The introduction of DeFi, which Ethereum largely powers, has been a pivotal moment in the history of finance since it has ushered in new use cases such as borrowing and lending, derivatives, and gaming that promise attractive yields to investors. As network participants compete for limited block space on Ethereum, the platform’s gas fees has skyrocketed to astronomical levels.
This is because, in its present state, the Ethereum network can only support between 13 to 15 transactions per second (tps), with users incentivizing miners with high fees to prioritize their transactions. This has sidelined a vast majority of users that cannot afford these high transaction fees.
Over time, we have seen a wide variety of layer one (L1) chains such as Binance Smart Chain and Avalanche emerging to challenge Ethereum’s dominance. Besides L1 chains, we have also seen many layer two (L2) scaling solutions, such as Polygon, Starkware, and Optimism, run on top of Ethereum.
Each of these solutions seeks to provide its own benefits, mostly guaranteeing lower gas fees, high throughput, unique use cases, and a more user-friendly onboarding experience. Cumulatively, L1 and L2 chains have diminished Ethereum’s dominance of the DeFi space in terms of the total value locked (TVL) from nearly 90% at the beginning of January 2021 to roughly 54% as of June 2022.
The growth of these chains clearly indicates that we have entered a multichain world. With the proliferation of these networks, the growing need for cross-chain bridges between them has become increasingly obvious. Such an ecosystem allows decentralized applications (dApp) developers and users to unlock new use cases.
Challenges of Cross-chain Bridges
While cross-chain bridges exist, they have presented a unique set of challenges that either impede or defeat the core purpose and value of DLTs. Below are a few of them:
- Centralization. Currently, many cross-chain solutions leverage intermediate consensus layers that are not fully decentralized. In most cases, either the validators operate in a permissioned network setting or the bridge is secured by a multi-signature wallet. This is highly insecure because the destination chains implicitly trust the middle bridge layer that is prone to a single point of failure attacks.
- Lack of composability. Most bridges use a wrapped or intermediate token to solve the problem of fragmented liquidity between heterogeneous chains. The use of intermediate assets not only adds complexity to the interoperability process but also adds unnecessary overheads and results in a horrible user experience, especially if the user ends up with an error or cases where there is insufficient liquidity on the destination network.
- Inefficient and costly. As it stands, the process users must undergo when they think about utilizing dApps on various chains is overly cumbersome. It involves several steps of token approvals, swaps, and bridging transactions for each new blockchain network they exchange their assets onto. This is highly inefficient and prohibitively costly for users.
Analog Network as a Solution
Analog is a proof-of-time (PoT) omnichain interoperability network that can connect any given dApp across every given blockchain. Its technology stack consists of the Timechain, threshold signature schemes (TSS), gateway smart contracts, and cross-chain event data transfer (XCEDT) protocol that users can leverage to facilitate cross-chain requests.
Instead of relying on pairwise cross-chain bridges that are largely centralized, the platform relies on a trustless architecture that is powered by tesseracts and time nodes to allow platform builders and dApp developers to connect their systems seamlessly. Unlike typical cross-chain interactions that focus only on two networks, Analog’s interoperability capabilities create a shared infrastructure where all blockchains interact.
You can learn more about Analog’s underlying infrastructure from the Timepaper.
Users can leverage the Analog network for various use cases in DeFi, NFT, and gaming. Some of these use cases include:
Decentralized money markets
Automated market makers (AMMs) like SushiSwap exist on multiple chains, with each instance running in a siloed ecosystem. For such networks to synchronize their state across different networks, for example, dApp developers have to write multiple lines of codes for various bridges that interoperate these chains.
This process is not only laborious but also untenable in the long run. With an Analog network, developers would have a single gateway API and SDK to implement state sharing with AMMs across any connected chain.
Yield farming allows the cryptocurrency community to earn rewards with their assets whenever they stake or lend them on blockchain platforms. Besides obtaining new tokens when the price of an asset increases, users can also receive other incentives. Presently, most yield farming protocols are Ethereum-based, which means users can only operate in a siloed liquidity environment.
Besides a fragmented liquidity framework, most protocols have weak assumptions about event data, which is crucial in today’s fast-paced cryptocurrency markets. For example, market makers cannot easily determine whether they should lock up their cash in liquidity pools to maximize their annual percentage rates (APRs) or annual percentage yield (APYs)
The Analog network can help such users determine the appropriate time to lock up their funds for maximum return on investment (ROI). For example, the platform can capture the correct signals on one platform and feed the signal to another ecosystem, allowing them to determine the appropriate time to invest in the platform.
Non-fungible tokens (NFTs) tend to drop in value over time, and history shows that a small percentage of them stay relevant over time. However, due to the siloed nature of blockchains, users can only exchange NFTs on the native chains that minted them.
With Analog’s general cross-chain event data transfer (XCEDT) protocol, users can easily swap NFTs between different chains from a single pane of glass. Users could even leverage the XCEDT protocol and use NFTs on one platform as collateral for a loan application in other dApps that reside on different chains.
Earning an income from playing games has traditionally been restricted to content creators or e-sport athletes. However, with blockchain-enabled play-to-earn (P2E) games, gamers can now farm or collect NFTs and directly sell them on the marketplace. Because blockchain facilitates cross-border transactions, players can get paid and transfer value regardless of who they are or their geographical locations.
However, despite the attractiveness of P2E games, players cannot seamlessly transfer NFTs such as avatars or weapons created in one game to another game or chain. For example, while gamers can easily buy hundreds of dollars of cosmetics in Fortnite, they cannot move such purchases to another gaming ecosystem when they opt out of the game.
Analog allows gamers to transfer the off-chain earnings to on-chain networks easily. For example, a user can earn the Jinx skin in Fortnite and move it to the Sandbox or Decentraland.
As we progress toward an omnichain world, we believe that Analog’s interoperability infrastructure will be at the center of it all, forming a crucial technology stack that promises a truly trustless and secure network for cross-chain interactions. You can learn more about Analog’s omnichain future and use cases from the official website: https://www.analog.one.
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