Every day the crypto space is growing. Blockchain developers are beginning to crush the partition walls between them and collaborating to combine ideas. It shows a sign of maturity in the space. It shows a clear sense of vision when developers know that their works have specific use cases and are different from any other blockchain. Blockchain developers are beginning to value interoperability, they are building tools to make users easily interact with other blockchains without having to trust a third party. It seems Harmony protocol has taken the lead by updating its Roadmap to include cross-chain swap platforms without custodial interventions.
Decentralized Exchanges have evolved beyond what we know them to be, they have become the backbone of Decentralized Finance and yield farming. But in a bid to extend the Defi use cases beyond the resident blockchain, blockchain developers have devised means to enable such.
Crypto Wrapping or Crypto-Backed Assets
One popular method is the creation of Wrapped Crypto assets (or crypto-backed assets) like Wrapped Bitcoin (WBTC), a token on Ethereum blockchain. Thus Bitcoin can be used for yield farming on various Defi protocols on Ethereum blockchain. It makes it easy to interact with coins and use them for various purposes, not having to worry about multiple fees for coin conversion and multiple movements (time and transaction fee wastes). This is a great innovation but assets like these need a well-known custodial wallet where Bitcoins can be saved and redeemed when choosing to wrap and unwrap assets.
Crypto-backed assets might also not be very efficient considering many crypto assets there are on many blockchains they solution is cross-chain swaps or transactions.
Harmony protocol on the 24th of September, 2020 announced in a seven-minute-read long medium blog post:
“In short, we are building trustless bridges to Bitcoin, Ethereum and Binance chains for broader access of users and assets to decentralized finance. Our consumer product is a cross-chain exchange without custodial risks. Later we will be putting centralized exchanges’ order books on chain for cross-exchange arbitrage and fiat cash-flow management.”
Essentially, developers at Harmony protocol want to make it possible to swap coins from different blockchains without having to go through centralized exchanges or trusting custodial wallets. Not just on the surface but this interoperability goes deeper:
“Our approach to unification is to embed the light clients of multiple chains into our existing validators… Here, a light client is another blockchain’s node using minimal resources to validate transactions at lower fees, suitable for embedding directly into Harmony’s nodes. Cross-chain transactions are more than asset transfers via atomic swaps with hash time locked contracts; the innovation, across open heterogeneous systems, to commit then verify computations and states is truly groundbreaking.”
Enabling cross-chain transfers will definitely open up a new wave of innovation- an advantage for DeFi protocols.
What arrow of innovation do you think is next in the quiver of Harmony Protocol?
Credit: Source link