Is A Multichain Ecosystem the Future of Blockchain?
30.09.2021 | 8 min read
Recent research has shown that the enterprise blockchain market will hit $21 billion by 2025 (Fortune Business Insights) - a staggering figure, demonstrating the rapid pace of expansion in the industry. A market that was initially defined by tight-knit communities has now become the domain of the governments, businesses and institutional investors. But this rising widespread popularity is posing new challenges, particularly concerning scalability. How can they be solved? And does the answer lie in a multichain future?
Blockchain scalability issues
It’s a well known fact that blockchains suffer congestion and scalability issues. This is far-reaching and leads to slow transaction processing times and higher transaction fees, which causes a poor user experience.
Ethereum, the second-biggest blockchain network in the world, has been suffering from scalability issues for the last few years, which has led some developers to explore other options - including Cardano or Solana which offer higher speeds. However, most developers believe that for DeFi to take centre stage and for decentralized applications to be ready for the billions of people who will adopt these services soon, blockchains don't need to compete but rather cooperate with each other for a perfect user experience.
What is Multichain?
Multichain might just hold the answer to many of the above-mentioned scalability issues. But how does it work? As the name itself suggests, a multiple chain ecosystem ecosystem is one in which several blockchains are interconnected.The ultimate aim is to improve user experience. It is dependent on cross-chain solutions, a few of which are already being produced.
SushiSwap leads the way in multichain adoption
In March 2021, SushiSwap jumped on the trend of decentralized applications being deployed on multiple chains to catch up with the main rival, Uniswap. The SushiSwap protocol is now one of the largest multichain adopters, and exists on 13 chains at the time of writing, including Ethereum, Binance Smart Chain, Polygon, Avalanche and Fantom.
Ethereum has dominated in SushiSwap for many months, but Polygon recently took over, showing how fast layer-two solutions can take charge. The main driver behind SushiSwap’s adoption of multichain has been an aim to drive down gas fees. By offering different options, other than Ethereum, the protocol has been successful in achieving this.
Aave uses multichain to take it to the next level
DeFi protocol, Aave is exploring a multichain approach to take it to the next level. It is already a success through its crypto lending and borrowing offering, which has led to many users locking up assets.
Last month, Aave’s founder and CEO, Stani Kulechov, stated that Aave was contemplating launching on many different networks. He revealed the possibility of expanding Aave‘s loan and borrowing markets on Solana via the EVM-compatible solution Neon Labs, Avalanche, and the Optimistic Rollup solutions Arbitrum and Optimism as part of its multichain strategy. The expansion is planned to take place in phases. Kulechov also revealed that the team is working on a cross-chain governance structure.
The important role of multichain aggregators
Multichain or crosschain aggregators identify the best possible routes to fulfil trades across blockchain ecosystems. In doing so, they ease the burden of existing DeFi users and remove some of the barriers to entry for new joiners.
An example of such an aggregator is Apeboard, which enables users to monitor their portfolios across different platforms. Apeboard supports 11 chains, including Ethereum, The Binance Smart Chain, Polygon, Solana, and Terra. It is perfect for monitoring assets among several chains and tracking balances.
It’s also worth mentioning 1Inch here, an exchange aggregator which works by scanning DEXs to find the lowest cryptocurrency prices for traders. 1inch offers its liquidity to 78 platforms across Ethereum, Binance Smart Chain, and Polygon.
Last but not least, AnySwap deserves a mention. Launched last year, it’s afully decentralized cross chain swap protocol, based on Fusion DCRM technology. It allows swaps between any coins on any blockchain which uses ECDSA or EdDSA as a signature algorithm. AnySwap features a decentralized cross chain bridge, cross chain swaps and programmed pricing and liquidity.
The most popular multichain protocols
When talking about a multichain future, it’s important to discuss multi-asset blockchains which store, transfer, and verify information and assets existing on a whole range of public blockchains, using Decentralized Inter-Blockchain Communication (IBC).
One of these protocols is Orbit Chain which aims to work as a hub for public blockchains, for fluid asset movement and interaction within a single blockchain network.
Polkadot is also worth mentioning here - it’s a multichain protocol that is able to transfer data among both permissioned and permissionless blockchains. Polkadot's bridges allow its parachains and parathreads to connect to external blockchains. Polkadot follows the shared security model (or pooled security), providing security to every parachain as soon as it gets attached to the Polkadot Relay Chain.
While Polkadot focuses on security, Cosmos