Cross-Chain: A Paradigm for Blockchain Interoperability.

Originally Posted: Publish0x

The Blockchain is a technology that allows the creation of decentralized, secure and transparent networks, where data, digital assets, smart contracts and applications can be stored and transferred. However, there are many types of blockchain, each with its own characteristics, advantages, and disadvantages. For example, Bitcoin is the first and best-known blockchain, which focuses on the exchange of a eponymous cryptocurrency. Ethereum is another very popular blockchain, which enables the development of decentralized applications (dApps) and decentralized finance (DeFi) through the use of smart contracts. In addition, there are other, more recent blockchains with different value propositions, such as Avalanche, Polygon, Solana, and Arbitrum.

The problem is that these blockchains work in isolation and incompatible with each other, limiting the possibilities for interaction and collaboration between users and applications running on different networks. For example, if a user wants to send Bitcoin to another user who only has an Ethereum account, he cannot do it directly, but has to resort to centralized intermediaries or complex and expensive conversion processes. The same is true if you want to transfer a smart contract or non-fungible token (NFT) from one blockchain to another.

To solve this problem, the concept of Cross-Chain (or crossed chain) arises, which refers to the interconnection of two or more completely separate blockchains. This enables the exchange of information and data, such as digital assets, smart contracts, and NFTs between blockchains that would otherwise be isolated from each other. Cross-Chain technology eliminates the need for trusted intermediaries and makes it easier to build more innovative and efficient applications and services on the blockchain ecosystem.

There are several ways to implement the Cross-Chain, but one of the most common is the use of bridges. A bridge is a service or protocol that allows two-way communication between two or more blockchains. A bridge can be built by a centralized or decentralized entity, and can have different degrees of safety, reliability, and efficiency.

A bridge works by using a wrapped token, which is a representation of another token on a different blockchain. The wrapped tokens are usually based on the ERC-20 technical specification for the Ethereum network. For example, WBTC is a Bitcoin token wrapped with an Ethereum ERC-20 smart contract. This allows the value of Bitcoin to be transferred and used on the Ethereum network as if it were a native token.

The process for using a bridge is usually as follows:

📌 The user sends the original token (eg Bitcoin) to a specific bridge address on the source blockchain (eg Bitcoin network).

📌 The bridge locks the original token and issues an equivalent wrapped token (eg WBTC) on the destination blockchain (eg Ethereum network).

📌 The user receives the wrapped token in his account on the destination blockchain and can use it as he wishes.

📌 If the user wants to retrieve the original token, they need to send the wrapped token to another bridge-specific address on the destination blockchain.

📌 The bridge burns the wrapped token and releases the original token on the source blockchain.

📌 The user receives the original token in his account of the origin blockchain.

The Cross-Chain has several benefits for users and developers of the blockchain ecosystem, among the most important are:

✔ They allow the fast, secure and cheap transfer of digital assets between different blockchains without relying on centralized intermediaries or complex processes.

✔ They facilitate the creation of innovative applications and services that can take advantage of the advantages and characteristics of different blockchains. For example, dApps can be created that combine the security of Bitcoin with the functionality of Ethereum, or that integrate external data through oracles such as Chainlink.

✔ They expand the investment and diversification possibilities for users who want to access different financial opportunities in different DeFi networks.

✔ They promote the adoption and growth of blockchains by increasing their interoperability, accessibility and scalability.

Cross-Chain also has some challenges and limitations that need to be overcome in order to achieve greater maturity and adoption:

✔ It requires coordination and standardization between the different blockchains to guarantee the compatibility, security and efficiency of the Cross-Chain protocols and services.

✔ Involves certain technical and operational risks, such as the possibility of bridges failing, being attacked or tampered with, which could result in the loss or theft of transferred digital assets.

✔ Depends on the trust and reputation of the bridge providers, which may be centralized or decentralized, and may have different incentives and governance mechanisms.

✔ You face regulatory and legal challenges, as different blockchains may be subject to different jurisdictions and regulations, which could create conflicts or uncertainties for users and developers.

Some examples of projects that use Cross-Chain are:

📌 Cosmos: Network of Blockchain Hubs that helps everyone connect with each other and exchange assets without intermediaries.

📌 Fusion: Platform that uses blockchain smart contracts to create a connected blockchain ecosystem.

📌 Hard Protocol: Decentralized cross-chain money market that allows the supply and lending of assets such as BTC, XRP, BNB, BUSD, KAVA and USDX.

📌 Panama Project: Gateway service that facilitates the cross-chain process in the different assets that circulate in the Binance Smart Chain network.

However, some critics consider that this technology has several problems and risks, such as:

❌ The loss of security and sovereignty of each block chain, by depending on external mechanisms to guarantee the validity and consensus of Cross-Chain transactions.

❌ The technical and operational complexity of implementing and maintaining the Cross-Chain, which requires protocols, standards, infrastructures and specialized agents to facilitate communication between chains.

❌ The lack of regulation and supervision of the Cross-Chain, which can lead to fraud, abuse, conflicts and vulnerabilities in the blockchain ecosystem.

❌ The dilution of the identity and value proposition of each chain of blocks, by losing its uniqueness and differentiation from other chains with which it connects.

Cross-Chain is a new paradigm for blockchain interoperability, which allows the exchange of information and data, such as digital assets, smart contracts and NFTs between different networks. It is a technology that has multiple benefits for the blockchain ecosystem, such as the fast, secure and cheap transfer of digital assets, the creation of innovative applications and services, the expansion of investment and diversification possibilities, and the enhancement of adoption and growth. blockchain growth. However, as I explained before, it also has many challenges and limitations that need to be overcome, such as coordination and standardization between the different blockchains, technical and operational risks, the trust and reputation of the bridge providers, and regulatory challenges and legal. Regardless of the arguments of defenders and critics, Cross-Chain is a developing technology that opens a new horizon for the future of blockchain and cryptocurrencies.

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Author's Note: The opinion expressed here is not investment advice, is provided for informational purposes only, and reflects the opinion of the author only. I do not promote, endorse or recommend any particular investment. Investments may not be right for everyone. Every investment in the market and every trade you make involves risk, so you should always do your own research before making any decision. I do not recommend investing money that you cannot afford to chair, as you could lose the entire amount invested.