What the adoption of cross-chain interoperability means for DeFi protocols

Improved scalability: Utilizing multiple blockchains leads to improved scalability, faster transaction speeds, and lower transaction fees.

Greater adoption: If the DeFi protocol supports interoperability, it can gain access to more users on various chains and provide its services to all.

Storage Expansion: High user counts lead to higher storage costs for DeFi applications. When services are supported across multiple blockchains, protocols can evenly distribute storage costs across chains.

Liquidity Spread: The more users a DeFi protocol can reach, the more liquidity is available for lending, borrowing, staking, etc. Interoperability between chains creates a path for a large inflow of liquidity across multiple blockchains.

Advantages of using Cross-chain technology

• Linking two separate blockchains, allowing efficient communication between both.
• Cross-chain technology allows users to interact with many blockchains and is therefore able to utilize the speed of several blockchains, thus improving scalability.
• Cross-chain technology helps to keep markets stable by reducing monopolization by large corporations. With the most popular cryptocurrencies like bitcoin and ethereum forming the majority share of the market, resulting in a shrinking market space for new projects, cross-chain technology can help in these situations because it creates an ecosystem in which transactions are evenly distributed across multiple chains

Cross-chain is a revolutionary technology, but beware of applications that currently still have vulnerabilities and can be exploited at the expense of users:

• Cross-chain applications differ in their design. Centralized bridges rely on a single administrator or a small group of entities to manage asset minting and burning. In this case, a single party or group of trusted individuals would be responsible for the following function. Centralization creates risks for users and forces them to trust the company. In the case of the concentration of a large amount of assets, trust ceases to play a key role. For a hacker or even an insider without KYC, these concentrated places will become an ideal target for theft, and more pressure is therefore exerted on these targets by attackers. An attack would involve an attempt to break the security of central nodes and obtain permission to steal clients' funds or mint new tokens without deposits of other funds.
• Technical flaws - To reduce reliance on "trusted" intermediaries, decentralized bridges use smart contracts to manage asset exchanges. Users store assets in a smart contract, which automatically initiates the minting of a wrapped assets on another blockchain. However, smart contracts have many flaws, the main one being that they are only as secure as their developers make them. Many cross-chain applications rely on the reliability of the smart contract code, not the security of the blockchain. In the event that a hacker discovers a flaw in the code that they can use, the app becomes  vulnerable to an exploit, which puts users at great risk of having their digital assets stolen.

Conclusion

Blockchain interoperability and cross-chain technology are two essential aspects of blockchain. After the integration of these two concepts, we may discover the expanding scope of the crypto world, which could greatly promote the concept of blockchain adoption. The main reason that the importance of cross-chain technology has been emphasized so much is that it has great potential to solve a large number of challenges that blockchains face. From scalability issues to the urgent need for transparency, cross-chain technology can provide several pathways to solve fundamental challenges in the blockchain ecosystem. Therefore, it is reasonable to say that cross-chain technology is a promising revolution for the future!

Personal Opinion

The main advantage of cross-chain technology is that it allows the user to share data and digital assets without necessarily using any intermediary if you are using decentralized cross-chain applications. This infrastructure facilitates blockchain interoperability, allowing two or more blockchains to increase their efficiency, decentralization and security. It improves chain efficiency, reduces segmentation, and allows users to interact more freely across multiple blockchains. Cross-chain technology has tremendous potential to enable blockchain interoperability, which can solve many problems while removing several limitations of blockchains.

However, beware of the amount of fraud that is still happening in the development of today's cross-chain applications. Before you use one of these, do your research (DYOR) thoroughly by checking who is behind the development of the project, what the developers' history is, and whether they have been through transparent KYC. Study the whitepaper and check the code audit reports. The role of cyber security should never be underestimated because even one incident, such as a bug in the code and a subsequent hacking attack on the platform, can destroy the future of the entire project, resulting in you losing money, and ultimately having a negative impact on general motivation to continue to invest time and money in digital assets and Web 3.0. Always be prepared to accept a certain amount of risk and diversify your investments wisely. Your main task is to ensure that you are earning consistent profits for the minimum possible level of risk. Always DYOR!