2020 was the year that DeFi took the blockchain world by storm. While the rest of the planet will most likely remember 2020 as the year of COVID-19 and lock-down, crypto enthusiasts will also remember it as the year of crypto lending, lending, liquidity mining, and the much-reported year on Volume Closed Volume (TVL) graph. That wasn’t without good reason, though, because in 2020 the TVL protocols grew in DeFi $ 675M to $ 16.2B.
Other parts of DeFi also performed well as the dollar value of fixedcoins rose from $ 5B at the start of the year to $ 26.4B. However, it was not good news for decentralized finance, as the Ethereum chain that carries DeFi’s majority is being put under more strain, with transaction times slowing to a halt and gas fees rocking. The average transaction costs for the network in 2020 spiked from just a few cents at the beginning of the year to over $ 12 in September. This in turn led to several projects highlighting cross-chain technology as a long-term solution, spreading the pressure across multiple blockchain.
Cross-chain Progress
While cross-chain technology has been specifically focused thanks to the scaling challenges faced by Ethereum, it is by no means the only use case for cross-chain or the reason why it will dominate year to come. Interoperability has long been an aspiration within blockchain, and now the technology is finally catching up to its ideals.
One of the projects that adds significant momentum to the cross-chain trend is Fire Protocol, developed on Huobi’s Eco Smart Chain. The Fire Protocol uses cross-chain technology to bring hundreds of digital assets into the Huobi ecosystem. FireSwap called DEX is also part of the offering and provides cross-chain asset wrapping, which is especially important in reducing the stress on overworked networks like Ethereum. The Fire Protocol is also underpinned by its own proprietary FIRE ticket, which is used to power incentive mechanisms such as community offers and for consumer voting.
PlasmaPay is a new DeFi project that celebrates cross-chain technology. The online banking system and the DeFi aggregator have continually pushed the message that the sector cannot rely on just one chain to bring DeFi to the wider public. When PlasmaPay’s cross-chain HyperLoop is launched in 2021 it will join an increasing number of cross-chain solutions including Matic.
Cooperation
Beyond the desire to maximize DeFi’s effectiveness, cross-chain technology and interoperability are at the heart of many next-generation blockchain networks. Cosmos a Polkadot are among the best known of these. Cosmos Network promises “the most powerful ecosystem of connected blockchains”, for which they have coined the phrase Inter-Blockchain Communication (IBC). The idea is interesting, and several projects are already developing on these including IRISnet, e-Money, Sentinel, and Contract Network. The Binance network has also built on Cosmos technology but it is unclear to what extent Binance has embraced the idea of interoperability at this time.
Polkadot is the cross-chain solution developed by Ethereum co-creator Gavin Wood. Such is the strong genealogy and scope of the project that it has recently been touched on as the “Ethereum killer”By Bloomberg. Whether or not Polkadot can meet that bill, there is ample evidence to suggest that 2021 will be the year of the cross-chain.
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