow between different ecosystems because now link between them. You can use them to transfer information, data, and other assets.
Without this technology, the cryptocurrency exchange process across different blockchains would be painful, expensive and time-consuming. A user would need to convert his tokens into fiat currency, and then buy a different cryptocurrency, both times paying fees and investing a lot of time.
As you can see, these bridges are necessary for the development of the DeFi world. Users need to be able to move their tokens easily, fast, and without high or hidden costs.
Making the transaction process between blockchains more efficient ensures greater scalability along the whole system.
On the other hand, since this technology is still in the process of developing, it might be relevant to keep in mind that bridges can still be vulnerable.
Why is multichain so popular?
Besides supporting more than 42 chains like BNB Smart Chain, Fantom, and Harmony, Multichain eliminates the hidden fees and costs, which was the main problem when the need for exchange started.
Multichain is of great importance to the DeFi world since it can access liquidity across different blockchains. It offers more than 2,000 bridges for crypto tokens to thousands of projects and DeFi protocols.
Other popular cross-chain bridges
In general, cross-chain bridges can support different blockchains and have a variety of features. A common point for them is the support for bringing smart contracts, tokens, and NFTs from the Ethereum mainline to other blockchain networks. Let’s have a look at other popular cross-chain solutions.
Wormhole Portal Bridge
When using this bridge, you can’t swap your assets directly. The bridge locks them in a smart contract and mints new Wormhole-wrapped assets on the target chain. After this, you can swap Wormhole-wrapped assets in exchange for other assets on the target chain. The Wormhole Portal Bridge connects different ecosystems Ethereum, Solana, Terra, Binance Smart Chain, Polygon, Avalanche, Oasis, Fantom, Karura, Celo, Acala, Aurora and Klaytn.
Avalanche Bridge helps you bridge assets between Avalanche and Ethereum in a single on-chain transaction. When the bridge receives fungible Ethereum tokens (ERC-20) from the Ethereum network, the transaction is validated. Then a wrapped ERC-20 token is minted on the Avalanche network. The process can also be reversed. First, the tokens are unwrapped on the smart contract after which the native ERC-20 tokens are unlocked.
Polygon Bridge enables the transfer of assets between Polygon and Ethereum. You can transfer your ERC-20 tokens and NFTs to the Polygon layer-2 chains through its two cross-bridge solutions: Polygon (POS) bridge or Plasma bridge.
Both bridges can port crypto assets from the Ethereum network to Polygon, but they work in different ways. The POS bridge uses proof-of-stake (PoS), while the Plasma Bridge uses Ethereum plasma scaling solution.
The cross-chain technology contributes something important to the blockchain space. It brings the solution for interoperability, scalability and true decentralization. Different cross-chain solutions have different ways of making this happen. Multichain protocol has proven itself as a successful solution when comes to this technology. It definitely stands out as a leader in the future of the development of decentralized finance. At Dexvers, we see ourselves as a part of this future and a decentralized ecosystem.
Disclaimer: The information provided in this post is not legal, accounting, or financial advice. The information should not be construed as investment or trading advice and is not meant to be a solicitation or recommendation to buy, sell, or hold any cryptocurrencies.