Multi-chain Approach- A Solution To The Interoperability
Blockchain technology has been around for just over a decade but has already changed the socio-economic system greatly by introducing a new global payment system. As a revolutionary database technology, blockchain can be the future venue for all virtual transactions. But this will, however, be possible when there is a proper solution for the interoperability issue.
Layer 1 blockchain adoption is unable to solve many problems, among which the most notable one is the scalability issue. The increasing numbers of users are making it difficult for layer 1 to cope. Such incompetence could be the result of the network’s reliance on complicated, outdated proof-of-work consensus mechanisms. Moreover, excessive load on layer 1 is negatively affecting the network, reducing its processing speed. Thus, the options of moving liquidity between chains became limited, resulting in isolated chains.
However, the increasing popularity of blockchain has forced this technology to revolutionize. Users expect quick, fast, and smooth fund movements, and a multi-chain approach is indeed the finest option. It is because people are eager to participate in their preferred ecosystem without any third-party intervention and to achieve that communication between chains is highly desired.
To facilitate the process of value transfer between chains, many solutions have come up in the past. Some of them are as follows:
Wrapped asset bridges: Wrapped assets are crypto tokens or cryptocurrencies that are essentially pegged to assets like gold, shares, stocks, real estate, and so on, and are used on DeFi platforms. Since the original asset is put in a digital vault or wrapper, it is called a wrapped asset or token.
Wrapped tokens serve as network bridges, allowing non-native assets to be utilized on any blockchain. As a result, it brings interoperability to the cryptocurrency world. A newly minted coin is issued for transactions on another platform when the original asset is secured in a digital vault. It represents the source chain that you locked to receive the representation token.
On Ethereum, Ether(WETH) is an excellent example of a wrapped token. Ether is necessary for transactions on the Ethereum network. However, ERC-20 is a technical standard for producing tokens. Because Ether does not meet the ERC 20 standard, Ether (WETH) was created. The exchange between ether and an ERC-20 token is only feasible when using a dApp. Therefore, a representation token Ether(WETH) was necessary.
Disadvantages of wrapped asset bridges
Certainly, the assets that are wrapped are not fully secure. As wrapping is done by a central program, it is vulnerable to manipulation. To put it another way, a smart contract on the blockchain network cannot automate wrapping. Vitalik Buterin, the creator of Ethereum, has also voiced concerns about the reliability of such crypto token exchanges for representation tokens.
The example of Wormhole Bridge, which was exploited for roughly 320 million dollars, should be highlighted here. Such an incident happens when there is a bug in the smart contract. Hackers get a wonderful opportunity to mint as many representation tokens as they like, making it possible to exchange all the tokens for native assets in the same manner.
Thus, we can see that all the money that the bridge holds can be easily stolen.
Cross-chain solutions: Cross-chain technology has made it possible to transmit value and data between multiple blockchain networks. Most importantly, it has simplified interoperability between them. With its assistance, users can communicate without the need for intermediaries. It primarily operates on the principle of atomicity, guaranteeing proper consistency between various interconnected blockchains.
How does it work to facilitate interoperability?
To isolate transactions across multiple chains, cross-chain technology uses the following methodologies.
Atomic swaps: These are intermediaries that allow two parties to trade their tokens across several blockchains. There is no requirement for a centralized third party for this type of process. Users can trade their coins with one another on a peer-to-peer basis.
Relays: Blockchain networks can use relays to keep a watch on transactions and events happening on other chains. They operate on a chain-to-chain basis, without the use of scattered nodes, allowing a single contract to act as a central client for numerous chains. This allows it to validate the full transaction history.
The drawbacks of cross-chain technology
Although cross-chain technology has aided interoperability, it is not without flaws, since it has failed to address several issues. It has not only failed to keep track of the history of non-fungible tokens but also failed to finalize the transactions.
It has also been reported that users have experienced congestion while making transactions. It is, in fact, vulnerable to cyber hacking.
What is the ultimate interoperability solution?
In the context of crypto networks, interoperability means that assets, data, smart contracts, and apps can connect with multiple chains. Users, programs, and developers should not be tied to a single chain. There should be a free movement throughout the multichain crypto-verse. Although a multi-chain platform allow users to transfer funds between different networks swiftly, promptly, and safely, digital asset swap between networks can be time-consuming and costly, depending on the technique used.
However, the FibSwap project by aiding in the settlement of several multi-chain challenges aspires to be the first all-in-one multi-chain solution.
How projects like FibSwap can solve interoperability issues?
By giving significantly greater accessibility, FibSwap has overcome the users’ barrier of sticking to tokens available on a single chain. FibSwap users may trade BSC tokens for ERC20 tokens, as well as with polygon, phantom, and many other cryptocurrencies. All of these are possible in one simple, cost-effective, fast, and transparent process.
It can take a long time to swap between chains. FibSwap, on the other hand, takes only 10 seconds to swap between the BEP20, ERC20, Polygon, Phantom, Arbitrum One, and Avalanche chains. It is so simple to use that even a beginner will have no trouble using it. Most importantly, because it is a decentralized exchange, it is safe from hackers, and users have complete control over their private keys.
Users of crypto tokens expect no-congestion trading, which is why it’s critical to develop a viable solution to blockchain interoperability difficulties. The crypto-community has tried various approaches to overcome the problem until a multi-chain strategy was developed to expedite the crypto trading process.
Therefore, we can say a multi-chain solution is the most effective way to address interoperability difficulties and provide a seamless trading experience.