Is a Multi-Chain Ecosystem the Future of Blockchain?

A multi-chain ecosystem is one where several blockchains are interconnected. There have been many arguments for and against multi-chain ecosystems, though most experts believe that multichain-based blockchain solutions have the potential to transform and elevate the industry with high yield and fast growth.

The industry is set to see significant growth over the next few years as more individuals, big businesses, and governments utilize the technology to solve their everyday problems. However, as more users come in, the many shortcomings of existing blockchains, such as lack of scalability and interoperability, are exposed. This has seen the industry transition from siloed individual networks to a vast interconnected ecosystem that enables users to transfer value freely.

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Over the past few years, we have witnessed the rise of cross-chain DEX aggregators, wrapped assets, interoperable NFT marketplaces, and bridging solutions, all of which have shaped a multi-chain environment. It is a reflection of a shared vision among developers of an interoperable future that has been born out of necessity, given the eye-watering gas fees and constant congestion on protocols such as Ethereum.

The desire of token-holders to leverage certain coins on dApps native to other networks has also given rise to cross-chain wrapped assets such as wBTC and wETH. These synthetics represent tokenized versions of Bitcoin and Ether, whose value is pegged to the original. They allow users to ‘wrap’ the native token to be used in decentralized finance applications. Wrapped crypto allows coins that live on one chain to be used on another.

Promoting Better Communication between Blockchains:

By enabling better communication between different blockchain networks, the overall crypto ecosystem is becoming more cohesive and attractive to mainstream users. Barriers to entry are being reduced, and the complexity of asset swapping and connecting different Web3 wallets is becoming a thing of the past. Over the past few months, multi-chain bridge protocols have seen all-time high volumes as users take advantage of low-cost value transfers between a dozen different networks.

The explosion of lending, savings, and trading protocols during the so-called “DeFi summer of 2020” gave rise to the first wave of functional cross-chain solutions. Since then, the pace has picked up after the explosion of NFTs the following year. Even though most non-fungible tokens representing artwork, virtual land, and commodities for use in GameFi are minted on Ethereum, emerging multi-chain marketplaces are giving NFTs cross-chain capabilities. Users can buy and sell NFTs using a range of cryptocurrencies or mint their own NFTs on alternate networks.

NFTs are proving to be hot commodities, having generated over $24 billion in sales at the end of last year. If this tremendous growth is to continue, the industry cannot afford to rely on Ethereum alone. Users should be able to mint and trade tokens on the blockchain of their choice and seamlessly exchange and use their NFTs in different ecosystems and metaverses; no one wants to be locked on one network, one play-to-earn game, or one currency.

For this reason, we are witnessing the rise of protocols with interoperability in mind that seek to expand the multi-chain experience for creators and buyers, who are looking to bridge major blockchains and add certain DeFi functionalities into their platform. For example, Spherium through HyperLaunch offers projects the opportunity to integrate a bridge solution into their core functionality and enable the deployment of their native tokens on different networks. The platform’s bridge enables token swaps in less than a minute, and it is free for use for projects that are part of the HyperLaunch program.

Multichain will Promote Collaboration:

A multichain version of the blockchain ecosystem enables developers and users to look beyond the nuances of competition and instead work together with interconnecting new chains that will help improve the overall user experience. More importantly, there is an added advantage to using a multichain platform since one can build or develop anytime and anywhere. Ethereum hosts the most developed infrastructure when it comes to dApps, and serves as the market standard. This has seen the rise of compatibility solutions for Ethereum Virtual Machine (EVM), which makes it possible for various blockchains to communicate with one another without the need for third parties.

As was the case when the internet was introduced, blockchains have to shift from the present state of existence, which is basically a number of chains performing in isolation, to an entirely interconnected ecosystem. Many experts believe that only then will users be able to utilize the full benefits of a decentralized ledger system.

The early days of the internet were considered crude and slow. In the same way, dApps today are seen as expensive and complicated. Thus, the technology needs to adopt multichain performativity so that users can experience more seamless activities on a larger scale and get large amounts of work done with greater efficiency and lower costs.