Cross Chain

What are Cross-Chains?

There is more and more talk in the world of DeFi about 'cross chain' or bridges between cryptocurrencies, a concept that people are beginning to know. The possibilities offered by blockchain technology are bringing solutions to improve interoperability between them. The role that smart contracts play is decisive for the whole system to be more integrated. In principle, one chain of blocks cannot communicate with another due to the incompatibility between them. The limitations are programming languages, encryption and the processes to generate new coins or verify transactions. Each system is unique and nobody could make transactions from Bitcoin to Ethereum, from their main chains. For this, the 'cross chain' or bridges between cryptocurrencies have emerged.

How does a cross chain work?

Thanks to programming, it is possible to establish those mechanisms of crossing of chains of blocks. This includes smart contracts and other applications that make this possible. Users can cross from Bitcoin to Ethereum, using a 'cross chain' or bridge between cryptocurrencies. The creation of synthetic assets or minting of wrapped tokens, called 'wrapped', is the result of the previous approach.

This solution is being integrated into an increasingly large system between different chains of blocks to decentralized applications. It is possible for a user to keep the value of Bitcoin on the Ethereum network, to move those 'tokens' in the Dapps. For example, the user can use bitcoins in yield applications, called 'yield farming' and also return if desired.

For the 'cross chain' or bridges between cryptocurrencies to be possible, smart contracts and wrapped coins are required. A user sends his bitcoins to an address on the main chain, which is used in a smart contract, for example, on Ethereum, TRON, or Binance Chain. That will do it to the address indicated by the decentralized application you use. Your coins are locked at that public address and upon verification of their legitimacy, according to the blockchain, new tokens are issued that can be used on the destination blockchain.

The tokens are not actually passed to the destination blockchain, because that is not possible. What happens is that the smart contract issues the number of tokens, equivalent to the value, at the time of the operation. That new token will obviously be in another chain of blocks, previously created in the destination network. As the smart contract will keep the bitcoins locked, the wrapped currency will have the backing of the locked token. That means the user will then have synthetic bitcoins in the decentralized application system. For this reason it is called a 'cross chain' or bridge between cryptocurrencies, because it crosses from one chain to another virtually.

Advantages of cross chains:

Among the advantages of cross-chain swaps we can mention:

1) It allows a new decentralized, secure and private functionality to exchange our coins for others without relying on centralized or decentralized exchanges.

2) It helps us to generate a much greater dynamic of the use of coins. The currency exchange, for example, would allow us to expand our use of currencies at any time, and without major complications.

Disadvantages of cross-chains:

1) If we use wallets that have a poor implementation of this type of protocol, we risk losing our money. The security of this system lies in the programming of very clear and safe conditions that protect us at all times.

2) They can be somewhat complex to use, especially for those who are just starting out in the world of cryptocurrencies.