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What is multi-chain? What is the difference between Cross-Chain and multi-chain?

Understand trends and investment potential through multichain.

In the past, you may not be familiar with the term multi-chain, and many brothers may be confused about multi-chain and Cross-chain. So, in this article, I will answer the following questions with you:

  • What is multi-chain? . How is multi-chain different from cross-chain?

  • The benefits of Multi-chain.

  • Analyze specific case studies.

  • Multi-chain & Cross-chain trend review.

  • At the end of the article, I will share my personal perspective on the opportunities to make money in this trend.

What is multi-chain?

Multi-chain is a term that means "multi-chain, cross-platform". More specifically, in the crypto market, if a project is deployed on multichain, it means that the project is deployed on at least two chains, which may be Ethereum, Binance Smart Chain, Solana, Polkadot, Avalanche or other blockchains.

Differentiate between Multi-chain and Cross-chain

First, I will reiterate the definition of Cross-chain:

Cross-chain is a solution that helps transfer assets from one chain to another to optimize the ability to combine between chains. That is, projects operating in the Cross-chain field will have the function of helping users connect and transfer assets among many blockchain platforms with different structures.

Cross-chain helps in transferring assets from one blockchain to another.

The difference between Multi-chain and Cross-chain is reflected in the following features:

Multi-chain refers to many different chains. When the "ABC" project deploys Multichain, it means that in addition to the original source chain (Ethereum, BSC, or other chains, ..), the "ABC" project can be independently deployed. Built on other chains, such as BSC or Polkadot.

However, in order for assets to flow between independent chains, you will need Cross-chain tools, which are tools that allow you to transfer assets between the Ethereum chain and other chains on the market.

Benefits and Impacts of Implementing Multi-chain

As you can see, in the current context, in the same field as AMM DEX, there are very prominent names on various platforms, such as Uniswap on Ethereum, PancakeSwap on Binance Smart Chain, and Quickswap on Polygon.

However, each project operates very independently and has yet to reach a large number of users from other ecosystems. So, what do you think if a project will implement multi-chain?

When implementing a multi-chain mechanism on a project, not only users but also the project 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 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 realized (insurance, index tokens, etc.).

The article will be a bit long, but don’t miss the next part, because I will try to bring the most value through analysis, as well as Cross-chain & Multi-chain investment opportunities to investors.

Multi-chain implementation project case study

With the above benefits, the implementation of Multi-chain is only a matter of time for projects if they want to attract users and cash flow from other ecosystems. In the next section, I will illustrate the potential of Multi-chain through case studies of two projects, Tether and Sushiswap.

Tether (USDT)

I will give the first example of Tether (USDT), Tether is the most prominent stablecoin, accounting for 80% of the stablecoin market share. This is the most traded stablecoin through OTC, and it is also the coin that has the greatest impact on the market through USDT "printing".

Tether chain deployed

You can see Tether’s Multi-chain implementation process in the figure below. First is Bitcoin’s Omni network, then Ethereum, Tron, Algorand, Solana, and EOS.

Why does Tether issue its tokens on so many chains?

Why does Tether support Multi-chain?

  • Benefits of Tether

Tether is not only the earliest stablecoin, but also the most influential stablecoin in the current crypto market. Therefore, Tether will definitely not let competitors' stablecoins take away its market share.

In terms of applicability, if Tether does not deploy USDT on the ERC-20 network, who will share the DeFi pie - stablecoins account for 50% of the TVL worth more than $25 billion?

When deployed on multiple networks, Tether will popularize USDT to users in many different networks such as #Ethereum, Polkadot, Solana, etc., helping USDT become a widely accepted token among projects.

  • Benefits to Users

From the experience point of view, everyone can see very clearly that when depositing and withdrawing USDT on Binance, if there is a fee difference of only $0.50 between two different networks, users will choose the one with cheaper fees.

As you can see, with its fast network and cheaper transaction fees, Tron has gained the upper hand over time and surpassed Ethereum as the network with the most USDT issues.

So after Ethereum, which blockchain network will be the next to both solve the congestion problem and become the ecosystem where DeFi projects can be fully deployed?

I wouldn’t be surprised if it’s Solana since it’s one of the best and fastest growing blockchains in recent times.

Sushiswap

  • Sushiswap is one of the most famous AMM DEX projects in the crypto market, with a TVL of up to $4.5 billion (accounting for 7.3% of the DeFi TVL market value) and a trading volume of up to $370 million (ranked 5th in CoinMarketCap ratings).

  • Sushiswap chain will be deployed: On March 4, 2021, the Sushiswap team announced that it will deploy multiple chains. More specifically, it is deployed on 5 different chains outside of Ethereum, which are Fantom, Polygon, xDAI, Binance Smart Chain, and Moonbeam Network. Fantom will be the first chain deployed by Sushiswap.

  • Why does Sushiswap support multi-chain? The AMM DEX field in the Ethereum ecosystem is somewhat saturated with huge competition from Uniswap and 0x protocols, so in order to be able to expand its potential and attract new users to its platform. There are not many prominent AMM DEX projects that Sushiswap needs to deploy on other chains.

personal opinion:

Sushiswap TVL estimates across the ecosystem.

Above is a statistical table of the total market value of the Ethereum ecosystem, the TVL of the DeFi market, and the TVL of Sushiswap. I want to rely on the available data to estimate the TVL Sushiswap on other ecosystems.

This is a personal opinion and estimation method. To get the estimate, I calculated the following:

DeFi TVL = (20 - 40%) of total ecosystem cap. Where:

Ethereum’s DeFi TVL is equal to 21% (59/280) of the total capitalization of the Ethereum ecosystem.

BSC’s DeFi TVL equals 44% (35.7/80) of the total capitalization of the BSC ecosystem.

⇒ Average of ~30% to calculate DeFi TVL in the rest of the ecosystem.

Sushiswap TVL = 7% of DeFi TVL ($4.3 billion / $59 billion).

⇒ Averaged ~7% to calculate Sushiswap TVL in the rest of the ecosystem.

So, how much more can Sushiswap expand if successfully deployed on BSC and Polkadot, the two ecosystems attracting the most DeFi cash flow today?

This is personal opinion, and TVL could depend on many other factors. Let's make a case for Sushiswap to successfully deploy and attract users on the rest of the chains. I can estimate that TVL could increase by $3.5 billion (light yellow background), which is what I expect if Sushiswap's performance on other chains remains the same.

Cross-chain & Multi-chain trends and developments

From a personal perspective, Cross-chains tools have made a significant contribution to the development of Multi-chain, because Cross-chain will help us 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-chainss tools in the new ecosystem

In the first stage, in order to attract assets from other ecosystems, newly developed ecosystems such as Binance Smart Chain and Polkadot have implemented Cross-chain bridges, allowing brothers to transfer assets from other chains to their own chains, especially to attract users from Binance Smart Chain and Polkadot. Ethereum chain - the strongest chain for the development of DeFi platforms.

Binance Smart Chain also implements Binance Bridge, which allows peers to move from another chain to the BSC chain. Not only BSC, but also when Solana has Wormhole and NEAR has Rainbow Bridge, each ecosystem will gradually deploy its own "bridge" tool.

I consider this to be phase 1 because most of the supporting tools are being created by these ecosystems themselves, most of which are only focused on bringing the number of Ethereum users into their ecosystem.

Phase 2: Projects that specifically support the Cross-chain & Multi-chain fields emerge

By the second stage, you will see that there are many projects specializing in the field of cross-chain bridge for you to use. You will easily interact and transfer your assets to more chains on one platform.

AnySwap and Multi-chain.xyz are two prominent projects in the cross-chain bridge space that support up to 10 chains, mostly those built on Ethereum’s EVM. These projects can help you transfer assets between chains like Ethereum, BSC, Fantom, and many others without having to do it on many different bridges.

In addition, you can also use Cross-chain Bridge directly in Coin98 Wallet - one of the first wallets to support in-app bridges and help users store assets on 22 blockchains. Currently, Coin98 Wallet's Cross-chain Bridge supports bridges between:

  • SPL (Solana) <> ERC20 (Ethereum)。

  • ERC20 (Ethereum) <> TRC20 (Tron) <> BEP 20 (Binance Smart Chain)。

  • Avalanche C-Chain <> Avalanche X-Chain。

Phase 3: Multi-chain integration becomes indispensable for DeFi projects

In my opinion, the market is currently between the second and third stages when more Cross-chain tools are born. At the same time, large and potential projects in the market are also gradually implementing Multi-chain.

Once a project implements Multi-chain on the market, it means that they are looking to attract new users and bring their products to the market. I can draw some conclusions that if successfully deployed on other chains, the project will have higher applicability, attract more users and bring more cash flow to the project.

What opportunities are there for investors?

To get good investment opportunities, pay attention to big projects in important fields such as AMM DEX or Lending that have not yet implemented Multi-chain, because they will be trending and potential projects. First Multi-chain implementation.

So how to predict which projects will implement Multi-chain?

Monitor social media activity for potential chains, such as Binance Smart Chain or Polkadot. Before deploying to a new chain, they will develop a cross-chain tool to help you transfer assets to those chains, or conduct an AMA dialogue with the development team when it is officially implemented to announce the cooperation in advance.

Tracking and listing DeFi projects in many different ecosystems, you will find that some emerging ecosystems lack very important areas, such as Lending or AMM DEX. Therefore, projects that are already "mature" in the original ecosystem often find ways to deploy and attract users on other chains, similar to what Sushiswap did.

Summary

I'll summarize some insights for you:

Deploying Cross-chain & Multi-chain is just a matter of time for the project to reach new users. Pay attention to the big projects in the Ethereum ecosystem, they are potential teams. The power is deployed on the new ecosystem.

Pay attention to projects operating in the basic areas of the ecosystem, such as AMM DEX, Lending, Stablecoin or Synthetic. Pay attention to ecosystem social sites such as BSC, Polkadot, Solana, etc., and get project AMA or Cross-chains tool information. These are "alerts" that help you easily search for "hidden gems" before the official deployment of Multi-chain. Therefore, I introduced you to the concept of Multi-chain and its investment opportunities.

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