With the introduction of yield farming in the first quarter of 2020, the Decentralized Finance (DeFi) industry experienced a boom. Investors, developers, and entrepreneurs were attracted to the industry because of the high profits and innovative uses. Since then, the total value locked (TVL) in DeFi has increased by an order of magnitude.
Because of the popularity of DeFi, Ethereum has always been the platform of choice. However, as more and more people were involved in the craze, scalability issues began to appear for this particular ecosystem. Because of high costs and congestion, Ethereum has become almost unusable for retail customers, which has resulted in the emergence of various other ecosystems.
There are a number of popular ecosystems, including the Binance Smart Chain (BSC), Fantom, Polygon, and xDai, which are all EVM-compatible and allow for easier integration for DeFi projects. Users can choose which blockchain or ecosystem to use when navigating their respective decentralized applications, allowing for greater flexibility (dApps).
Going multi-chain: Is it that easy?
Despite the fact that these new ecosystems provide substantially cheaper transaction fees, faster transaction times, and extra functionality, Ethereum remains the preferred platform for most DeFi initiatives, particularly owing to the tremendous liquidity and volume seen on the Ethereum network.
It is understandable why there is so much excitement surrounding cross-chain infrastructure, given that the concept serves as the „holy grail“ for the development of Blockchain technology, as it allows for the realization of interoperability across all chains. Some cross-chain technology types are already available that allow for asset interoperability. Others, on the other hand, offer communication protocols to facilitate communication between blockchains, as well as new system architecture and operating modes to support greater access to blockchains in general.
There are numerous obstacles to moving to an alternate network, which affect both the initiatives and the users themselves. However, the lack of liquidity and volume observed in these new ecosystems has proven to be the most persistent problem to date. Through cross-chain linkages, projects themselves attempt to give solutions for their own communities. This system, on the other hand, has a number of shortcomings.
The benefits of cross-chain bridges in terms of scalability and connection are undeniable, but the drawbacks are linked. For example, plasma and sharding, two of the most prominent Ethereum scaling methods, necessitate the use of parallel chains (called „parachains“) or chain splits (called „shards“) that are capable of communicating with one another. While these solutions have the potential to be revolutionary, they will require a significant amount of time to implement.
Aside from the fact that the DeFi protocols enable communication between two different smart contracts running on two different chains, the illiquidity of the protocols renders the solutions virtually unusable in terms of functionality.
All of these problems are frequent, resulting in an unsatisfactory user experience and posing a barrier to entrance for potential customers. However, below are some examples of projects that have begun to make use of cross-chain capabilities across many blockchains.
Wormhole (Solana)
Wormhole allows existing projects, services, and communities to easily move tokenized assets across blockchains, allowing them to benefit from Solana’s fast speed and low cost.
Interoperability remains a top priority because it enables the most efficient use of resources and unleashes network effects. It employs guardians, which are decentralized cross-chain oracles run by a group of node operators that includes top Solana validators and other ecosystem players whose interests are closely aligned with Solana’s.
Wormhole enables non-native assets to enter Solana’s thriving DeFi ecosystem faster. Wormhole may assist projects in gaining access to more cross-chain liquidity.
Coin98
Coin98 developed open financial infrastructure in response to global demand. It functions as a one-stop shop for decentralized banking, cross-chain swaps, staking, earning, and yield farming.
To utilize these capabilities, users can choose from more than 20 different blockchains. This is made feasible via Space Gate, a cross-chain bridge that enables swapping and transfers across many networks.
Coin98’s liquidity and DeFi solutions, which leverage multiple blockchains, provide customers with extensive liquidity while guaranteeing they receive the best possible price when trading tokens. According to the site, over 284,000 users generated over $216 million in volume through over 488,000 transactions.
Anyswap
Anyswap is a fully decentralized cross-chain swap protocol built on Fusion DCRM technology. It features an automated pricing and liquidity system. You can use AnySwap to exchange tokens or coins between any blockchain that supports the ECDSA or EdDSA cryptographic algorithms, which covers over 95% of all chains, including BTC, ETH, USDT, XRP, LTC, and FSN.
Anyswap offers users three major cross-chain advantages:
- Users can deposit any currency into the system and create decentralized wrapped tokens.
- Users can switch from one coin to another at any time.
- The liquidity provider has the ability to add and remove liquidity from the swap pair. The liquidity offered is the basis for the programmed pricing mechanism.
Kylin
The Kylin Network is a project that attempts to power the data economy by utilizing the Polkadot network. Polkadot received a Web3 Foundation grant in late 2020 and will launch its mainnet next year, while continuing to pursue partner network integrations. The Polkadot parachain will include data analytic tools, an advanced decentralized data feed, an open marketplace for data exchange and pricing, and a native token to manage governance.
Interestingly, the Kylin cross-chain platform was hailed as a viable answer to the United States‘ election-related problems.
The Cosmos blockchain is the most underappreciated interoperability attempt for blockchains.
Numerous initiatives are attempting to make the blockchain project the center of attention. The makers have provided a software development kit they claim will address concerns with scalability and interoperability in blockchain applications. Cosmos is a decentralized network of autonomous parallel blockchains that communicates with external networks using the Interblockchain Communication (IBC) message protocol.
The Cosmos blockchain system is comprised of multiple autonomous blockchains dubbed Zones that are connected via a central blockchain dubbed the Hub. Each Zone is powered by Tendermint Core, which provides a high-performance, consistent, and secure consensus engine akin to PBFT. The cosmos Hub connects blockchain projects via the Inter-Blockchain communication protocol to promote interoperability.
Graviton
Cross-chain technology aims to address challenges with decentralized applications and the DeFi area. Graviton significantly reduces illiquidity and other entrance hurdles.
Graviton is a cross-chain connectivity solution that enables tokens to be used across several blockchains. The technology’s fundamental premise is to act as a liquidity incentive for wrapped assets, specifically CEX tokens. This is to ensure a consistent cross-chain experience. Graviton is essentially a handshake between various blockchains.
Graviton’s positioning is straightforward: it is a unifier that resolves the fragmentation in the DeFi area. It is an open, frictionless, and user-friendly architecture that enables the aggregation of bridges, cross-chain swaps, and reward farming by liquidity providers.
Graviton connects communities for a variety of blockchain initiatives, including chains, AMMs, farms, and tokens. It provides clients with governance tools for boosting liquidity and yield generation on the destination chain for their selected wrapped digital asset.
What does Graviton offer?
On the surface, Graviton appears to be just another DeFi project. However, it is a one-of-a-kind project in terms of the problem it addresses.
To begin, Graviton makes use of the best-in-class existing bridge solution to ensure an abundance of infrastructure for cross-chain farming. Graviton will have its own megabridge that will act as a bridge aggregator for trustless bridges such as multichain.xyz, RenVM, and the Susy protocol. These bridges are required components in several Graviton subsystems, and they will also aid in making cross-bridge usage seamless and quick.
Second, the emergence of competing blockchains, as well as widespread adoption of cross-chain technologies, is critical for the expansion of the DeFi space.
As a result, Graviton’s infrastructure includes the governance token, GTON, which aids in bridging DeFi space fragmentation.
GTON is more than just a governance token; it is a multichain relay token that connects AMM DEX liquidity across multiple chains, increasing liquidity for initially illiquid assets such as wrapped, CEX, and recently tokenized enterprises. GTON is a reflection farming token that can be used to set up a permissionless Liquidity Provision (LP) farm in order to accelerate liquidity for any asset on any supported chain.
Furthermore, Graviton is brilliant in its ability to boost multichain relay liquidity and amplify wrapped token efficiency. Graviton has low entry and interoperability barriers. Tokens can be moved quickly across the ecosystem by communities. The Graviton Catalyst initiative provides liquidity to wrapped tokens, allowing various tokenized blockchain projects to spread into non-native networks.
Catalyst is based on increasing reward incentives for tokens that lack liquidity (wrapped, CEX, newly emerged) on a regular basis. Its goal is to help tokenized blockchain initiatives such as protocols, AMMs, and farms gain traction by rewarding liquidity and, if desired, expand to non-native networks. Catalyst intends to engage the communities of participating projects in short and medium-term activities that will incentivize the bootstrapping of liquidity for newly created wrapped tokens by delivering additional LP rewards on a regular basis.
Catalyst programs are only available for two to three weeks, and LP rewards allocation points are reweighted weekly. The Catalyst initiative reserves 12% of GTON supply to reward liquidity providers. Members of a community can use their GTON to nominate their favorite project for the Graviton Catalyst program, increasing the LP tokens‘ staking yield.
Conclusion
As the DeFi business expands, it appears as though there is no shortage of fresh DeFi initiatives sprouting up on the Blockchains. The proliferation of blockchains, on the other hand, makes it difficult for the typical user to scale from chain to chain. The protocols Wanchain, Cosmos, and Graviton, among others, bring order, transparency, and security to the crypto market and liquidity pools.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
