At present, the crypto industry stands at a unique crossroads between nearly all of the most important financial systems of our world today. In previous years banks played the preeminent role as the main intermediary regulating the flow of assets, but the ongoing innovations within the cryptocurrency ecosystem are rapidly phasing out the need for banking institutions.
Crypto in Finance
Due to the efficiency in payment systems and underlying blockchain technology, crypto has become a preferred bridge with point-of-sale products like crypto debit and credit cards, as well as conducting transactions for traditional asset classes such as real estate, fine art, and luxury jewelry. Crypto has also entered the foreign exchange (Forex) and remittance markets, where peer-to-peer networks can now effectively and quickly transfer funds from a cryptocurrency into a mobile money or local bank account.
In addition, cryptocurrencies are the gateway into the realm of DeFi (Decentralized Finance), which has its own bridging complexities to account for. To begin, much of the initial development has been built out on the Ethereum blockchain, the number two cryptocurrency by market cap, with a solid infrastructure in its smart contracts, DAOs (decentralized autonomous organizations), and NFTs (Non-Fungible Tokens).
To date, the issues with Ethereum have more to do with its usability than its innovating capacity. Ethereum networks prohibitively expensive gas fees, network congestion, and scaling capabilities are a cause for concern for the average DeFi user. Jumping onto the DeFi scene with gusto in the second quarter of 2021, Binance and its native blockchain Binance Smart Chain (BSC) have contributed a more user-friendly, cost effective alternative to the space.
Characterized by its fun, food themed platforms and high APY yield farming campaigns, BSC has the advantage of being backed with liquidity from its centralized exchange that dedicated $100 million to liquidity incentive programs and even more in development support. These strong fundamentals and solid use cases have resulted in a steady stronghold for the number three by market cap Binance native token (BNB).
The Polygon network has also seen a considerable rise this year, being integrated with several of the top DEXs and AMMs, as well as receiving investments from notable investors such as Mark Cuban. In part, this popularity can be attributed to its unique architecture which supports scaling solutions for Ethereum along with its own stand alone chain. Polygon’s presence has certainly been a welcome asset to DeFi, as it has allowed users to hold and utilize Ethereum assets with negligible costs, in many cases transfers costing upwards of 1000 times less than on the Ethereum chain.
Yet hefty fees transferring to/from Ethereum and Polygon are still hindrances that prompt the need for developing better bridging solutions. However, in recent months, total value locked (TVL) in cross-chain bridging technology has reached an all time high, indicating the market's preferences and sophistication towards using the strengths and avoiding the weaknesses of any given chain.
Cross-chain liquidity and Swaps
Other trends to keep an eye on when it comes to bridges include cross-chain liquidity aggregation and cross-chain bridge aggregation. The function of the former serves to direct multiple cross-chain assets to the same liquidity pool, while the latter aims to aggregate those pools across the various layer, layer 2, and consensus protocols.
Smartdex 2.0 has implemented features from our partners in Biconomy for instant deposit/withdrawal between layer 1 and 2, Router protocol to aggregate liquidity across Polygon and BSC with aggregation for HEC, Avalanche, Polkadot, and Algorand in future updates, AnySwap to facilitate secure cross-chain swaps, as well as Connext for trustless cross-chain bridging with lower fees and we will continue to leverage these partnerships to add even more features in future updates.
Try out our cross chain bridging and swaps with the new Smartdex 2.0 beta and let us know what you think.
Have fun and happy trading with Autonio!