For crypto users in general, and DeFi users in particular, the term multi-chain may not be unfamiliar. So what is it and how does it affect, let’s learn more through the article below and give yourself the most comprehensive understanding of this term.
What is multi-chain?
Multi-chain is a term that means "multi-chain, cross-platform". More specifically, in the crypto market, a project deployed on a Multi-chain will be understood to mean that the project is deployed on at least two different chains. It can be Ethereum (ETH), Binance Smart Chain (BSC), Solana (SOL), Polkadot (DOT), Avalanche (AVAX), or other blockchains.
Projects implementing Multi-chain mean that in addition to the original root chain (Bitcoin, Ethereum, BSC, ...), the project can be deployed independently on another chain. However, to allow assets to rotate between chains, cross-chain tools are required.
What are the benefits and impacts of implementing Multi-chain?
You can see that in the current context, the same field is AMM DEX, which has very prominent names on various platforms, such as Uniswap on Ethereum, PancakeSwap on Binance Smart Chain, and Uniswap on Ethereum. There is quick exchange.
However, each project operates independently and has not yet reached a large number of users from other ecosystems. So what do you think if the project deploys Multi-chain?
When implementing the Multi-chain mechanism on a project, not only users but also the project itself will enjoy the following benefits:
Reach the number of users in the new ecosystem.
Overcome the shortcomings of the main chain (congestion, slow speed).
Take advantage of the many different chains (cheap fees, fast speeds).
Promote your token on other ecosystems (especially stablecoin projects).
Users in smaller ecosystems can access areas that their ecosystem has not yet implemented (Insurance, Index Token,…).
Why is not enough coins reserved on Single-chain?
Each blockchain has its own native token, and other tokens are built on top of that blockchain. For example, everyone knows that Ethereum, the native token of the blockchain, is the famous ETH token, currently ranked second on the Coinmarketcap rankings. However, there are many other coins (tokens) built on Ethereum's blockchain, collectively known as ERC-20 tokens. However, as mentioned earlier, the needs of cryptocurrency users are increasingly diverse and rich, and the ability and need to own many coins/tokens on many different chains is understandable. There is no reason to limit investors to buying tokens created on the Ethereum blockchain or Binance Token. Therefore, if the electronic wallet only meets the Coin reserve of a single blockchain, it is not enough, resulting in the installation of too many wallets for each Chain on one device, making the operation cumbersome and cumbersome.
In addition, after the 3-year boom of blockchain since Bitcoin became the most expensive currency in history with a peak of $20,000/BTC, expectations for this technology do not stop at the exchange function. Blockchain applications such as smart contracts, Dapps, big data, and the Internet of Things are being strongly promoted in surprising numbers. This shows that now and in the future, there is a huge demand for interacting with Dapps on multiple different blockchains, but electronic wallet technology that only supports one Blockchain cannot integrate multiple Dapps. The question is, in an era of rapid technological development, everyone needs dozens or even hundreds of Dapps. Are you willing to install hundreds of electronic wallet applications on your mobile phone? Such small details will become annoying in the long run, preventing users from experiencing the magic of cutting-edge technology.
Multi-chain trends and developments
Cross-chain has made a significant contribution to the development of Multi-chain because Cross-chain is responsible for helping users transfer assets between chains. I will summarize the development of Cross-chain and Multi-chain through the following 3 stages:
Phase 1: The emergence of cross-chains in the new ecosystem
The first stage is to attract digital assets from other ecosystems. Newly developed ecosystems such as Binance Smart Chain and Polkadot have deployed the Cross-chain Bridge mechanism to support users to transfer digital assets from other chains to their own chains, which is particularly attractive to users. With the word Ethereum - the most powerful development chain DeFi platform.
On the Binance Smart Chain (BSC) platform, Binance Bridge is also deployed, allowing users to transfer digital assets in other chains to the BSC chain and vice versa. Not only BSC, but also various ecosystems will gradually deploy their own "bridge" tools, such as Solana's Wormhole Bridge, NEAR's Rainbow Bridge, etc.
Most of these support tools are created by the ecosystem and focus on bringing Ethereum's user base into their ecosystem.
Phase 2: Projects supporting Cross-chain & Multi-chain
Entering the second stage, with the development trend of cryptocurrency and user needs, a series of projects focusing on cross-chain were born to improve cross-platform service quality and user experience. Users can easily interact on one platform and transfer their assets to many other chains.
This is a decisive stage before the project plans to launch on other chains. However, users need to pay attention to whether the Native Token in the project is used extensively on the new chain. If the tokens are heavily used in Yield Farming, Pool or AMM, the project will likely be deployed on these chains as the platform already has many users already using the Cross-chain Bridge to circulate tokens.
Stage 3: The trend of integrating Multi-chain and DeFi projects
At the same time, large-scale projects with potential in the market have begun to gradually implement Multi-chain. Projects deploy Multi-chain in the market to facilitate the acquisition of new users and promote their products on new platforms. When successfully deployed on other chains, the project will have higher applicability, attract users and bring investment cash flow to the project.
Conclusion
The above is the basic information of Multi-chain and the huge potential it brings. Hopefully it will provide you with enough useful information and overview to find attractive investment opportunities in the cryptocurrency market.
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