Understanding Cross-Chain Infrastructure And Its Importance In Fostering ‘Internet 3.0’
Shine Li May 05, 2021 08:02
Cross-chain assets and transactions sound complex, but are actually an easy way to better understand how blockchain networks communicate with each other.
Cross-chain assets and transactions sound complex, but are actually an easy way to better understand how blockchain networks communicate with each other.
In the early days of blockchain development, many assumed the technology would serve as a ‘one-size fits all’ solution where any transaction could be completed in a single chain.
Cross-Chain Infrastructure Looks To Solve Many Issues
As the blockchain ecosystem expanded, it became obvious issues related to scalability and interoperability inhibited the ability for different blockchains to share data.
Examples abound when it comes to sending cryptocurrencies. Every crypto holder understands you are not able to exchange Bitcoin for Ethereum. Block strings are not able to interact.
Developers came up with the concept of cross-chains to promote interoperability between independent blocks. This technology lets many blocks interact on a centralized platform and foster scalability, as the power of participating blockchains can be leveraged.
Cross-chain networks open up the creation of intelligent contracts that permit value to be transferred without actually making an exchange. Some platforms, like EVEN, are building a library of intelligent contract templates to be deployed across the API.
Others hope cross-chain infrastructure can allow dApps to link with third-party blockchains and make it easier in general to create and deploy a dApp.
Understanding The Advantages Of Cross-Chain Crypto Projects
There are just a few cross-chain asset-related projects currently on the market. The vast majority focus on asset exchange and transfer.
One is Cook Protocol, a decentralized cross-chain asset management platform that lets investors pick and choose options offered by fund managers. Fund managers themselves can offer a variety of investment strategies on their own prerogative and carry out yield farming with leverage to reap maximum returns.
For each investment fund, a unique LP token (proportional to the contribution) is issued to investors who can divest the tokens for the equivalent underlying asset. All Cook Protocol funds can be managed passively or actively with the help of whitelisted DeFi protocols.
Cook Protocol’s focus on cross-chain asset management provides a number of advantages. Unlike traditional funds, the decentralized nature of the protocol ensures transparency is at the forefront and that investors can always remain aware about what money is used for.
The platform also relies on oracle services like Chainlink and Band Protocol to acquire pricing information about a fund’s valuation, deposited asset value, and the price of a ckToken.
Cook Protocol token holders maintain a lot of influence. They are able to propose modifications to the governance model, vote to have the pricing oracle updated, decide to raise or lower platform fees, and add new protocol-level features.
The cross-chain functionality makes Cook Protocol advantageous over other fund management platforms that are Ethereum-based. High gas fees and issues with scalability have plagued Ethereum, while Cook Protocol users can tap into cheaper alternatives other systems offer.
Cook Protocol also utilizes Nexus Mutual insurance to protect user funds and offers specific insurance options for investors interested in paying to hedge against risk.
Cross-Chain Assets And The Push Towards Decentralized Internet
Cross-chain infrastructure is an important development in the push towards Internet 3.0, where online websites and applications share and receive information so they can give new data to users.
A basic example of what to expect with Internet 3.0 can already be seen on Amazon after a purchase is made. The website’s algorithms examine other items bought by customers who purchased the same product you did and then recommends those items to you.
Essentially, one key component of Internet 3.0 is the ability for websites to learn by themselves and become more intelligent.
Cross-chain infrastructure helps bridge the gaps between different blockchains and protocols and harnesses their collective power.
Many hope it will then lead to a single chain that’s strong enough to serve as a basis for a global, decentralized Internet where collective computing power can work together.
Image source: Shutterstock