During Messari’s Mainnet 2021, the conversation around growing a multichain economy sparked some insightful conversations on the future of crypto, decentralized economies, and scalable solutions that will meet the wide range of needs for mass adoption.
Today, cryptocurrencies have grown beyond Bitcoin and Ethereum, and we see prospering projects such as Solana, Polka Dot, and Cosmos creating multichain technologies that will change the way crypto users interact with different protocols. The crypto ecosystem is a competitive space, where projects can claim they are “Ethereum killers” or “the new Bitcoin,” but few can deliver on the promise of scalability. But what if, for a second, we stopped comparing projects and focused instead on creating multichain solutions that encourage collaboration, instead of competition? That will eventually lead to an increase in user interaction and benefit the crypto ecosystem as a whole.
Let me give an example of how collaboration in our current financial system has helped the world. Today, if you want to send money to another country, it is possible because of different bank partnerships that exist around the world. Imagine how difficult and inconvenient it would be if banks did not have wire solutions and third-party platforms to send funds. This could lead to lost business opportunities and costumer dissatisfaction.
Crypto is a similar concept. Crypto enthusiasts are often discouraged from navigating certain projects due to fees, delays, and lack of technical knowledge of specific platforms. Multichain networks will facilitate cross-chain interaction, as they will connect many crypto projects on one platform, allowing us to send funds with ease, interact with different smart contracts, and facilitate a better user experience.
One of the main problems with UX in crypto is that platforms can be very technical and not friendly for beginners, especially when it comes to sending funds between non-compatible Blockchains. For example, let's say I have a Metamask (ETH based) wallet, and I want to pay a friend that only has a Bitcoin wallet. Both projects are incompatible with one another unless there's a bridge between these networks. If I am a crypto newbie, I might not be familiar with the way bridges work and the easiest solution would be to sell my Ethereum, buy some Bitcoin, then send it to my friend. This procedure is both inefficient and costly.
The conversation held at the conference on building Layer 0’s by the Polka Dot team was fascinating. Before we understand what a Layer 0 is, let’s start by defining what a Layer 1 and 2 are. Layer 1’s are known as main Blockchains, while Layer 2’s are third-party programming that live within Layer 1 Blockchains to solve a problem or improve user experience. For example, Polygon is a Layer 2 scaling solution for Ethereum, used to improve the gas fee problem within the network.
The premise behind Layer 0 is that it is extremely hard for one single project to do everything right, so instead of focusing on one Blockchain that will do it all, we can work on integrated bridges that will connect different projects. Layer 0’s propose that Blockchains can share one same protocol, connecting seamlessly with other protocols to build, connect value chains, offer advanced smart contracts, and improve security. Layer 0’s will connect protocols, hardware, validators, and the crypto world into one unified Blockchain.
The Polka Dot team brought some interesting insights into the improved security capabilities of Layer 0’s. Many Blockchains that start from zero often struggle with security because it is a new protocol that needs to be tested and discover vulnerabilities as they go.
Many times, it is easier to build new projects with existing protocols like Ethereum because development teams can then use security guidelines and check for vulnerabilities before launching their project.
In Layer 0’s such as Polka Dot, Blockchains share data on security and they automatically receive access to validator nodes in the network, rather than having to recruit their own set of validators. Building a new team of validators often takes a lot of time and leaves networks insecure if there's a shortage of validators. In protocols with more validator nodes, cyber-attacks become increasingly more difficult.
The Multichain world is still very new, and still needs a lot of development, however once it becomes a reality, it will contain powerful access to large sums of tokens in different protocols. As the crypto ecosystem grows into multichain technologies, there will be a higher need for security and data monitoring to ensure protocols are working together correctly.
Eventually, multichain networks also need constant monitoring and real-time data that help actors and investors make decisions and detect suspicious activity and vulnerabilities before projects are exploited. Valid Data – our crypto data insights platform - can be used in any Blockchain and protocol, regardless of its layer. Already today, Valid Data continuously monitors dozens of blockchains and thousands of digital assets to provide predictive and real time insights on reliability and security. As multichains develop, Valid Data will continue to serve as the security standard for cross-chains and the crypto world.
Valid Data’s real-time and predictive insights are used by Cryptocurrency traders and exchanges, as well as investors and hedge funds, to make better investment and trading decisions, to protect the value of their digital assets, and to capitalize on market opportunities that only Valid Network’s technology can uncover.
Get crypto analysis, insights and updates right to your inbox! Sign up here so you don't miss a single newsletter.