Why 2021 Will Be the Year of Cross-Chain?
2020 was the year in which DeFi took the blockchain world by storm. While the rest of the planet will most likely remember 2020 as the year of COVID-19 and lockdown, crypto enthusiasts will also remember it as the year of crypto lending, borrowing, liquidity mining, and the much-reported upon Total Volume Locked (TVL) graph. That was not without good reason, however, as in 2020 the TVL in DeFi protocols grew from $675M to $16.2B.
Other parts of DeFi also performed well as the dollar value of stablecoins rose from $5B at the start of the year to $26.4B. It wasn’t all good news for decentralized finance, however, as the Ethereum chainopoly which shoulders the bulk of DeFi was placed under increased stress, with transaction times slowing to a standstill and gas fees rocketing. Average transaction costs on the network spiked in 2020 from a few cents at the very start of the year to over $12 in September. This in turn led to a number of projects touting cross-chain technology as a long-term solution, spreading the weight across multiple blockchains.
The Rise of Cross-chain
Although cross-chain technology has been brought into particular focus thanks to the scaling challenges faced by Ethereum, it is by no means the only use case for cross-chain or the reason why it will dominate the coming year. Interoperability has been an aspiration within blockchain for a considerable time, and now the technology is finally catching up to its ideals.
One of the projects adding considerable momentum to the cross-chain trend is Fire Protocol, developed on the Huobi Smart Eco Chain. Fire Protocol uses cross-chain technology to bring hundreds of digital assets to the Huobi ecosystem. A DEX dubbed FireSwap is also part of the offering and provides cross-chain asset wrapping, which is of particular importance in reducing the strain on overworked networks such as Ethereum. Fire Protocol is also backed by its own proprietary FIRE token, which is used to power incentive mechanisms such as community proposals and for user voting.
PlasmaPay is another emergent DeFi project extolling cross-chain technology. The online banking system and DeFi aggregator have continually pushed the message that in order to bring DeFi to the wider public the sector cannot rely on one chain alone. When PlasmaPay’s cross-chain HyperLoop is launched in 2021 it will join a growing number of cross-chain solutions including Matic.
Interoperability
Beyond the desire to maximize the efficacy of DeFi, cross-chain technology and interoperability is at the very heart of a number of next-generation blockchain networks. Cosmos and Polkadot are among the best known of these. Cosmos Network promises “the most powerful ecosystem of connected blockchains”, for which they have coined the phrase Inter-Blockchain Communication (IBC). The idea is intriguing, and a number of projects are already developing on these including IRISnet, e-Money, Sentinel, and Agreements Network. Binance network has also built on Cosmos technology but it is unclear to what degree Binance has embraced the idea of interoperability at this stage.
Polkadot is the cross-chain solution developed by Ethereum co-creator Gavin Wood. Such is the strong pedigree and scope of the project it was recently touted as the “Ethereum killer” by Bloomberg. Whether Polkadot can live up to that billing or not, there is plenty of evidence to suggest that 2021 will be the year of cross-chain.
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OhNoCryptocurrency via https://www.ohnocrypto.com/ @Bitcoinist, @Khareem Sudlow