The DeFi market has entered a new phase of development in 2021, with new public chains such as BSC, Heco, Terra, Solana, etc. being launched one after another, and the DeFi ecosystem based on these public chains is evolving. the DeFi market landscape has quietly changed.
The DeFi landscape is quietly changing, with strong cross-chain demand
In terms of data, according to Debank’s statistics as of June 3, 2021, the total lockup in the DeFi market is $84.73 billion, of which $61.16 billion is in the DeFi ecosystem on the Ethernet chain, $16.29 billion on the BSC chain, and $6.89 billion on the Ploygon chain. Although this statistic does not include data on OKChain, Heco and other new public chains, Ether’s share in the DeFi market is being eaten up by other public chains, and BSC has become a strong rival to Ether.
In terms of individual DApp data, there are some star projects on each public chain, and while the overall quality of DeFi projects on the Ethernet chain is higher, the star projects on the newer public chains can also pose competition to most of the Ethernet DeFi projects. The decentralized exchange Pancakeswap, deployed on the BSC chain, already has more lockups than Uniswap V2. Even MDEX, the largest decentralized exchange on the Heco chain not included on the site, has more than $2 billion in lockups.
As new opportunities emerge in the market and investors’ choices diversify, it is no longer possible to complete interactions on just one public chain or a few specific decentralized DApps in the past. Especially when there are star projects and wealth effects on different public chains, frequent asset cross-chain has become an inevitable choice. Seeking to complete asset cross-chain with high efficiency and high cost performance and chasing high returns has become a real demand in the market.
For capital and project parties, DeFi market ecology is moving towards the pattern of “multi-chain coexistence”, and the “high and low match” among public chains has been formed to meet the needs of different users. In the past, the thinking of only holding on to the development of Ether is definitely not suitable for the current market environment. Just yesterday (6/3), Sam Kazemian, founder of Frax Finance, an algorithmic stablecoin protocol, tweeted that SushiSwap should develop its own blockchain, Sushichain, to facilitate exchange with other blockchain assets. Later, Dave Liebowitz, head of business growth at the Gelato project, commented on the SushiSwap discussion board that such a move would solve SushiSwap’s current problem of liquidity fragmentation across blockchains. In the future, more lightweight blockchains or DApps may emerge to accommodate asset transfers between different public chains, and the cross-chain track may see more investment opportunities in the new era of DeFi.
Cross-chain and cross-chain bridge
There are many connotations to the concept of “cross-chain”. These include simple asset transfer, information interaction between different chains, and even transaction interaction between two or more chains. Depending on the connotation, there are different meanings of cross-chains.
In the early days, we wanted to transfer BTC from OMNI chain to Ether to release the liquidity of BTC, then we mapped BTC to Ether to form wBTC, which is a kind of cross-chain. Only this is a centralized cross-chain approach, where the whole process is led by BitGo, a centralized company, and the mapped collateral BTC is hosted on a third-party platform.
With the development of DeFi technology, what we often call cross-chain evolved into a decentralized form of cross-chain, which is mainly divided into two levels: chain and smart contract.
The so-called chain level cross-chain is the interaction between two chains as the goal, which is what we usually call “cross-chain”, and the representative projects are Polkadot and Cosmos, which are more difficult to realize because of the need to realize more complex application scenarios in the cross-chain, and therefore need to build a unified protocol and governance model. Take Polkadot as an example, all the DApps involved in cross-chain are transferred and applied in assets, information, transactions and security functions through the interaction between the parallel chain and the main chain (relay chain).
The smart contract level cross-chain, compared to the former, only completes the function of asset transfer, which is what we usually call “cross-chain bridge”. It is more lightweight, and its essence is only to verify the security of transaction information when assets are transferred from one chain to another, which is a kind of cross-chain interaction between smart contracts.
Before cross-chain implementation at the chain level, cross-chain bridges simply provided a compatible way for two chains with different protocols, rules, and governance models to transfer assets between chains in the form of a mapping. Mapped assets were often hosted in a cross-chain bridge or third-party pool after the cross-chain. However, with the development of various decentralized DApps, cross-chain bridges are also moving towards non-custody.
At the application level, due to the current high demand for asset cross-chains, many high TVL Swaps have cross-chain bridge functions in them, which can satisfy investors’ assets to switch freely between related chains with extremely low fees.
The future of cross-chain
The above has illustrated that cross-chaining at the chain and smart contract levels is not the same thing, and while cross-chaining and cross-chaining bridges are just one word apart, they have completely different goals. The emergence of cross-chain bridge is only to meet the user’s need for quick transfer of assets, and can only be considered a form of cross-chain overkill. Similar to Polkadot and Cosmos, the focus of development is to complete the scalability, security and multi-scene application of blockchain. Will the existing cross-chain bridge projects evolve to replace or weaken the position of cross-chain projects like Polkadot or Cosmos in the market?
For DeFi users, it is enough to have a good enough bridge to help them mine on chains outside of ethereum, but cross-chains certainly can’t just meet the needs of asset transfer, and in the eyes of blockchain technology developers, cross-chains have a long way to go in the future.
RChain community technology developer Mo gave the machine crazy has said to me that security is the most important issue for cross-chain development. The biggest problem of cross-chain is that absolute trust is needed between two chains, and very often this trust cannot be established, so the cross-chain bridge cannot accomplish richer application scenarios. And when it comes to real cross-chain projects, he believes that although Poca can become such a role as an intermediary, but at present, whether it is Poca or Ether between parallel chains, layer2 interoperability between each layer 2 network still needs a lot of room for improvement. This directly limits cross-chain, slice and dice atomic transactions.
“Although cross-chain bridges meet the need for asset transfer, in terms of future cross-chain transactions, most of the current technology direction is moving towards hash time lock, which fragments the transactions, i.e., chain A completes part of it, chain B completes part of it, and then A completes part of it, which violates the atomicity of transactions. Whereas among the existing projects in the current market, Avalanche, Harmony, and RChain use synchronous consensus across splits in their protocols, which ensures the atomicity of transactions.” Mo gives Machine Mania this indication that perhaps the future of cross-chaining will arise in these projects.
Although cross-chain technology still has a long way to go, the development of cross-chain bridges is also a necessary part of the further expansion of the current DeFi ecosystem given the current market size and stage. In the development of the DeFi ecosystem, it is important to have both projects that are in line with the general trend of technology development to move forward and products that improve the user experience in stages to be launched continuously in order to eventually form a mature and stable DeFi market.
Examples of cross-chain bridge projects in the market today are
Thorswap is a cross-chain liquid asset exchange deployed on Thorchain. Thorchain is a decentralized cross-chain liquidity network that allows any asset to be exchanged with assets in other decentralized liquidity pools. Users can complete spot exchanges of native assets from different chains on the app.
Thorchain’s main slogan is the first decentralized cross-chain liquidity network, and RUNE is its network-native token. Users can complete the conversion of cross-chain tokens by exchanging with RUNE. For example, converting ERC20 Sushi to BEP2 BNB requires exchanging Sushi for RUNE and then for BNB. as an early cross-chain bridge application, Thorswap supports a relatively small number of conversion tokens and chains, with a total locked position of over $86 million on the platform.
Anyswap is a decentralized cross-chain transaction protocol that allows users to complete decentralized cross-chain exchange of assets across multiple ecosystems via an asset cross-chain routing service.
Compared to other cross-chain bridge projects, AnySwap is more project-side friendly and most DeFi applications can be integrated with it quickly. As of yesterday (6/3), there are 14 public chains integrated on AnySwap, including Ethereum, BSC, Fantom, Heco, Fusion, xDAI, Polygon, and more. Cross-chain assets that can be supported include Sushiswap, Curve, ChainLink, Aave, YFI, 1inch, TokenPocket, Unit and 309 others, with a cross-chain lockup of $348 million.
Anyswap uses MPC (Multiparty Computation Consensus) combined with escrow to complete the transfer of DeFi assets. The overall process is as follows: the user charges assets to the Anyswap escrow account, the nodes on the cross-chain bridge automatically verify the authenticity of the charge operation, and upon successful verification, the nodes perform MPC+TSS signatures to generate on-chain mapped assets and release them to the user’s account on the chain. The above process takes only a few seconds to complete.
Multichain.xyz is a multichain cross-chain platform developed by the Anyswap team and Andre Cronje, founder of yearn.finance, based on the Anyswap SMPC Network. Multichain.xyz provides users with the channel and technology to exchange any two assets directly between different DeFi ecosystems.
Compared to Anyswap, Multichain.xyz takes decentralized cross-chain one step further and is already in the process of non-custodial cross-chain asset transfers. In addition, since it relies on Anyswap’s technology, Multichain.xyz operates on data similar to Anyswap, both of which can support multiple on-chain transfers of a large number of digital assets.
O3 Swap is a cross-chain aggregation decentralized exchange that enables liquidity aggregation from chains such as Ether, BSC, Neo, Heco, etc. to decentralized exchanges, while its cross-chain asset transfer features are based on the cross-chain interoperability protocol Poly Network to build cross-chain transaction pools.
While investors get mapped assets through traditional cross-chain bridges, O3swap has designed a cross-chain asset exchange pool (O3Hub) for stablecoins on different chains. Investors can complete the exchange of cross-chain stablecoins at O3 Hub, and the exchange proceeds are the native tokens of the main network. Investors can then trade through these different chains’ stablecoins. The stable coins locked in O3Hub have reached $101 million at present.
Darwinia is a decentralized bridge network based on Substrate that provides a secure and universal bridge solution for asset cross-chain and universal remote chain calls between heterogeneous chains such as Boca, Ether, Coinan Smartchain, etc. The main application areas include DeFi, cross-chain NFT transactions and gaming.
The Darwinia bridge transfer method does not rely on intermediate custodians, but combines MMR encryption technology, authentication games and ultra-light client technology to achieve decentralization of the cross-chain transfer process, thereby eliminating third-party involvement throughout the process.
The cross-chain bridge project in the Solana network is Wormhole, but it seems that the project is still in testing at the moment. What we can get through public information in the market is that Wormhole acts as a two-way cross-chain bridge between Solana and Ether, allowing users to convert ERC20 tokens into Solana’s SPL standard tokens for use in DeFi applications. To achieve this, it will rely on a series of cross-chain prophecy machines called “guardians”, which will be composed of a set of node operators that include top Solana verifier nodes and other system stakeholders that are highly aligned with the interests of Solana and Serum. The operators will be highly aligned with the interests of Solana and Serum. Officials also said that in the future Wormhole will also add support for Terra and upgrade it to a three-way cross-chain bridge.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/defi-landscape-is-quietly-changing-cross-chain-track-contains-opportunities-to-be-explored/
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