In 2020, Ethereum-based DeFi has grown more than anyone could have predicted. In January, speculation was rife that investment would soon hit the $1 billion mark. By October, investors and speculators had poured over $12 billion into DeFi applications, as it became known that users could profit from high yields.
However, as DeFi has grown, it’s become more evident that its dependence on Ethereum would constrain its ongoing expansion. Users faced spiraling transaction fees and slow confirmation times, resulting in an overall subpar experience. Furthermore, DeFi’s confinement to Ethereum results in a situation where users and developers can’t benefit from the vast value in other blockchains and non-Ethereum tokens.
Thankfully, there are signs this is starting to change. For most of 2020, interoperability between platforms has been a significant focus. Now, there are several positive indicators that DeFi users are beginning to reap the benefits of cross-chain communications and token swaps. Here are three examples.
RSK, Ethereum and DAI
RSK caused much excitement when it first emerged in 2017, promising to bring Ethereum-like smart contract capabilities to Bitcoin via a side chain. Since then, the project has made significant progress in developing its technology stack. RSK is now one of the leading projects blazing a trail in Bitcoin-based DeFi, unlocking the value of crypto’s most valuable asset.
Earlier this year, IOV Labs was among the first blockchain operators to announce it was launching an interoperability bridge, allowing the Bitcoin and Ethereum ecosystems to interact for the first time. The bridge allows users to send their tokens between RSK and Ethereum by locking them into one platform and minting them on the other.
The most recent development is that the RSK Swap exchange, an analog of Uniswap based on RSK, has integrated DAI, meaning users can send their DAI across the RSK interoperability bridge and put them to work in RSK-based applications. RSK also launched DAI pools on RSK Swap for its two tokens, RBTC and RIF.
RSK also has its own stablecoin applications called Dollar on Chain (DOC) and RIF on Chain (ROC), both operated by the Money on Chain project. Both projects allow users to mint dollar-pegged stablecoins, with DOC collateralized by Bitcoin and ROC collateralized by RIF.
Waves and Ethereum
The Waves protocol is also one of the long-established platforms in the blockchain space, having launched way back in 2016 before anyone was talking about interoperability. It aimed to make it easy for anyone to get a customized token up and running without the need for complex smart contract programming. It achieves this by having tokens managed by scripts running in user accounts. It was also one of the earlier platforms to operate its own decentralized exchange, the Waves DEX.
Waves.tech has evolved to become an ecosystem of technologies based on the Waves protocol. In late October, Waves announced that it had ported its WAVES token to Ethereum as a means of achieving interoperability between the two networks. The move gives WAVES token holders access to the entire suite of Ethereum-based DeFi products, and similarly, Ethereum DeFi users can also access Waves functionality.
It works in a comparable way to the RSK interoperability bridge, by allowing users to lock WAVES tokens on the Waves network and issuing an ERC20 WAVES token on Ethereum.
Waves.tech also includes Gravity Protocol, a blockchain-agnostic cross-chain oracle, and communication network. By 2021, the Waves team intends to use the Gravity Protocol to operate the gateway to Ethereum.
Equilibrium Migrates to Polkadot
Equilibrium established itself as the original stablecoin based on EOS, comparable to Maker on Ethereum or Money on Chain on RSK. However, it’s seen an opportunity to expand its features by leveraging Polkadot.
Polkadot has been one of the most hotly anticipated platforms in blockchain, thanks to its promise of scalability, decentralization, and, most importantly, interoperability. Having launched on mainnet earlier this year, the project has been attracting significant development. Now, Equilibrium is extending development to Polkadot in a bid to achieve interoperability with Ethereum-based DeFi and other blockchains.
The original EOSDT stablecoin will remain on EOS. The team behind Equilibrium is also developing a Polkadot parachain with a new token called EQ, which will serve as a native token for transaction fees, and also as a governance token.
New features on Equilibrium will include a lending platform, a cross-chain DEX, and a synthetic asset platform. The platform is currently in development and will launch its token in the coming weeks.
While 2020 has seen significant strides in both interoperability and DeFi, these emerging developments are extremely positive news for cross-chain DeFi. As we move into 2021 and beyond, it seems inevitable that DeFi will flourish into a truly interoperable financial system.
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