What are inter-chain exchanges?
Even if the cryptocurrency market seems to be slowing down and most of the major coins have lost almost half of their value there is still interest in digital assets and adoption continues to increase. The sustained interest is mainly due to several reasons. DeFi is getting ems to be stronger than ever as it offers a whole new avenue of profit. Second, even though cryptos have mostly lost value since their recent bull run, they still outgrow traditional forms of long-term investing and are a great way to hedge wealth.
No wonder the entire cryptocurrency market still has a combined value.born from data $ 1.3 trillion . One might consider that such accelerated adoption due to its differences from centralized ordinary monetary systems would mean universal existence among all the thousands of coins and tokens.
Decentralized silo systems
Unfortunately, modern coins have an isolated existence. Designed to be decentralized and operate independently, they either have their own separate blockchain ecosystem or larger ones such as Ethereum and Binance Smart Chain.
This essentially means that one token cannot interact with another if it is running on different ecosystems. As more and more tokens are launched, coupled with increased interest due to DeFi, thestruggle is becoming more serious than ever. Take the example of Binance Smart Chain. Less than a year ago it was a non-existent player in the market, but the last few months have proven it to be a serious ecosystem and many tokens l 'use now. Ethereum always keeps its dominance as the first to allow the launch of different tokens using it.
And if you have tokens on a blockchain and that want another one that runs on a different system? This is where cross-ch ain swaps comes in handy.
Sometimes also known as atomic swap, a inter-chain exchange is an exchange mechanisme decentralized complete your tokens for other non-native ones without the need for an escrow or an intermediary.
Inter-chain exchanges are carried out via special smart contracts that can handle both (or more) types of tokens. Although these swap contracts have been around for four years (the data the first known atomic exchange was performed in 2017 by the creator of Litecoin, Charlie Lee, who managed to trade LTC with BTC.
Today, many platforms offer cross-chain swap functionality. An example is the decentralized platform MintySwap uses its d 'aggregation that exploits the inter-chain exchanges between the two largest DeFi chains and yet, isolated from each other - Ethereum and BSC.
The aggregation and cross-trade feature gives a boost to the mature DeFi market, as users discover new markets that were previously inaccessible and provide DeFi developers with a wider audience and growth.
There are many other platforms, such as Shapeshift and Wanhain that claim to have the cross-chai n swap capability, but these platforms do slightly away from a real exchange. Shapeshift insists that users sign up and therefore collect user data, a major no-no in a purely decentralized system and Wanchain essentially creates an intermediary chain that acts as a bridge and does not directly exchange tokens.
So, how do inter-chain exchanges work?
As said before, inter-chain exchanges - chains are made using smart contracts - de small applications that can connect with two different strings and perform an automatic token exchange when certain conditions are met.
The process, although quite complicated behind - plan, is fairly straightforward. When two people agree to trade their assets, they submit those tokens to what is known as a Hash Time Locked (HTLC) contract. Each participant will then exchange hash keys so that both can make sure the other party has deposited the correct amount. The transaction is executed if deposits are made within a specified time frame. Otherwise, the deposited amounts are returned.
This way two people with completely different coins can exchange their assets without needing a guarantor to act as receiver or go to a centralized exchange, then exchange for the required assets.
While the exchanges inter-chains may not be a novelty, the recent interest in different tokens, especially due to the high-profit margins in DeFi oriented agriculture have led to demand for tokens from different chains. Cross-chain exchanges such as those offered by MintySwap are the logical choice.
While centralized exchanges offer exchanges, the simple tedious effort of registering, KYC, and then paying associated fees quickly make this an obsolete option.
The author has no direct interest in the projects mentioned above.
The opinions expressed in this article are solely the property of the author. Nothing in this article constitutes investment advice. Please do your own thorough research before making any investment decisions.
Join the free TON community and enter contests!