Your DeFi product must be multichain in order to be competitive. This is the hard but exciting truth of 2021. Your target audience is aware that there’s more to crypto than Ethereum, so whether you’re creating a wallet or a lending service, they know this. They expect you to offer the best of both worlds.
There will be debates about which blockchain is best for projects. There will always be a blockchain that has greater security, lower transaction costs, and a faster speed. As speculators debate the next “Ethereum killer”, a new multichain reality is emerging that has a less competitive implication. The future of blockchain and DeFi is not a dog-eats-dog model. Instead, products that can mesh with a cooperative multichain user solution will be preferred and eventually forgotten by those that remain isolated.
This trend is partly due to the Polkadot ecosystem and Kusama ecosystem, which was built with multichain philosophy as its core. Parachains linked to the relay chain can easily communicate with each other, raising the bar for the whole industry. They continue to set the bar for multichain industry with the second round of parachain slot auctions.
To simplify multichain technology, projects that make it simpler for average users to connect more systems (such as the Moonbeam protocol or the Phantom wallet) are raising millions of dollar. How do developers navigate this?
It is clear that market dynamics are shaped by customer demands. Your users will choose blockchains that best serve their needs and platforms that can access them. Projects that can support multiple blockchains gain more users and liquidity. Your DeFi product must support Ethereum and a “niche blockchain” at the minimum. There are leaders in trading, staking and other functions. The more chains you can interact with, the better.
There are many obstacles that developers might encounter when trying to achieve multichain goals.
Related: What intrigue lies behind Kusama’s parachain auctions
Barriers to multichain building
High costs: If you plan to build a cross-chain link bridge, you will need to have a lot of nodes to connect all the chains. It is expensive and requires a lot of maintenance. A developer can find it very expensive to set up and manage a single node on a blockchain. Imagine connecting three, four, or ten nodes.
It is difficult to access capital, hardware maintenance, and capital. If you are unable to find cost-effective alternatives, it will take more resources and investment.
Security issues: The recent hacks on bridges have highlighted that security is still a major concern with multichain. When you swap assets, hackers have more options. We can see how bridges can be extremely vulnerable by looking at the PolyNetwork attack.
Hackers found weaknesses in Poly’s interchain messaging system and used them to steal an estimated $600,000,000 in user funds. This is a crucial lesson for multichain DeFi solutions that want to learn the consequences of security breaches.
Layers of complexity: Connecting and integrating blockchains can add layers of complexity as well as the need for workarounds to link disparate chains. Each chain has its own set of peculiarities, mechanisms, and nuances which builders need to be familiar with. DeFi organizations will likely need to have access to a larger talent pool in order to gain more skills. Blockchains are always evolving and you will also need to keep up with them.
Multichain is crucial to the success of DeFi products in the future, despite the difficulties and barriers it presents. Web 3.0 is not a place for isolated products. They are part of a decentralized economy that has a new generation. To be successful in this economy, projects need to have a strong and connected infrastructure. How do we get there?
Developers need easy, affordable access to APIs, nodes and support for a growing number of blockchains. DeFi developers will have more options to build and can contribute to the next generation of finance and blockchain. These barriers can be broken faster, which will make it easier to move on to mass adoption and better user experience.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Chandler Song is co-founder and CEO at Ankr Network. Ankr Network is a Web 3.0 infrastructure firm based in San Francisco. He was also a Forbes “30 Under 30” laureate. Before joining Ankr Network, he was an engineer for Amazon Web Services.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.