What Is Cross-Chain?

Cross-chain is a technology that improves connections between blockchain networks by enabling the exchange of information and value.

Understanding Cross-Chains

Cross-chain is a technical term that refers to the connection of two or more completely separate blockchains. It enables the exchange of information and data, such as digital assets across different blockchains that would otherwise be isolated from each other.

Cross-chain technology eliminates the need for trusted third-party intermediaries. It plays a fundamental role in blockchain interoperability, the ability to move assets and information across blockchains, which will ultimately lead to greater adoption of Web3.

There are many use cases for cross-chain technology such as asset transfer via cross-chain bridges, cross-chain oracles, and cross-chain smart contracts .

Why Do We Need Cross-Chain?

As blockchain adoption increases and blockchain interdependence becomes more prominent, the impracticality of isolated blockchains reveals that a seamless and secure cross-chain solution is absolutely necessary for the future of web3 .

Cross-chain technology is essential because it eliminates the need for a custodian – a third party (e.g. a centralized exchange) that would otherwise be required when transferring assets or information across different blockchain protocols. 

The Nature of Cross-chain Technology 

Many cross-chain technologies are designed to be non-custodial and trustless, meaning users control and own their funds and data at all times. Therefore, it facilitates interoperability between blockchains in a more secure and decentralized manner.

There are also some custody/trusted cross-chain technologies, which prioritize convenience and usability over decentralization and security. The cross-chain potential cannot be underestimated along with the popularity of asset tokenization.

Cross-chain bridges will play an important role in public finance such as interbank transactions, as tokenization allows new digital assets to emerge (e.g. shares and real estate splits).

The Importance of Cross-Chain to the DeFi Ecosystem

Additionally, the DeFi ecosystem would not be able to thrive without cross-chain technology as it is key to enabling token exchange and data transfer between different blockchains.

It is also important to note that this increases blockchain efficiency and allows users to communicate between blockchains more freely.

How Cross-Chain Works?

There are two types of cross-chain interactions: isomorphic and heterogeneous. They are differentiated by the underlying technology that supports them, for example their security mechanisms, consensus mechanisms, network topologies, and block generators.

Isomorphic and Heterogeneous Cross-Chain Interactions Isomorphic cross-chain interactions are much simpler because blockchains share similar consensus mechanisms. Heterogeneous cross-chains are much more complex because the underlying technology is quite different. 

Cross-Chain Benefits

Connection of Two Independent Blockchain Networks

The biggest advantage of cross-chain technology is that it allows truly independent blockchains to communicate effectively.

Blockchain incompatibility is no longer a problem as it is used to initiate asset transfers and token exchanges.

Better Scalability

Cross-chain technology has a vital role in blockchain scalability as it will improve user experience by making transactions interoperable. This will ultimately lead to greater scalability.

Improved Data Flow and Token Transfer

Cross-chain relieves users of the cumbersome current mechanisms. With cross-chain technology, transactions are verified as soon as they are completed and only arrive at their destination once the verification process is complete.

This reduces the number of interceptions from validators thereby making the entire process much smoother compared to the current mechanism where users have to send instructions from the source chain to the validator which is then forwarded to the destination chain.

Examples of Cross-Chain Projects

Cross-chain projects include the word “bridge” in their name to indicate that they help users connect one blockchain to another.

Avalanche Bridge, for example, is used primarily to connect assets to and from the Avalanche blockchain ecosystem. Other cross-chain bridge applications, such as AtomicDEX and cBridge, support the exchange of crypto assets across different blockchain ecosystems.

Conclusion

With cross-chain technology, the blockchain ecosystem is increasingly able to overcome the challenges of interoperability and interdependence between networks. This not only facilitates seamless exchange of assets, but also provides a solid foundation for the evolution of Web3, creating a more connected and efficient ecosystem.

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DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.