Bitcoin was initially described as “peer-to-peer electronic cash” in Satoshi Nakamoto’s 2008 whitepaper. So how did such a straightforward concept spawn so many different cryptocurrencies?
Blockchain networks have experimented with different consensus mechanisms and other architectural decisions to offer superior security, privacy, or speed. Some coins came about in the aftermath of community disagreement or even disaster. Ethereum and Ethereum Classic became two separate blockchains after a hard fork that was implemented as a response to a massive hack in 2016. The utility token class of cryptos isn’t really meant to function as electronic cash at all. Instead, they are typically used to govern internal economies for decentralized applications designed for virtually every industry under the sun.
Crypto’s diversity is one of the technology’s strengths. It means users can choose the appropriate crypto tool for each situation, which makes crypto more usable and accessible for a wider variety of people. However, using a diverse crypto toolset often requires moving value between different blockchains. A user might, for example, trade their bitcoin for a utility token designed for an industry-specific platform. Interoperability is key to a diverse crypto world functioning. But interoperability between blockchains has also historically been a point of delay, centralization, extra cost, and friction even for sophisticated crypto users.
The Top Cross-Chain Protocols
There are solutions for crypto users who hold one cryptocurrency but need to use another that is native to a different blockchain. Centralized exchanges and brokers offer speedy purchases and sales between cryptocurrencies, but users lose substantial security by relying on a centralized storage solution for their private keys. Decentralized exchanges let traders exchange their coins without going through a centralized authority or losing custody of their private keys, but these lower-traffic exchanges tend to offer limited liquidity and token availability. But cross-chain swap protocols are the solution.
A cross-chain protocol or, ‘bridge’ allows users to send a cryptocurrency like bitcoin, directly to a different blockchain like ethereum. Cross-chain operations are essential to crypto, there are a handful of cross-chain solutions available in the market at the moment, but each has its advantages and disadvantages. So what are the best cross-chain protocols available to crypto users right now?
Swingby
Swingby launched its testnet in January and uses an Elliptic Curve Digital Signature Algorithm (ECDSA) to operate its cross-chain protocol, the Swingby Skybridge. The Skybridge uses deposit certificates to let crypto holders create pegged 1:1 swaps on non-native crypto networks. This system allows users to explore other platforms without losing price exposure to the cryptocurrency they initially held. ECDSA renders stakes and signatures trustless and decentralized by requiring a group of Swingby nodes–not a singular authority–to generate a single signature needed to authorize or verify a transaction. The Skybridge solution significantly reduces Bitcoin’s network congestion, transaction speed, and settlement time while providing much-needed traffic and liquidity to many other valuable crypto networks. Swingby currently operates a Binance-Bitcoin bridge and has plans to offer many more pairs in the future.
Liquality
Liquality uses atomic swaps. Atomic swaps are peer-to-peer transactions relying on hash time-locked contracts that programmatically hold funds in escrow. They either complete transactions if both parties fulfill their obligations or provide refunds if either party fails to follow through within a set amount of time. Liquality users deploy their own contracts rather than trusting an administrator contract. Those contracts set up dual escrows on each end of the transaction. Liquality does require each transaction to have a counterparty (i.e., someone who has agreed to sell the crypto a user wants to buy) and doesn’t offer a matching service. That being said, it’s best leveraged by traders with existing crypto social networks who need a secure, low-mediation transaction channel.
Komodo
Komodo is a pioneer of cross-chain protocols. Their lead programmer, James Lee, claims to have executed the first cross-chain atomic swap in 2015. Komodo also supported a groundbreaking cross-chain swap between Ethereum and DOGE coin, showing how these two protocols could be linked. Successfully bridging Ethereum and DOGE means that Komodo’s decentralized exchange can execute trades between many cryptocurrencies and any Ethereum-based crypto, a huge swathe of coins and trading pairs that few DEXs can rival. In late 2019, Komodo announced that this DEX could execute decentralized exchanges taking place entirely within a web browser. Komodo might suit crypto users searching for a cross-chain trading option that simultaneously maintains decentralization via atomic swap technology while also offering user-friendliness, liquidity, and several trading pairs.
Interoperability Optimizes Cryptocurrency Ecosystems
Interoperability is key to helping the cryptocurrency environment evolve to better suit existing and future users’ needs. Bitcoin is powerful, but for most crypto users, it’s not enough. Whether they’re executing a trade, experimenting with a faster protocol, or trying out a new DApp launched for their industry. Users need access to crypto’s incredible diversity to unlock its true potential and promote widespread adoption. That’s why cross-chain protocols are so crucial to the future of crypto.
Discuss this news on our Telegram Community. Subscribe to us on Google news and do follow us on Twitter @Blockmanity
Did you like the news you just read? Please leave a feedback to help us serve you better
Disclaimer: Blockmanity is a news portal and does not provide any financial advice. Blockmanity's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Blockmanity won't be responsible for any loss of funds.
