Cross-Platform Transactions: The Next Big Thing in Blockchain
One may be the loneliest number, but cryptocurrency most certainly is considered the loneliest asset class out there. For all of their prominence and value, cryptocurrencies on the same blockchain are not exchangeable simply as a matter of proportionate value the way fiat currencies are. It’s more complicated than that, and cross-chain transactions still exist at blockchain’s innovative edge.
Quite a few technical factors must align for transactions to be made across different chains without the need for an intermediary. This involves a quality called isomorphism. However, isomorphism can be very difficult to achieve, so other solutions need to be made. For example, bitcoin (BTC) and ether (ETH), the most valuable and traded cryptocurrencies, are not similarly compatible.
That’s not to say that you can’t trade one cryptocurrency for another directly, such as with BTC and ETH. With cryptocurrencies, many people use a kind of centralized intermediary, such as Coinbase or Binance, for cross-chain transactions.
Of course, this is a common process that those dealing with fiat currencies are used to as well. If you want to trade one kind of fiat currency for another, you have to use a centralized exchange of some sort — a bank, an exchange office, etc — as an intermediary. And with both fiat currency and cryptocurrencies on centralized platforms, you’ll need to share a substantial piece of the pie with the intermediary. On top of that, centralized exchanges convert your money and store it, but how it’s done is not as transparent as it could be.
The drawbacks of centralized finance (CeFi) don’t stop there, either, despite the way they allow some cross-chain transactions. CeFi is less secure, too, because assets and security keys, and the data they secure, are not under your direct control. This relative lack of control makes them more likely to be stolen or compromised in systems whose inner workings are not transparent or accessible to you.
Moreover, if you need to establish your own token and want cross-chain capability with it, the steps to take to do so and potential barriers to it are tremendous. Finally, CeFi doesn’t allow lending and borrowing crypto on platforms such as Compound.
Indeed, cryptocurrency transactions requiring intermediaries sidestep the whole point of cryptocurrency — a form of exchange freed from intermediaries, which decentralized finance (DeFi) platforms are already achieving.
Time Is Money, and Blockchain Interoperability Solutions Are About Saving That, Too
Source: https://unsplash.com/photos/e4KVtc6Wbbo
One of the most significant problems involving blockchain on DeFi that many developers are solving is scalability. Essentially, the problem is that there are many bottlenecks in the traffic of Ethereum-based transactions because the scale of these transactions remains relatively limited — too many transactions in too short a time.
What’s intensifying these bottlenecks is that ETH is the dominant coin of the DeFi realm. And it’s not only that — Ethereum is not only used as a currency itself, but also for transacting in stablecoin, a subclass of cryptocurrency that has risen sharply in usage. Keep in mind, this is trading within a single blockchain, not cross-platform crypto trading.
Because of scalability issues, the average amount of gas fees, which are paid to crypto miners for making any kind of transaction with ETH, have grown as high as hundreds of dollars at times and have become highly volatile, as shown in the graph below.
Source: https://www.coindesk.com/ethereum-gas-limit-eth-price-soars
Ethereum 2.0, the Ethereum network’s planned upgrade, aims to eliminate the problem of scalability through sharding, which creates multiple side chains handling parallel transactions to save the time individual transactions take. Although there are high hopes for Ethereum 2.0, it is certainly not a sure or absolute solution. That’s why alternative solutions are needed to address the scalability problem in the DeFi space.
Accordingly, blockchain interoperability solutions can fit the bill. With multiple blockchains for crypto coins and tokens to be exchanged fluidly, there would be less need to depend on one particular blockchain, such as Ethereum, to maintain transaction information and handle transaction load. Just as importantly, cross-chain allows for a greater sharing of information between blockchains, which stands to benefit blockchain applications in and among a wide variety of industries.
Moreover, many sources point out that cross-chain won’t just solve problems but also increase participation in DeFi.
Crossing Chasms Means Picking the Right Bridge
Although many solutions are trying to conquer cross-chain, some blockchain integration solutions are more value-added than others. For example, AIKON is a startup that aims to provide functionality as innovative as integration itself. Not only will the AIKON-affiliated ORE Token allow individual and enterprise users to perform transactions across multiple blockchains in a democratized network, but it also provides users a platform to create and manage their own DeFi app (dAPP).
AIKON’s ORE ID (a secure login tool for blockchain) sign-up and login interface allows users to integrate securely and easily with virtually any blockchain through email, SMS or a wide variety of social media platforms including Facebook, Twitter, Linked In and more. Enterprise users, specifically, can take advantage of multi-signature (multisig) security, which requires multiple signatories for transactions through ORE Vault).
All blockchain interoperability solutions must follow the best new practices. For example, a platform needs to be GDPR-compliant to ensure data privacy. Also, block producers, including EOS block producers, should follow a proof-of-stake protocol, where transactions are fast and fewer resources are wasted than with proof-of-work models. AIKON meets these requirements.
It’s time for the loneliest of assets to get together and improve blockchain altogether.