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According to Hot Crypto Market Trend, Blockchains are expected to replace centralized exchanges and bridges as the crypto industry recovers.
In the last decade, the growth of the public blockchain sector has grown from not more than a few million dollars in comparison to a $1 trillion (about $3,100 per person in the US) industry. Nonetheless, space is yet to achieve a decentralized, secure interoperable solution.
For instance, let’s use the largest Bitcoin network, Ethereum and Bitcoin. Authentically, one of the few viable and safe solutions to safely shift from one chain to another is the centralized exchange.
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With Wrapped Bitcoin (WBTC), Ethereum users can gain exposure to Bitcoin via the centralized solution provider, BitGo. Bitcoin has passed over 93.6 percent of BitGo IOU accounts to Ethereum. Users should rely on the BitGo partner platforms to exchange BTC and WBTC such as CoinList or centralized exchanges.
Regularity risks and evident centralization have been exposed by the BTWC. Alameda Research controls a platform known as RenBTC though it was dismissed in December 2022 after the FTX’s collapse.
It is assumed that the same thing can happen to BitGo. The crackdown regulatory on Paxos for issuing U.S. dollar-backed Binance USD stablecoin that could eventually bring several services like the Securities and Exchange Commission’s crosshairs and BitGo into the U.S. Securities.
The interoperability in-between the smart contract platforms and other application-specific blockchains must be developed. At least 90 percent of the cross-chain bridge volume of Ethereum consists of Arbitrum and Optimism, sidechains and rollups on Polygon. There are only two independent blockchains with notable values that are locked on the bridges with Ethereum. These blockchains are; Fantom Bridges and Near’s Rainbow.
The ultimate goal to establish an interoperable ‘network of networks’ is the goal of Cosmos and Polkadot which are some major crypto projects who are going to implement modularity from the ground to build a scalable and secure cross-chain platform. Additionally, sufficient liquidity in the ecosystem of Cosmos is yet to be developed.
The issue of bridge centralization:
‘Multichain future’ hype was observed by the 2021 hype cycle in which there were various blockchains that hosted some distinct functions though, they were joined by an interoperable solution. The first generations of bridges were known to be highly centralized and primitive which made them the hot target for exploits.
The next generation of these interoperable solutions is going to operate as separate blockchains so that they can enhance security and decentralization.
Via THORchain the daily volume of transfers is below $20 Million.
Using Cosmos SDK, there is a 1-layer blockchain built which is known as Celestia. The smart contract execution is supported by Celestia. Though, the platform is only responsible for the ordering of transactions and making the blockchain easily accessible.
Other decentralized solutions are going to be launched in 2023 as well.
A multichain future where different users can talk to each other easily can be built by these.