Navigating the chaotic world of the multichain universe

Introduction

In this article, we discuss navigating the chaotic world of the multichain universe. Due to the transaction limitations in the Ethereum world, ecosystems in the multichain universe such as Fantom (FTM), Binance Smart Chain (BSC), Huobi Eco Chain (HECO), Near Protocol (NEAR), etc have quickly gained popularity in the industry in order to achieve scalability. We have seen some major DeFi protocols in the process of deploying and shifting some of their liquidity to alternative ecosystems in order to offer additional choices to the crypto community. 

Figure 1: The Multichain Universe

There is a lack of tools to easily manage crypto portfolios in the multichain universe. Users interact with various ecosystems, token standards, and technical structures. Moreover, a cross-chain swap is necessary to move tokens from one ecosystem (i.e. Ethereum) to an alternative ecosystem (i.e. Solana) via a bridge.

 

As part of this analysis, we will delve into different cross-chain bridges to shed light on the current market solutions:

Figure 2: Metamask Multichain Universe

Multi-directional cross-chain swap solutions are still limited, existing solutions leverage Ethereum as the settlement layer. The current bridging solutions are fragmented in a way that each ecosystem has its own natively supported cross-chain bridge solution with Ethereum. For example, when a user swaps tokens from Polygon to Fantom, he/she needs to bridge the tokens on Polygon to Ethereum, and Ethereum to Fantom, leveraging Ethereum as the settlement layer.

Bridging solutions existing in the following ecosystems:

Polygon (Matic)

There are two main bridge solutions (PoS vs Plasma) in the Polygon ecosystem that differs based on their structure and security features.

Figure 3: Polygon Bridges Comparison

Due to the expensive Ethereum gas fee, many DeFi users have shifted to the Polygon ecosystem in early April 2021, with a total of nearly $8 billion locked in the ecosystem at its peak.

Figure 4: Total Value Locked (USD) in Polygon ecosystem

Binance Smart Chain (BSC)

The BSC ecosystem gained significant market traction in early 2021 from adoption in key projects such as Pancakeswap and Dodo due to lower transaction costs. The rapid growth in the BSC community resulted in Binance Smart Chain Bridge becoming the most adopted bridge to migrate tokens from Ethereum to BSC.

Figure 5: Total Value Locked (USD) in BSC ecosystem

Solana (SOL)

The Wormhole project by Certus One is the first bidirectional decentralized ERC-20 to SPL token bridge between Ethereum and Solana.

One of the most important elements in the bridge is called “guardians” which are decentralized cross-chain oracles utilized by a set of node operators to certify token lockups and burns

Figure 6: Wormhole Bridge

NEAR Rainbow Bridge (NEAR)

NEAR rainbow bridge opens the gate for ERC20 tokens to flow into the NEAR ecosystem. So the “prover” listens and validates a specific event on a monitored chain to enable cross-chain communication.

Figure 7: NEAR Rainbow Bridge

At the time of writing the piece, NEAR rainbow bridge has more than USD 3mn worth of tokens from nearly 400 unique users. The NEAR token has been the largest bridged token between the NEAR and Ethereum ecosystem. 

Figure 8: Total Value Locked in NEAR Rainbow Bridge

We have provided a brief overview of some of the key bridges on the market. Many additional bridges offer different technical flexibility and security to the ones that we mentioned above. Moreover, we have summarized these in the below section. Generally speaking, there are mainly five categories of bridges:

Figure 9: Bridges in the Multichain Universe

L1- L2

EVM - EVM

Non-EVM to EVM

Multidirectional Bridges

Final thoughts

As users continue to interact with multiple blockchains, we believe Ethereum will remain the industry’s dominant Layer 1 DeFi ecosystem. So alternative ecosystems will complement the Ethereum ecosystem by creating a specialized user experience to target specific sectors or use cases.

To achieve a multichain universe, we envision a one-stop bridging tool to emerge that enables DeFi users to easily migrate tokens across multiple ecosystems with minimal steps. Thanks for reading Navigating the chaotic world of the multichain universe. Written by 0xminion.eth, 0xProductGal, and 0xLight. So if you found this content helpful be sure to follow them!

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