👉👉👉 Why #multichain Compatibility Could Deliver the True Promise of #Web3 Interoperability

DeFi Evolution: From Cross-Chain Bridges to Multi-Chain Interoperability

DeFi has evolved since the 2020/2021 yield farming boom, initially dominated by Ethereum but shifting to Layer 1 blockchains like Solana and Layer 2 networks such as Optimism due to high transaction fees. This shift, while improving accessibility, introduced interoperability challenges.

Interoperability Challenges

Early DeFi apps were limited to single blockchains, complicating asset transfers. Developers created cross-chain bridges using smart contracts to facilitate asset movement between blockchains. However, these bridges have significant security vulnerabilities.

Security Issues with Cross-Chain Bridges

In 2022, 70% of DeFi hacks involved cross-chain bridges (Chainalysis). Vulnerabilities in their smart and storage contracts make them prime targets, with notable hacks including the Nomad bridge ($200 million) and the Fantom bridge (over $100 million). High-profile hackers, like North Korea’s Lazarus Group, have exploited these weaknesses.

Transition to Multi-Chain Interoperability

DeFi is shifting towards secure multi-chain interoperability to address security issues. Multi-chain DApps enhance composability across blockchains without security risks, supported by protocols like Compound and Uniswap. Layer 2 networks such as Prom's ZKEVM offer seamless multi-chain compatibility and secure transactions via ZK rollup technology, showcasing significant potential.

Vitalik Buterin’s Perspective

Ethereum co-founder Vitalik Buterin supports multi-chain blockchains but is skeptical of cross-chain applications due to security risks. He advocates for a multi-chain ecosystem to better serve diverse community needs.

Conclusion

DeFi is moving from cross-chain bridges to multi-chain interoperability to improve security and usability. Future advancements will focus on seamless multi-chain solutions and enhanced privacy, promoting broader adoption in the Web3 era.

Source - thenewscrypto.com