Right now, your DeFi product has to be multi-chain to be competitive – that’s the tough (and exciting) truth of 2021. Whether you’re building a wallet, credit service, or DeFi game, your target audience knows it’s more enters the crypto space as Ethereum. And they expect you to offer the best of all worlds.
There always seems to be a debate about which blockchain is the best foundation for projects. Increased security, low transaction costs, and impressive speed – there will always be a chain that offers greater advantages. While speculators argue about the next potential “Ethereum killer”, a new multichain reality is emerging that has less competitive implications. Instead of a dog-eat-dog framework, the future of blockchain and DeFi will favor those products that fit into a collaborative, multi-chain user solution and eventually forget about those that remain isolated.
This trend is driven in part by the Polkadot and Kusama ecosystem, which was built with a multichain philosophy at its core. Parachains connected to the relay chain communicate with each other without any problems, which raises the bar even higher for the entire room. With the second line of Parachain slot auctions just around the corner, they continue to set the standard for the multichain industry.
Projects that make it easier for the average user to connect more systems – like the Moonbeam protocol and the Phantom wallet – are bringing in millions of dollars to simplify this new multichain reality for users. But how do you deal with it as a developer?
We can clearly see that the market is shaped by user requirements. Depending on their needs, your users are turning to blockchains that serve them better – and the platforms that provide access to them. As a result, projects that support multiple chains gain larger audiences and more liquidity. That means your DeFi product must support at least Ethereum and a “niche” blockchain – there are established leaders in trading, staking, non-fungible tokens (NFTs) and more. And the more chains you can interact with, the better.
If you are a developer pursuing these multichain goals, there are several obstacles you may face.
Related: How much intrigue is behind Kusama’s parachain auctions?
Obstacles in building multichain
High costs: Let’s say you want to build a cross-chain bridge; You need to do a large number of knots for all of the chains that you want to bridge together. It’s expensive and requires a lot of maintenance. It can become costly for a developer to start and operate a node on a single blockchain. Now imagine you have to connect two, three, or ten.
It becomes extremely difficult in terms of hardware, maintenance and access to capital. You will need a lot more resources and investment to get started unless you can find other inexpensive solutions.
Security challenges: With recent bridges hacking, security remains one of the biggest challenges with multichain – when you exchange assets, there are more opportunities for hackers. If we look at the recent PolyNetwork incident, we can see that bridges can become extremely vulnerable.
Hackers discovered the network’s weaknesses in Poly’s inter-chain messaging and exploited them to raise an estimated $ 600 million in user funds. This is an important lesson for new multichain DeFi solutions to understand the consequences of security flaws.
Complexity layers: Of course, connecting and integrating blockchains will increase the complexity and workarounds required to connect different chains. Each chain offers a new set of quirks, mechanisms, and nuances that builders need to become familiar with. This will likely mean that DeFi organizations will need access to a wider talent pool in order to access more skills. Blockchains are constantly evolving, and so must you.
Despite the obstacles and additional difficulties that building Multichain presents, it is critical to the future success of DeFi products. There can be no isolated products in Web 3.0 because they do not exist in a vacuum, but in a decentralized economy of the new generation. Projects need a robust and networked infrastructure in order to apply effectively in this economy and to inspire a new audience. But how do we get there?
We need to provide developers with easy and affordable access to nodes, APIs, and support for an ever-growing number of blockchains. With more build options, DeFi developers can break down the barriers to entry and contribute to the next generations of blockchain and finance. The faster we break these barriers, the smoother our next steps towards better user experience and mass adoption will be.
This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
Chandler song is the co-founder and CEO of Ankr Network, a San Francisco-based Web 3.0 infrastructure company and Forbes Award winner “30 Under 30”. He previously worked as an engineer at Amazon Web Services.