Cross-chain is a technology that improves the connectivity between blockchain networks by exchanging information. This breaks down the boundaries of individual blockchains and creates an interconnected ecosystem.
Cross-chain operates independently of the connected platforms and therefore does not share the weaknesses of the interconnected networks. It aims to eradicate intermediaries in the transfer of value between decentralized networks, allowing users to interact seamlessly with other blockchains.
Leading cross-chain projects include Polkadot, Blocknet and Cosmos, each of which focuses on a different aspect of interoperability.
Polkadot wants to improve smart contract data sharing between distributed platforms.
Blocknet is putting more effort into decentralized exchanges (DEXs), operating between blockchains.
Cosmos provides a base to support other blockchains connected to a central protocol called Hub.
Thanks to cross-chain technology, decentralized finance (DeFi) can exchange assets between different networks and supports interoperability. The latter is key to the prosperity of financial ecosystems.
Cross-chain technology allows users to overcome common trade-offs between distributed platforms and to take advantage of different consensus mechanisms in order to get the best of all worlds.
- Interconnecting multiple blockchains
- Ecosystem stability
- Information and data transfer
- Low liquidity
- Technology vulnerability
- Frequent attacks by hackers
Where can cross-chain technology help in the real world?
Worldwide, healthcare systems are run by governments or private companies. These organizations are unable to communicate with each other. Everything is managed using centralized server databases. The disadvantage of this system is the security risk of data loss. This problem could be mitigated by cross-chain technology, which would interlink all of these systems through the blockchain. The data would be protected and there would be no risk of data loss when transferred between institutions.
Cross-chain technologies have brought greater interoperability to blockchain ecosystems and created a better experience for blockchain users and developers. However, interoperable blockchain platforms must address challenges, including increased centralization, security risks, liquidity issues, and more.