Hackernoon logoCross-chain as the next stage in the development of decentralized networks by@TonyToreto

Cross-chain as the next stage in the development of decentralized networks

Tony Toreto Hacker Noon profile picture

@TonyToretoTony Toreto

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Cross-chain (sometimes also called "blockchains of blockchains") — is the technology of transactions between different blockchains. In recent years, the need to implement this technology has increased, and there are a number of serious reasons for this:

The number of startups, and as a result, various blockchains continues to increase;

Applications deployed on different blockchains cannot interact with each other in any way, limiting the capabilities of users;

Value cannot be transferred between blockchains, limiting the potential for decentralization;

Blockchain technology has evolved from cryptocurrency platforms like Bitcoin to a variety of innovative projects. Many of these projects solve actual problems and have value in the market, expressed in the capitalization of tokens. However, at present, we have a lot of good ideas that cannot directly interact with each other due to the difference in blockchain protocols.

Using the example of traditional spheres of economics and finance, we can make sure that so far no platform has been able to implement all the problems in all industries and cover all problems. Therefore, they have to interact with each other, and in a centralized world, this is quite successful.

Following the example of ecosystems from the traditional sector of the economy, decentralized projects should learn how to distribute value and functions between different blockchains while maintaining the possibility of interaction between them.

Cross-chain can be the solution to the problem in the world of blockchain applications. Its principles will allow us to place independent business operations on a separate chain and then link information, transactions and interactions. And at the same time maintain huge throughput and speed of operations, which is impossible for centralized models

The latest achievements of the cross-chain technology

Attempts to create cross-chain platforms have been made in the past. Moreover, many projects have achieved significant success in this, offering transitional ways of exchanging information between blockchains. Polkadot, Lightning Labs, Wanchain, Fusion, Cosmos, Ink Labs Foundation — they have been working on the implementation of the space of interconnected decentralized networks for several years..

After the development of DeFi and, as a result, the invasion of thousands of new projects, this issue has become more relevant than ever again. As of January 2021, the capitalization of the DeFi sector exceeded $ 25 billion, showing a 30-fold increase over the past 12 months. Much of this growth has come from decentralized exchanges like Uniswap and Curve Finance, as well as the Maker and Compound lending platforms.

DEX and other DeFi projects are very advanced technology solutions, and of course, many of them are already developing ecosystems that can unify blockchains.

At the end of last year, the Compound DeFi Landing Project introduced the Compound Chain, a new protocol for the interaction of assets from various blockchains. Within the Compound Chain, users will have the ability to deposit and borrow assets from various systems, such as Polkadot or Tezos. To pay commissions, the new system will use a native token - CASH. The Compound Chain will be managed by the community through Ethereum-based COMP tokens.

In October 2020, the blockchain protocol for building decentralized applications and smart contracts Solana announced a cross-chain solution connecting Ethereum and Solana tokens. A solution called Wormhole will allow projects, platforms, and communities to move tokenized assets across blockchains.

Wormhole will allow DeFi platforms to use Solana for transactions while allowing settlement on a different backbone. Payment gateways can also use the solution to make faster transactions.

And more recently, on January 3, 2021, Binance Smart Chain (BSC) successfully integrated PARSIQ, a cross-chain solution for tracking events on the blockchain for use on any BSC smart contracts. The project was funded by $ 100 million. PARSIQ's toolkit allows users to create complex tasks triggered in real-time by data and smart contract events on the blockchain.

Now the cross-chain from NewsCrypto has joined the race. The NWC token was created on the Stellar blockchain due to its low fees and fast transactions, but since the development of various protocols for other blockchains has become so fast in the past year, NewsCrypto has implemented a cross-chain exchange of its NWC tokens right on the project website. Users can now switch between NWC versions of Stellar, Ethereum, and Binance Smart Chain in a 1: 1: 1 ratio with one click. Since the process is implemented with a smart contract, it is completely automatic and does not require additional permissions.

Given the number of innovative protocols on Ethereum and BSC, this will open the door to many new use cases. Now it will be possible to use the NWC token in any Ethereum or BSC decentralized application and place it on the decentralized exchanges of these two blockchains. A few days ago, the NWC/ETH trading pair was added to Uniswap.

Thus, 2021 could be the starting point for the implementation of interoperable blockchains and cross-chains. While all projects are experimenting with their own vision of interactions between different protocols, however, over time this will lead to significant advances in this direction.

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