How is cross chain the solution to the current state of DeFi Blockchain status?
Earlier on, a vast majority of blockchain networks including Bitcoin, Ethereum and Ripple operated only within isolated ecosystems, which restricted their functionality thence making it difficult for cryptocurrency traders and investors to leverage the full benefits of distributed ledger technology.
Decentralized Finance (DeFi) was developed based on the idea of creating a financial system that will be open to one and all, minimizing the need to trust and rely on a central authority. Built on applications and peer-to-peer protocols built up on decentralized blockchain networks requiring no access rights for easy lending, borrowing, or trading of financial tools. Most DeFi applications today are developed using the Ethereum network, but many alternative public networks are emergent, that promises to deliver on improved speed, scalability, security, and reduced costs.
Cross Chain, technology on the other hand is increasingly becoming a hot topic of discussion. Many cryptocurrency enthusiasts see it as the ultimate solution for enhancing interoperability between different blockchains. It is an emerging technology that permits the transmission of value and information among blockchain networks.
As the world evolves into a digital center, more industries will most likely embrace blockchain technology. These ecosystems will need to communicate with each other for maximum efficiency — a possibility achievable through cross-chain protocols which permits placing of independent business operations on a separate chain before linking information, transactions, and interactions. Businesses will no longer have to contend only with clients on a network the business are built on. Instead, companies will be able to transact with clients from other compatible blockchains that share the same or similar network.
The entire process will take place without any downtime or expensive transaction fees. Just like the Internet of value, cross blockchain compatibility is expected to accord blockchain networks an effective means of value transmission.
Beyond the desire to maximize the efficacy of DeFi, cross-chain technology is at the very heart of several next-generation blockchain networks, such as Cosmos, Polkadot, Wanchain, RAMP DeFi, Mantra Dao, Kylin Network, Ink Labs Foundation and many others.
According to Michael Egorov from Curve, “DeFi will grow really big and will replace banks and power a whole new world of financial systems, but there’s a long way to go.”
Potentially, Cross-chains will define the next era of blockchain development as mainstream industries build their ecosystems. Its composability is believed to propel DeFi to a new level of functionality and holistic acceptance.