Why maximalists are wrong — the future is cross-chain
You would not be surprised in recent history to see such an idea floated around online spaces. Originally, many thought it was Bitcoin; then, it was Ethereum because it offered tangible functionality via its smart contract framework.
The predominance of this conceptually naive worldview remained unchallenged for a significant period of time. Conventional wisdom concluded very early on that one chain could provide everything ever needed and there would seldom be a need for any other solution.
As we saw with Ethereum, that didn’t become reality. When a rather simple game like CryptoKitties can gain traction and swiftly and effectively crush the network thus slowing it down dramatically, initiating rising, exorbitant fees and making all other dApps built on the chain suffer, it became evident it would not grow into the mythical ‘one chain’.
We saw an exodus of projects move to the various other chains that claimed they would be the Ethereum killer. But how many times can a blockchain team say they’re building something which is very fast and very secure with low, low fees for the end user before we stop believing in their ability to deliver? The proof is in the pudding on this one: at the faintest hint of even reasonable amounts of traffic Solana and others have all shown their inability to scale.
Make no mistake, blockchain technologies are still in their infancy. But a collective realization is turning the tide of opinion amid signs of the industry maturing: people now perceive different blockchains to serve different use cases. To find success, a chain no longer needs to tout itself as the Ethereum killer.
What we sorely lack is a protocol to marry the functionalities of multiple blockchains and create an all-encompassing solution that brings the best of all worlds to the user.
Building a layer 2 above those chains and allowing projects to build on top of that platform is key to providing maximum benefit while at the same time mitigating risk. For example, if a developer built on top of the Terra chain then their work would be all for nothing following the well-publicised and catastrophic failure. Their code would be near-useless as a result.
This is the great question surrounding blockchain development right now. Do you live and die by the performance of the underlying chain to your project?
Picking and choosing the functionality of different chains is more than a sensible approach, it could become a mission-critical option to preserve the life of a project in the event that volatility or indeed, catastrophic failure, turns a crypto dream into a nightmare.
Crafting Layer Two Solutions
Building load balancing technology mitigates risk too a great extent, by allowing a project to move from chain to chain. Even six months ago many chain operators saw crypto as a monolithic space to be governed by one, or very few, massive entities. The shift in thinking is a potentially revolutionary one.
Interoperability is becoming a critical buzzword surrounding chain-related technology. Even so, the journey to this point hasn’t been for nothing: all of these chains had to build their own community and foster the belief that the project would be world-beating in order to not just thrive, but survive.
However, this approach was never consistent with how technological progress has happened in the past as significant momentum and widespread adoption do not happen in a vacuum: blockchains cannot be siloed if they are to move forward and into the mainstream.
In this context, Layer Two solutions are primed to emerge as a foundational principle for novel blockchain technologies. Perfect sense can be made of a cross-chain protocol that allows the transfer of tokens and assets between chains while keeping transactions ticking over during outages.
Just as visionaries have constructed Layer One blockchains to satisfy the needs of consumers and businesses in a multitude of ways, we will need considerable talent building on the Layer Two side to help execute and make it a reality. The underlying technology can only be unlocked by considerable L2 development, both in protocols building an effective cross-chain system and through dApps which provide a reason for the end user to interact with the chain.
The Reality of Centralisation
There is a fallacious belief that EVM compatibility and more broadly cross-chain solutions involve taking on higher security risks. There is an element of truth insomuch as there is a security risk in all code but in fact, a broad and robust development community as exists for EVM substantially diminishes this risk.
Building on the Ethereum family of chains does force developers to stick with EVM and this is not necessarily compatible with real-world technologies and use cases, which exist outside of token-buying communities. Where adoption can proliferate is when businesses decide to build on top of the chain and create an EVM framework. But that’s a significant barrier to entry.
The concept of decentralization ultimately powers blockchain. But there exists in all types of pipelines — from upstream to downstream — a point at which decentralization beats centralization. In the case of EOS, it’s incredibly close to a centralized project; there are other projects that have also strayed far away from any notion of decentralization.
And as a result of the varying architecture for each one of these chains, even if their focus is on solving the same types of problems, their end functionality and solution are very different. Part of that is where decentralization meets centralization.
Finding the Right Solution
For a DeFi product that wants the widest gap from centralization possible, then EOS may not be the right solution. But a logistics company looking to track its supply chain and who, as a consequence, seeks solely a smart contract framework to automate processes and cut out costly middlemen, there will be less of a concern about how close to centralization the solution is.
All in all, industry needs will drive the adoption of a certain kind of blockchain — at the same time, consumer usage habits naturally lead to the success of other types of blockchain. There is no single, right answer when it comes to crypto.
The continuous evolution of the market is likely to see adaptations and growth while many inadequate chains fall to the wayside. To gain traction, a chain needs to either serve the demands of its prospective customers or fulfill a need they perhaps didn’t even know they had.
Overall, use cases are in abundance for blockchain and there lies untold potential which we may not yet be able to unlock as the tech itself isn’t at the level it needs to be.
One tenet is clear: no single chain can do everything. We are moving inexorably towards a multi-chain future where the great minds across all of crypto either solve different problems with their chain or provide solutions to the same problems with varying functionalities.
Guest post by Toby Gilbert from Coinweb
Toby attended London’s Global University (UCL) and went on to focus on the tech and telco spaces. With a proven track record, including having successfully invested in and exited three telecommunications companies operating in Europe, Africa and Asia. In 2018, Toby invested in Coinweb, a cross-chain computation platform and solution for retail and enterprise. Toby also co-founded the Blockfort and OnRamp DeFi projects.