• The blockchain industry has grown from a few million dollars to a $1 trillion market, but it has yet to create a decentralized, safe, and interoperable solution.
• Centralized exchanges have traditionally been among the few secure options for switching between blockchains.
• Projects like Polkadot and Cosmos are attempting to create an interoperable “network of networks” with modularity.
Growth of Blockchain Industry
In the past ten years, the public blockchain industry has grown from a few million dollars to a $1 trillion market. Despite this growth, there is still no decentralized, safe, and interoperable solution available yet.
Centralized exchanges have traditionally been among the few secure options for users wanting to switch between blockchains. BitGo’s Wrapped Bitcoin (WBTC) is currently the biggest pool of liquidity for Ethereum users who want to access Bitcoin. However, WBTC is vulnerable to centralization and regulatory issues due to its dominance in the market. In December 2022 RenBTC was shut down due to legal action taken against Paxos for releasing Binance USD (BUSD). This may eventually lead the U.S Securities and Exchange Commission (SEC) to target BitGo as well.
It is necessary for smart contract platforms and other blockchains designed for certain applications to have interoperability solutions in order for them to be successful. Currently 90% of cross-chain bridge transactions from Ethereum are made up of sidechains and rollups on Polygon, Arbitrum, and Optimist while Near’s Rainbow and Fantom bridges make up the rest of this volume with small amounts of wealth locked on them respectively.
Network of Networks
Polkadot and Cosmos are working towards creating an interoperable “network of networks” that uses modularity from the ground up in order to provide a safe and scalable cross-chain platform which can support multiple different functions within one network architecture but remain connected through various solutions . However these projects are still under development so they haven’t managed to bring enough liquidity into their ecosystems yet.
Centralization continues be an issue when it comes creating cross-chain solutions as many current ones rely on centralized platforms like exchanges or CoinList in order for them work properly or even exist at all . If large centralized exchanges such as BitGo were targeted by regulators then most cross-chain solutions would be affected as they rely heavily on their services in order function effectively .