Today’s digital world is going through some of the most innovative changes we have ever witnessed, powered by blockchain technology. People can now easily play around with tokens loaded with utilities, rights, and monetary value to access one-of-a-kind resources in the so-called “decentralized” world. As a new chapter redefining the evolution of token development further, cross-chain tokens facilitate transactions to wider ranges than before, and this is the perfect time for you to learn more about this fascinating ingenuity. Also, we will look at how these can help in a business-savvy individual’s mission to launch a crypto token.
Table of Contents
● What are Cross-Chain Tokens?
● How Do These Tokens Work Across Blockchains?
● Why are Cross-Chain Tokens Beneficial?
● Various Possible Facets in Cross-Chain Token Development
○ Sidechains
○ Notary Schemes
○ Cross-Chain Bridges
○ Blockchain Routers
○ Industry-Grade Blockchain Solutions
○ Hashed TimeLocks
● Is It Ideal to Launch a Crypto Token Working Across Blockchains for Business?
● Conclusion
What are Cross-Chain Tokens?
Cross-chain tokens are blockchain-based digital entities that can represent both fungible and non-fungible assets on multiple (mostly two) blockchains. While the concept has not gained traction for long, owing to various blockchains’ inherent inability to interact with one another, things are changing in recent times.
Cross-chain token development harnesses the concept of blockchain interoperability that powers people to access their favorite digital assets without any constraints (even one associated with starting out on another blockchain). These tokens aim to make the crypto ecosystem more seamless, hence allowing diverse stakeholders to interact with one another without having to face underlying technological barriers.
How Do These Tokens Work Across Blockchains?
A user wishing to transfer a token from blockchain ‘A’ to blockchain ‘B’ should utilize one of the solutions that focuses on blockchain interoperability. We will see some of them in a later section. Conventionally, atomic swapping and token warping are used as they are easy to perform and involve decentralized processes.
Atomic swapping allows one to burn tokens at the source network and create equivalent ones in the destination blockchain. Token warping enables one to create tokens on the destination network representing tokens on the source network through pegging. Anyway, crypto tokens native to a blockchain can be represented on another network without any intermediary involvement.
Why are Cross-Chain Tokens Beneficial?
● Cross-chain tokens connect different blockchains easily, paving the way for a thriving economy in the decentralized space.
● These tokens also allow businesses to commence operations in various blockchains, thus slashing any concerns of monopoly in the blockchain world.
● Creating cross-chain tokens can enhance scalability prospects for businesses as they can now access multiple networks.
● Utilizing cross-chain technology in tokens also improves the transfer of tokens and the flow of relevant data with instantaneous verifications once transactions are complete.
● Cross-chain tokens linking public and private blockchains can aid in conveying critical information seamlessly and in generating insights for various stakeholders.
Various Possible Facets in Cross-Chain Token Development
Sidechains
Sidechains are separate networks that utilize Two-Way Pegs to transfer tokens between two main blockchains. These networks use what is known as a Cross-Chain Interoperability Protocol (CCIP) to facilitate seamless token transfer between blockchains.
Smart contracts play a vital role in ensuring the token transfer has actually taken place by letting validators across networks confirm the transactions. These aid in facilitating the off-chain process typical for any smart contract-based transaction. There are sidechains that only work for one mainnet, and several others are interoperable through the extensive usage of smart contracts, letting users transfer tokens between networks.
Notary Schemes
Perhaps a surprising yet common way for cross-chain coin development is using notary schemes. The idea relies on an intermediate entity, typically a crypto exchange, to facilitate token transactions across blockchains. Even a network of crypto exchanges can operate notary schemes to execute transactions between blockchains.
Binance and Coinbase are popular in this aspect, owing to their long presence in the crypto market. The presence of centralized entities means the process has largely drawn criticism among users embracing hardcore decentralization. The notary typically locks the tokens from the source chain for verification before actually sending them to the destination chain.
Cross-Chain Bridges
Cross-chain bridges have emerged as a go-to solution for projects aiming to mint tokens working across blockchains. These bridges facilitate token warping by locking tokens on the source network and pegging them to representative tokens on the destination network. Even atomic swapping can be executed by burning tokens on the source chain and developing equivalent tokens on the other blockchain.
Smart contracts execute the entire process, from token locking to minting equivalent tokens. Bridges use specialized mechanisms like Lock and Mint, Burn and Mint, and Lock and Unlock to facilitate the process we mentioned above. Currently, some famous cross-chain bridges include the Binance Bridge, Celer Bridge, Multichain, and Wormhole.
Blockchain Routers
Blockchain routers aid in connecting various chains in an entirely different way. These applications consider various networks as subchains and facilitate token transfer through blockchain routers. These are mostly hidden in the backends of most crypto-swapping portals, such as exchanges and wallets, as they facilitate transactions from these apps’ user interfaces.
These routers extensively utilize a combination of smart contracts and token bridges to link various blockchains. Some of these, like Router Protocol, also offer multi-chain token standards and SDKs for developers, enabling them to integrate these tokens into different dApps, allowing users to take advantage of cross-chain token transfers without hassles.
Industry-Grade Blockchain Solutions
Blockchain solutions such as Polkadot and Cosmos have changed most people’s perspectives on how blockchains work. This is because these tend to cater to industrial use cases by enabling an ecosystem comprising hundreds of sub-networks. Such solutions offer multiple possibilities – Either one can create specialized sidechains that can converse with public blockchains, or they can utilize a solution’s ecosystem to create permissionless and private blockchains.
Both possibilities open numerous opportunities for projects planning to launch tokens working across blockchains. While the former allows them to create proprietary tokens that can interact with mainstream networks, the latter facilitates the formation of an exclusive ecosystem where these tokens are supported.
Hashed TimeLocks
As a coin development facet focused on cross-chain payments, the Hashed TimeLock Contract (HTLC) lets users conduct token payments within a said time using a passcode. If the transaction does not happen, funds are reverted to the source. HTLCs have been a product of Bitcoin’s intelligent developer community, who put it to great use in the Lightning Network.
Deriving inspiration from these contracts, cross-chain tokens can be created in such a manner to ensure the transaction occurs between the intended peers within the stipulated time. By bringing atomic swaps (which usually require intermediaries) into the picture, HTLC allows token transactions to be truly between peers.
Is It Ideal to Launch a Crypto Token Working Across Blockchains for Business?
If you want to launch a crypto token working across multiple blockchains but doubt its feasibility as a business, fear no more! Cross-chain tokens have long been a hot business prospect as more users plan to explore other blockchains offering promising benefits.
If you can offer a token loaded with value and utility working across chains, your venture could well be the next heavyweight in the crypto space. Such token projects also tend to gain more recognition from existing platforms with whom they can create working partnerships. In such a way, creating cross-chain tokens for businesses stands a chance to prosper in the coming decades.
Conclusion
Coin development services have become an unignorable subject in the crypto space due to their bags of benefits. The projected rise in efficiency in communications between blockchains can get to new heights thanks to these tokens. Although the plan to launch a crypto token based on these premises sounds incredible, the technical intricacies involved are more sophisticated than one could imagine. Hence, we recommend you opt for professional assistance if you want to move forward with your coin development project focused on working cross-chain.
No comments:
Post a Comment