The decentralized finance (DeFi) ecosystem has grown exponentially during the past few years. Beginning with the launch of Ethereum (ETH) in mid-2015, application developers across the globe began to write smart contracts to support a wide range of decentralized applications (dApps). A few years later, other platforms such as EOS and TRON launched their mainnets during mid-2018.
Before their launch, the historic bull market of 2017 brought a lot of attention to the space, which was mostly a niche market. At that time, the market saw Bitcoin surge from around $1,000 in January to nearly $20,000 by December 2017 and the Ethereum (ETH) price skyrocketed from just $10 to briefly over $1,400. Although there was a very strong correction afterwards, many more individuals and organizations became aware of the potential of crypto.
As more users attempted to transact across blockchain networks, it became clear that distributed ledger technology (DLT) networks were just not able to settle transactions as quickly as high-performing networks like Visa (NYSE: V) or Mastercard (NYSE: MA). Although blockchain platforms are fundamentally different from more traditional payment processing networks, both need to offer a seamless user experience.
Visa Executive Identifies Requirement for Digital Currency Interoperability
That’s why the crypto and blockchain space is witnessing many new projects emerge that can address scalability requirements. In addition to being able to handle a large number of transactions, blockchain networks also need to be interoperable with each other. This means that if a user is transacting with a set of tokens on one DLT network, then they should also be able to engage in asset transfers with other DLT platforms in a seamless manner.
Catherine Gu, Global CBDC (Central Bank Digital Currency) Product Lead, Visa, recently noted that as the number of virtual currency networks continues to rise — each with “unique design characteristics” — the likelihood that individual consumers, businesses, and merchants are performing transactions on a single network and utilizing the same type of money (or digital tokens) decreases.
Gu added that the team at payments giant Visa believes that for digital currencies and token economies to be successful, they must provide an excellent consumer experience as well as “widespread merchant acceptance.”
This means that we need to have the ability to make and receive payments, “regardless of currency, channel, or form factor.” That’s why Visa decided to develop their own universal payment channel. While Visa may be focused mainly on payments, this clearly shows that interoperability between different networks, including blockchains, will be essential.
Creating Decentralized Standard for Cross-Chain Interoperability, Liquidity Transfers
That’s why projects such as deBridge have secured millions of dollars in funding, so that they can work towards establishing a decentralized standard for cross-chain interoperability. The developers of deBrige aim to enhance cross-chain functionality by allowing different DLT networks to seamlessly exchange assets and information between each other.
The deBridge development team aims to provide the critical digital infrastructure that would allow large blockchains such as Binance Smart Chain (BSC) and Ethereum (ETH) to interact with each other. While DeFi may be a key part of the digital economy of the future, it will require the support of cross-chain interoperability protocols to achieve its goal of mainstream adoption.
deBridge’s $5.5 million investment round, which was finalized in early September 2021, included participation from ParaFi, Animoca Brands, Huobi Ventures, Lemniscap, Crypto.com Capital, Fundamental Labs, bitScale, and many other investors. Notably, deBridge started during the Chainlink Spring 2021 Hackathon event, where the team received the grand prize while competing against 140 high-potential projects.
The modern consumer demands more accessible and diverse financial services. These requirements have made it critical to establish the appropriate infrastructure to enable interoperability between different blockchains and financial ecosystems.
