What is Cross-chain? why are blockchain companies adopting it
Cryptocurrencies have become more popular than ever among investors and users since they are faster and easily accessible than traditional currencies. There are hundreds of cryptocurrency companies now available in the market. For several years, these cryptocurrencies added value to them mostly through the technology that they depend upon called the blockchain. Blockchain technologies have enabled these cryptocurrency companies to think beyond just the currencies by providing a platform for new developers to create their medium of exchanges called the tokens, build mobile applications and games where blockchain technology helps in encrypted exchange and access of data over a large decentralized network.
Cross-chain is just a new solution for blockchains to communicate with one another. Every block in a blockchain has data that is validated, verified, and linked with the previous block. Most of the time there are no communications between the blocks. Hence, blockchain technology is limited to just being a secure database holding data over a long period. Access to data on a blockchain need certain consensus like proof of work and proof of stack. Either you work to maintain the ecosystem or have a stake to use the ecosystem. Either you are a validator or a verifier. While companies like Ethereum and Solana have built these ecosystems, they have also moved to a newer technology called cross-chain technology enabling blocks in blockchain to communicate and share data within their respective ecosystems.
Cross-chain is a new technology that allows blockchain interoperability and scalability. Interoperability is a new generation of blockchain technology to connect blockchain with interoperability ecosystems. The ecosystem can consist of a private chain such as a bank, a public chain such as Ethereum or Solana, and a supply chain on which the block’s interoperability is developed.
Cross-chain technology allows communication between these chains and sends messages between one another. Some of the advantages of this ecosystem are cross-chain transactions, multi-token transactions. Private chains are more reluctant to share their information with public chains one of the main goals of Cross-chain is to allow communications between these chains. Communication between cross-chain is sentential in guaranteeing the decentralized functionality of technology. As blockchain projects ultimately have very different structures, sometimes it might be impossible to exchange data between chains without additional software or third-party intervention. This is why cross-chain communication methods are becoming increasingly sought after. At the moment, there are several cross-chain communication processes for blockchains to exchange information. Most of the interoperability solutions proposed depend on protocols and smart-contracts built on top of the blockchains but the one that has gained recognitions and are being used by new generation of blockchain companies are swaps or Atomic swap.
Swaps are probably the most popular cross-chain communication tool for blockchain developers. Unlike purchasing cryptocurrency from an exchange, a swap allows peers to transfer tokens wallet-to-wallet through a dedicated smart contract. This process eliminates the necessity of a third-party exchange and allows peers to exchange cryptocurrency directly
The ultimate goal of cross-chain technology is to provide a ecosystem for the public chain (Ethereum, Bitcoin etc.) supply chain (protocols and smart-contracts and private chains like financial sectors (Banks) to seamlessly exchange information in a decentralised platform like blockchain.
