DeFi has been growing exponentially since June. As of September 1st, the market cap of DeFi projects has reached a record-high $18.65 billion. According to the growth in total locked value and market cap of DeFi projects over the last two weeks, it seems the meteoric growth has given way to a more moderate rate.
Following DeFi, cross-chain became all the rage. On August 22nd, DOT, Polkadot’s token, was split at a ratio of 1:100. After that, the prices of DOT began to skyrocket on major exchanges.
In fact, the popularity of cross-chain was partly helped by DeFi. Although DeFi aspires to reshape the financial ecosystem, it is in a difficult situation, the main reason being the poor infrastructure. Since the end of 2017, Ethereum has been running at high capacity, and as its gas fees rise and transactions are being processed increasingly slowly, there was even the news that some star DeFi projects might consider turning to other public chains because of Ethereum’s high gas fees.
In order to solve the problems faced by Ethereum 1.0, upgrading infrastructure is necessary. However, since the upgrade of Ethereum 2.0 has been delayed time and time again, and due to the complexity of sharding technology, people are turning their attention to some star cross-chain projects. In the future, the combination of cross-chain and DeFi will be the prevailing trend.
What problems and difficulties is cross-chain technology facing?
As of today, there have been numerous blockchains, but the information isolation of many chains has inevitably made blockchains isolated islands independent of each other. Cross-chain, as the name suggests, is aimed to build a bridge between two isolated islands, connecting different blockchains together. In practice, the problem to be solved in cross-chain is how to transfer tokens from one chain to another. This process is not only the transmission of information flow, but also the value transfer behind the information flow that needs to be accurately recorded.
At present, the problems and difficulties cross-chain technology is facing are mainly in two aspects: one is how to verify the transaction status of the original chain in a distributed way, the other is how to verify cross-chain data to ensure security.
Cross-chain interaction can be divided into homogeneous and heterogeneous cross-chain depending on the underlying blockchain platform. Mainstream cross-chain solutions include notary mechanism, hash locking, side chain / relay chain, and distributed private key control.
Polkadot’s vision is to use a Relay chain to verify the transactions of other chains and to establish a parallel chain to realize the transaction and communication with the original chain. Cosmos is similar to Polkadot in some concepts, but it also hopes to create a heterogeneous system to solve cross-chain problems. However, the compatibility of the two chains will not be easily solved by the heterogeneous design.
Aelf, which uses the side chain scheme, proposed its own cross-chain model to solve the above two difficult problems. In the cross-chain process, aelf uses a method called “indexing” to achieve cross-chain communications. Indexing refers to the transfer of data from one chain to another according to the defined structure and is the premise of any cross-chain function. Aelf also adopts the concept of “joint mining”, that is, miners can complete the indexing process on their own. This kind of design can effectively solve two problems: the first is whether a certain chain can be trusted or not. The concept of “joint mining” solves this problem in a fundamental way. It can take into account the normal running of the main-chain and side-chain, without the need to design a redundant trust mechanism. The second problem is whether data indexing is decentralized. The strategy is that the miners can complete indexing independently, and then consider the indexed data participating in the consensus verification process as common data. Therefore, the indexing process and data source of aelf are completely decentralized, which can ensure the security of indexed data.
Cross-chain + DeFi
For example, Telegram’s blockchain project TON was also popular for a time, being known as the combination of Ethereum 2.0, EOS and Polkadot. TON proposed an extensible multi-chain blockchain architecture and prepared a slew of network infrastructures to support various on-chain services, cryptocurrencies and applications.
However, TON went belly-up in the end. Telegram terminated its blockchain project TON in May 2020, but its testnet still ran for nearly a year. In the update on July 6th, TON’s dev team announced that it would stop supporting the TON testnet, and the remaining TON validators would be shut down on August 1st. TON advised all testnet participants to save all relevant data and stop their testing process.
Telegram, which raised $1.7 billion in an ICO, has failed. In the meantime, aelf has built its blockchain network with little funding which is not an easy task. Recently, aelf has updated the aelf product landscape on its website, which offers an overview of aelf’s architecture, including basic cloud environment, core services, components and instances, and scenario applications. As can be seen from the aelf product landscape, aelf has been working on DeFi for a long time. Aelf will start with AESwap and lending and strive to cover the entire DeFi ecosystem in the future.
At present, Ethereum’s DeFi ecosystem is relatively complete, but there are still a lot of possibilities out there. It is believed that aelf’s “cross-chain + DeFi” combination will continue to surprise the blockchain industry.
Aelf has built strong technical features for DeFi that will make it better prepared for applications. First, it will increase speed and reduce costs, which is critical to user experience. Second, aelf’s cross-chain capabilities will allow assets to flow freely between chains. In addition, aelf provides a well-designed governance module for DeFi, allowing them to customize their approach and engage with the community. These features will enable DeFi to perform better on aelf.
As cross-chain technology continues to develop, we may see the transition from the prosperity of a single chain to the value flow between numerous chains. In this cross-chain trend, aelf will continue to be the leader in the investment on DeFi projects and in developing the underlying technology.
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