The year 2020 certainly gave a lot of joy to the crypto community
2020 was the year that DeFi conquered the blockchain world. While the rest of the planet is likely to remember 2020 as the year of COVID-19 and lockdown, crypto enthusiasts will also remember it as the year of cryptocurrencies and DeFi projects. This was not without good reason, however, since in 2020 the TVL in the DeFi protocols grew from $ 675 million to $ 16.2 billion.
Other parts of DeFi also performed well, as the dollar value of stablecoins increased from $ 5 billion at the beginning of the year to $ 26.4 billion.
However, not all news was good for decentralized finance, as the polio of the Ethereum chain, which takes up most of DeFi, has been placed under increasing stress, with transaction times slowing and gas rates skyrocketing. Average transaction costs on the network skyrocketed in 2020, from a few cents at the beginning of the year to more than $ 12 in September. This, in turn, led to a series of projects promoting cross-chain technology as a long-term solution, spreading the weight across several blockchains.
Although cross-chain technology has received a particular focus thanks to the design challenges facing Ethereum, it is by no means the only use case for cross-chain or the reason it will dominate next year. Interoperability has been an aspiration within the blockchain for a considerable time and now the technology is finally reaching its ideals.
One of the projects that add considerable momentum to the cross-chain trend is the Fire Protocol, developed at Huobi Smart Eco Chain. Fire Protocol uses cross-chain technology to bring hundreds of digital assets to the Huobi ecosystem.
A DEX dubbed FireSwap is also part of the offering and provides grouping of cross-chain assets, which is of particular importance in reducing stress in overloaded networks, such as Ethereum. The Fire Protocol is also supported by its own proprietary FIRE token, which is used to power incentive mechanisms, such as community proposals and for user voting.
PlasmaPay is another emerging DeFi project that exalts cross-chain technology. The online banking system and the DeFi aggregator continually spread the message that, in order to bring DeFi to the broader public, the industry cannot rely on a single network. When PlasmaPay’s cross-chain HyperLoop is launched in 2021, it will join an increasing number of cross-chain solutions, including Matic.
In addition to the desire to maximize the effectiveness of DeFi, cross-chain technology and interoperability are at the heart of a series of next generation blockchain networks. Cosmos and Polkadot are among the best known of them. Cosmos Network promises “the most powerful connected blockchain ecosystem”, for which they coined the phrase Inter-Blockchain Communication (IBC).
The idea is intriguing and several projects are already being developed, including IRISnet, e-Money, Sentinel and Agreements Network. The Binance network was also based on Cosmos technology, but it is not clear to what degree Binance embraced the idea of interoperability at this stage.
Polkadot is the cross-chain solution developed by Ethereum co-creator Gavin Wood. Such is the strong pedigree and scope of the project that recently appointed as the “Ethereum killer” by Bloomberg. Whether Polkadot can meet this bill or not, there is much evidence to suggest that 2021 will be the year of cross-chains.