By Interoperability, enabling seamless transactions and communications across multiple blockchains, has long been a goal of crypto developers. Only with truly seamless interoperability is it possible to unlock the network effects of blockchain ecosystems, allowing liquidity and users to flow between connected apps and services as they do in Web2.
However, “solutions” often come at the risk of introducing yet more friction, making them offputting to all but the most hardcore crypto advocates. Could seamless cross-chain activity via providers like RocketX be the key to generating the network effects needed to recreate 2020’s “DeFi Summer”?
The summer of 2020 represented a pivotal point of innovation for the crypto sector, most specifically, DeFi. At the beginning of the year, liquidity locked in DeFi protocols stood at around $600 million – a figure that would rise to $15 billion within the next 12 months. Developments, including flash loans, project governance tokens, and yield farming, all fed into the craze, where each iteration of innovation created yet more interest and adoption.
There was just one huge problem – all the activity was concentrated on Ethereum. By the end of 2020, other blockchains such as Polygon and Solana were beginning to foster Defi ecosystems of their own, promising lower transaction fees and higher throughput. Fast forward to the present time, and there are many blockchains supporting networks of dApps offering access to on-chain financial services.
But the fact is that the overarching network of blockchains operating their own DeFi ecosystems doesn’t replicate the beauty of Ethereum’s OG DeFi network that flourished during the summer of 2020 due to a glaring lack of interoperability.
A Band-Aid Solution
The success of Ethereum’s DeFi summer was based on the fact that apps and services were composable, allowing a user to pass through multiple dApps in a single Ethereum transaction, giving rise to the phrase. “Money Lego.” While other blockchains have sought to replicate this composability, they can only do so within their own blockchain, creating a series of walled gardens where each generates diminishing returns in terms of liquidity and on-chain activity.
In an attempt to unblock fragmented liquidity, devs have introduced the concept of bridging, allowing users to send assets and information between different blockchains. But in practice, bridges are a Band-aid solution that has simply introduced a new layer of friction and additional headaches for users. Consider that there are now over 100 bridges across different chains, nearly all of which claim to be the fastest, cheapest, or safest. How is a newcomer meant to navigate to the right one for them?
Offering assurances of fund safety has also become a critical challenge for bridge developers. In 2022, Chainalysis found that bridges had become the most significant security risk in the digital asset sector, accounting for over two-thirds of all funds stolen. It’s worth noting the timing – bridges had proliferated in 2021 as blockchains attempted to compete on the scale of their DeFi ecosystems and tap into Ethereum’s liquidity.
Cutting Through the Complexity
So, while there is cross-chain traffic, it is still somewhat of a frontier. Safety isn’t guaranteed, and the process tends to be bespoke, depending on variables including the blockchain platform, user wallet type, assets involved, and the app in use. It’s a Frankenstein’s monster of a system, and if the industry ever hopes to replicate the network effects of the DeFi Summer and attain mass adoption, then enabling seamless cross-chain transactions should be a priority.
RocketX is one example of a project that aims to cut out the complexity and make the overall user experience of bridging and trading cross-chain simple and straightforward. Under the hood, RocketX offers access to over 200 blockchain platforms and aggregates liquidity from 450 centralized and decentralized exchanges, enabling asset swaps between 20,000 tokens. However, it all takes place in the background. The user only deals with a single interface, enabling seamless cross-chain swaps for any asset on any supported blockchain via their self-custodial wallet.
Furthermore, the RocketX API means that dApp developers can embed the functionality within their applications, meaning that users don’t need to go off-platform to send their assets between blockchains in the way they’d have to using a bridge. For instance, a lending app rolling out cross-chain support could embed the RocketX API into its interface so that users can access assets on all supported chains more easily. Furthermore, staying on-platform is more secure, as there is less risk that users could get caught up in scams such as domain spoofing. in-platform reduces the risk of people getting caught up in scams such as domain spoofing.
With a new bull market incoming, many DeFi innovators will be hoping that an influx of new users will recreate the success of 2020. However, now that the ecosystem is much larger and more complex than it has ever been, it’s necessary for founders and developers to focus on UX. The path to mass adoption lies in abstracting away the complexity and presenting a seamless and safe way to interoperate on-chain.
Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.
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