Moving Between Blockchains: Are One-Stop-Shops Possible in Crypto?
Several platforms, approaches, and technologies are promising ways for a frictionless exchange of digital assets.
Owning one digital asset is fine – but there are many inciting platforms and projects. How is it possible to move between blockchains without the need to perform an exchange or a trade, thus losing the original asset, while incurring trading fees and getting exposed to price risk?
Here is an extraction of projects aiming to solve that problem by technology. So far, the possibilities are limited, but they hint at what is to come for the ecosystem of coins and tokens.
Jeff Garzik’s Bloq and the Metronome Coin: The promises for this project were big. But then, months passed, and the token sale is still a thing of the future, opening on March 1. What this asset promises is that it could travel between blockchains, and be imported and exported across networks. In reality, this may be achieved by launching several assets in parallel on the Ethereum, Ethereum Classic, QTUM, and Rootstock network (the last one based on Bitcoin). After the launch, the coin would be left to the community, to decide how it would operate. So far, there are no clear answers on how the Metronome token would move to NEO, or Stellar, for instance, unless those blockchains create the asset.
WAVES Platform: The Waves wallet allows users to tokenize anything, including Bitcoin itself. What happens is that Bitcoins are parked securely and replaced with an official token representing them on the Waves system. That way, the tokenized asset can be exchanged or transferred with lower fees. The user remains the owner of the BTC coins, able to move out anytime. But the biggest problem with WAVES were the fake tokens mimicking the official ones. Those managed to fool many users who paid high prices for an asset that was not actually Bitcoin.
The Komodo Ecosystem: The Komodo ecosystem and BarterDex also aim to link several assets, but this is limited to the Komodo family of coins, and their “child chains”. The Komodo approach also includes the achievement of atomic swaps between the assets. So far, however, users have complained that the Ardor and Ignis platforms are a bit too counter-intuitive.
Decentralized Exchanges: The most common solution right now. Even wallets that boast an exchange mechanism actually rely on centralized markets. But decentralized exchanges are already operational, and give liquidity to many tokens that have listing problems. The trouble with decentralized exchanges is that they are not very user-friendly, are largely unpopular, and new ones are appearing all the time. Some exchanges, like Digibytes, are strangely counter-intuitive.
Decentralized Exchanges (DEX) – What Are They? Top Picks For 2018
Atomic Swaps: So far, the most direct way promised to move between assets. This approach is still in the experimental stage, and in the end, its chief reason may be to park all coins into Bitcoin while preserving their value. Yet atomic swaps also include a form of trading, again based on the exchange rate between the coins. The thing that changes is the technology, which avoids the manual sending of coins, and instead performs one operation based on a smart contract. Fees, however, still apply, this time to mine the transaction. Atomic swaps are limited to assets of the same cryptographic mechanism, and also require the second layer of a “lightning network”.
Other projects include niche ecosystems that allow for the creation of multiple tokens. This approach is similar to the WAVES platform, and includes use cases such as loyalty tokens, or freelancer payments. But at this point, users are pretty much stuck with their coins and tokens – and the more specialized the asset, the more difficult to switch to another one.
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