The decentralized finance (DeFi) ecosystem has expanded rapidly in recent years. Since the release of Ethereum (ETH) in mid-2015, application developers all over the world have been writing smart contracts to support a wide range of decentralized applications (dApps). Other platforms, such as EOS and TRON, launched their mainnets a few years later, in mid-2018.
The historic bull market of 2017 drew a lot of attention to the space, which was mostly a niche market prior to their launch. At the time, the market saw Bitcoin rise from around $1,000 in January to nearly $20,000 by December 2017, while the price of Ethereum (ETH) skyrocketed from $10 to briefly exceeding $1,400. Despite a severe correction, many more individuals and organizations became aware of the potential of cryptocurrency.
As more users attempted to transact across blockchain networks, it became clear that distributed ledger technology (DLT) networks simply could not settle transactions as quickly as high-performing networks such as Visa (NYSE: V) or Mastercard (NYSE: MA) (NYSE: MA). Although blockchain platforms differ fundamentally from more traditional payment processing networks, both must provide a unified user experience.
A Visa executive has identified the need for digital currency interoperability.
As a result, many new projects addressing scalability requirements are emerging in the crypto and blockchain space. Blockchain networks must be able to handle a large number of transactions while also being interoperable with one another. This means that if a user is transacting with a set of tokens on one DLT network, they should be able to seamlessly transfer assets to other DLT platforms.
According to Catherine Gu, Global CBDC (Central Bank Digital Currency) Product Lead at Visa, as the number of virtual currency networks grows — each with “unique design characteristics” — the likelihood of individual consumers, businesses, and merchants performing transactions on a single network and using the same type of money (or digital tokens) decreases.
Gu went on to say that the Visa team believes that in order for digital currencies and token economies to succeed, they must provide an excellent consumer experience as well as “widespread merchant acceptance.”
This means we must be able to send and receive payments “regardless of currency, channel, or form factor.” As a result, Visa decided to create their own universal payment channel. While Visa is primarily concerned with payments, this clearly demonstrates the importance of interoperability between different networks, including blockchains.
Developing a Decentralized Standard for Liquidity Transfers and Cross-Chain Interoperability
That is why projects like deBridge have received millions of dollars in funding in order to work toward establishing a decentralized standard for cross-chain interoperability. The developers of deBrige hope to improve cross-chain functionality by allowing different DLT networks to exchange assets and information in real time.
The deBridge development team’s goal is to provide critical digital infrastructure that will allow large blockchains like Binance Smart Chain (BSC) and Ethereum (ETH) to interact with one another. While DeFi may be an important part of the future digital economy, it will need the support of cross-chain interoperability protocols to achieve its goal of widespread adoption.
ParaFi, Animoca Brands, Huobi Ventures, Lemniscap, Crypto.com Capital, Fundamental Labs, bitScale, and many other investors participated in deBridge’s $5.5 million investment round, which was completed in early September 2021. Notably, deBridge began at the Chainlink Spring 2021 Hackathon, where the team won the grand prize while competing against 140 high-potential projects.
The modern consumer expects financial services to be more accessible and diverse. Because of these requirements, it is critical to build the necessary infrastructure to enable interoperability between different blockchains and financial ecosystems.