Interoperability seems to be the buzzword of the Autumn
Crypto in 2021 has been all about DeFi, NFTs and gaming. Whilst initial developments were on Ethereum, a number of other Level 1 smart contract blockchains have now risen up to compete. Binance Smart Chain. Solana. Cardano. All are no doubt familiar names to anyone on LeoFinance.
Each of these platforms offer smart contract operating systems. This functionality allows developers to build and secure their trustless applications. The race for DeFi has been a race to establish smart contract functionality and to attract developers to code smart contracts and build applications around them.
But crypto never stays still for long! Now the buzzword is interoperability: The ability to seamlessly transact between blockchains.
Q4 will see further movement in this area. Rather than just talking about the merits of individual blockchains we will now be considering multi-chain ecosystems and the strengths and weaknesses of how they achieve consensus.
The Cosmos network (ATOM) with its hub / zone architecture is one such system. Polkadot (DOT) with its parachains approach is another. Avalanche (AVAX) is a third and undoubtedly not the last. All three of these have seen strong price growth in the last couple of months since bouncing off the July lows.
Q4 could be defined by the battle between these ecosystems.
Replication / Competition
One of the themes of DeFi development has been replication.
Projects and smart contracts are often open-source to garner trust in a trustless operation. Succesful projects have swiftly spawned copycats that provide marginally improved offerings with different branding. Liquidity can be swiftly withdrawn and flipped to the newest big thing. A battle for higher yields and Total Value Locked (Assets Under Management) ensues.
NFT projects have seen a similar replication theme. A collection of apes. A collection of lions. A collection of penguins. Another collection of apes. Punks on every chain.
But why stop there? Now, rather than replicating an individual project, why not replicate an entire blockchain, complete with all the applications? Make minor improvements, rebrand, connect it to the ecosystem and voila!
Interoperability brings an increased flow of money between blockchains. Under such systems, all the liquidity in the ecosystem is within easy reach of your own chain. Development costs are low and you can distribute your own low cost blockchain tokens to your supporters for transactions rather than shelling out on existing and expensive blockchain tokens.
The number of individual blockchains may be about to explode.
What does this mean for coins and token investment?
Of course, a blockchain ecosystem brings another level of blockchain investment.
Currently if you like a particular team or a particular project you might invest in their project tokens.
Alternatively you might find you like the look of a number of projects on the blockchain and invest in the tokens that power the blockchain itself.
Now you also have the option of investing in the overarching ecosystem tokens (e.g. ATOM, DOT or AVAX). The choice is endless!
Which of these ecosystem coins is your choice?
Got a favourite? Let me know in the comments!
Not financial advice. Please do your own research.