Kana Labs Web3 Middleware — The Answer to Liquidity Fragmentation Conundrum
Today’s Web3 and DeFi market is a vast emerging industry with plenty of growth potential. But, the growth potential has one huge roadblock preventing participants in the industry from realising its full potential — the problem of liquidity fragmentation. Today’s cryptocurrency and blockchain market has too many blockchain networks each focusing on several different goals. Each blockchain has its own user base, developer base and use cases. But this has resulted in a market where despite sharing similar core values of decentralisation and immutable ledger-based data storage, users remain fragmented in smaller communities limited to individual blockchain networks.
These blockchain networks at their core can be classified into two divisions — EVM and Non-EVM blockchain networks. Since the debut of the Bitcoin blockchain network, various blockchains have come into existence such as Ethereum, Polygon, Avalanche, Kava, Solana, Aptos, and Cardano etc., Bitcoin started the blockchain revolution while Ethereum helped the cryptocurrency and blockchain ecosystem gain global renown.
Non-EVM blockchains — These are blockchain networks that started off as L1 or L2 blockchains that have clean and flexible rules where they could work with safer languages and create resilient products. Each of these blockchain networks has its own core architecture, coding languages and infrastructure that made them valuable. While Bitcoin started the crypto revolution, it has its limitations owing to its proof of work concept which limited the network’s use-case capabilities in terms of scalability, flexibility, cost of transactions etc.,
Blockchain and decentralisation enthusiasts from tech and investment sectors who realised the potential of these two technologies gathered together into small teams and built their own blockchains which were aimed at addressing one or more of the above-mentioned use cases. This resulted in the creation of numerous blockchains such as Kava, Solana, Radix, Cardano and Aptos. But this resulted in a market with a highly fragmented user base. As each of these blockchains had its own core architecture, coding languages etc, this resulted in a situation which lacked interoperability thereby limiting the flow of liquidity between these chains.
EVM blockchains — Soon after the debut of Bitcoin, the Ethereum blockchain came into existence and introduced the concept of smart contracts which helped capitalise on and realise the actual potential of blockchain across various industries including finance, logistics, healthcare etc., But as its user base continued to grow, given that Ethereum was built similar to Bitcoin using proof of work consensus mechanism, it started showing similar issues which manifested in form of scalability, flexibility, privacy, higher transaction cost, longer transaction time etc.,
Here comes EVM chains/EVM compatible chains. There are blockchains which use “Ethereum Virtual Machine” one of the core concepts behind Ethereum but have developed individually on their own into a different chain aiming to address and negate some of the issues faced by the Ethereum network such as scalability, interoperability, privacy and transaction speed and transaction costs etc such as Polygon, Neon, Binance Smart Chain and Shardeum.
Since these chains used EVM as the core concept behind their blockchain network and followed various blockchain tech and token standards set by the Ethereum blockchain network, they were able to capitalise on already existing larger dApp and user ecosystem of Ethereum to grow into the world’s largest interoperable blockchain dapp ecosystem. While this did help improve liquidity flow and address fragmentation issues to some extent, they were still unable to truly bring about any major changes as these chains remain limited by the rigid nature of EVM and austerity Solidity bytecodes.
Previously, various tech experts in the industry came up with two key ideas to help address illiquid scenarios and liquidity fragmentation namely liquidity aggregation and cross-chain interoperability. But, there existed the challenge of aggregating liquidity from different blockchains under a single UI and challenges faced in establishing true cross-chain communication (interoperability trilemma).
Kana Labs Web3 Middleware — Here comes Kana Labs to the rescue. The full potential of blockchain and decentralised ecosystems can only be realised when there is a clear and hurdle-free flow of assets between different blockchain networks. You can call this situation a “true on-chain cross-chain communication”. We at Kana Labs wanted to make it easier for users to approach and adopt to cryptocurrencies and blockchain technology. So we made it our goal to address the challenges above and our efforts were fruitful.
We have created a Web3 middleware SDK toolkit that helps facilitate communication between different blockchain networks both EVM and non-EVM under a single roof. This toolkit brings together two concepts of liquidity aggregation and cross-chain solutions under one entity. Our liquidity aggregation solution is made of proprietary aggregation engines and third-party liquidity aggregators such as 1inch and Jupiter aggregators. For cross-chain communication, we have built our own proprietary cross-chain solutions which aggregates our asset bridges and various third-party messaging protocols under a single roof to facilitate super-fast transaction speeds.
We have combined both the liquidity aggregation and cross-chain aggregation aspects into a single tool and this tool facilitates communication between various blockchains supported by us such as Solana and Aptos from the non-EVM chains and Ethereum, Polygon, Binance Smart Chain & Neon from the EVM chains. This way we are able to create true on-chain cross-chain communication via which we facilitate super fast and low-cost (gas-fee) flow of token liquidity between various supported chains providing users and developers with access to a wider user and dApp market base.
By building your dApp front end on top of our Web3 middleware, business organisations gain access to a larger target audience from multiple blockchains at a single point while both the business entity and users gain access to uninhibited liquidity flow. Furthermore, we believe that our product will help simplify the onboarding process for new users who come to Web3 space from Web2 while bringing about better mass adoption of blockchain and cryptocurrency-related products and services.
