What is multi-chain? Trends & investment potential with Multichain
What is Multichain? What is the difference between Cross Chain and Multichain? Learn about investment trends and potentials with Multichain.
In the past time, you are probably still familiar with the term Multi-chain, and there will be many brothers who are confused between Multi-chain & Cross-chain.
So, in this article, I will answer the following questions with you:
- What is multi-chain? How is Multi-chain different from Cross-chain?
- Benefits of Multi-chain.
- Analyze specific case studies.
- Review of the trend of Multi-chain & Cross-chain.
At the end of the article, I will share about the opportunity to make $ in this trend, from my personal perspective.
What is multi-chain?
Multi-chain is a term that means “multi-chain, cross-platform”.
More specifically in the crypto market, if a project is deployed on a multichain, it means that the project is being deployed on at least two chains, which can be Ethereum, Binance Smart Chain, Solana, Polkadot, Avalanche or other blockchains.
Distinguish Multi-chain from Cross-chain
First, I will reiterate the Cross-chain definition.
Cross-chain is a cross-chain, a solution to help transfer assets from one chain to another to optimize the ability to combine between chains.
It means that projects operating in the field of Cross-chain will have the function to help users connect and transfer assets in many different structured blockchain platforms.
Cross chain helps move assets from one blockchain to another.
The difference between Multi-chain and Cross-chain is shown in the following characteristics:
- Multi-chain refers to many different chains. When the “ABC” project deploys Multichain, it means that in addition to the original original chain (be it Ethereum, BSC, or another chain, ..), the “ABC” project can independently deploy in other chains like BSC or Polkadot.
- However, in order for assets to flow between independent chains, you will need a Cross-chain tool, which is a tool that allows you to transfer assets between the Ethereum chain and other chains on the market.
Benefits and implications of Multi-chain implementation
You can see that in the current context, in the same field as AMM DEX, on each platform there are extremely prominent names.
For example, on Ethereum there is Uniswap, on Binance Smart Chain there is PancakeSwap, on Polygon there is Quickswap.
However, each project is operating very independently and has not yet reached a large number of users from other ecosystems. So what do you think if projects will deploy Multi-chain?
When implementing the Multi-chain mechanism on projects, not only users but the project will also enjoy the following benefits:
- Reach the number of users in the new ecosystem.
- Overcoming the main chain’s shortcomings (congestion, slow speed).
- Take advantage of many different chains (cheap fees, fast speeds).
- Popularize your token on other ecosystems (especially stablecoin projects).
- Users in the smaller ecosystem can access areas that their ecosystem has not implemented (Insurance, Index token,…).
The article will be a bit long, but don’t miss the next parts, because I will try to bring the most value through analysis, along with investment opportunities in Cross-chain & Multi- chain for you.
Case study on Multi-chain implementation projects
With the above benefits, the implementation of Multi-chain is only sooner or later for projects if they want to attract users and cash flow from other ecosystems.
In the following section, I will give a case study of two projects Tether and Sushiswap to clarify the potential of Multi-chain.
I will give the first example of Tether (USDT), Tether is the most prominent stablecoin and accounts for 80% of the stablecoin market share.
This is the most traded stablecoin through OTC, also the coin that has the biggest impact on the market through USDT “prints”.
Tether Chains Deployed
You can see Tether’s Multi-chain implementation journey through the image below. First Bitcoin’s Omni network, then Ethereum, Tron, Algorand, Solana, and EOS.
Why does Tether issue its tokens on so many chains?
Tether (USDT) Multi-chain Deployment Journey.
Why does Tether support Multi-chain?
Benefits with Tether
Tether is not only the earliest stablecoin, but also the most influential stablecoin in the current crypto market. Therefore, Tether certainly does not let rival stablecoins take its market share.
In terms of applicability, if Tether does not deploy USDT on the ERC-20 network, who will the DeFi pie – where stablecoins account for 50% of TVL worth more than $ 25 billion?
When deployed on many networks, Tether will popularize USDT for users in many different networks such as Ethereum, Polkadot, Solana, … thereby helping USDT become a widely accepted token in the project. in the crypto market.
Benefits for users
In terms of experience, you will see very clearly in the deposit and withdrawal of USDT from Binance. With two different networks, just $0.50 fee difference, users will choose the network with the cheaper fee.
As you can see, with its fast network and cheaper transaction fees, Tron has prevailed over time and overtaken Ethereum to become the network with the most USDT issues.
So after Ethereum, which blockchain network will be the next name that will both solve the congestion problem and become an ecosystem that can deploy DeFi projects completely?
I wouldn’t be surprised if it was Solana because this is one of the blockchains with good technology and fastest growth in recent times.
Tether on Blockchains.
Sushiswap is one of the most prominent AMM DEX projects in the crypto market with a TVL of up to $4.5 billion (accounting for 7.3% of DeFi TVL marketcap) and a trading volume of up to $370 million (ranked #5 in CoinMarketCap ratings).
- Sushiswap Chains to Deploy: On March 4, 2021, the Sushiswap team announced that it will deploy Multi-chain. More specifically, it is deployed on 5 different chains besides Ethereum which are Fantom, Polygon, xDAI, Binance Smart Chain, Moonbeam Network. Fantom will be the first chain that Sushiswap will deploy.
- Why does Sushiswap support Multi-chain? The AMM DEX field in the Ethereum ecosystem has been somewhat saturated with huge competition from Uniswap and 0x Protocol, so to be able to expand its potential and attract new users to its platform, Sushiswap needs to be deployed in other chains where there are not many prominent AMM DEX projects.
Estimating Sushiswap’s TVL across ecosystems.
Above is the statistics table of the total capitalization of ecosystems, TVL of DeFi market and TVL of Sushiswap on Ethereum. And I want to use the available data to estimate TVL Sushiswap on other ecosystems.
This is a personal perspective and estimation method. To get the estimate, I calculated the following:
DeFi TVL = (20 – 40%) of Total Ecosystem Cap. In there:
- Ethereum’s DeFi TVL is equal to 21% of the Total Ethereum Ecosystem Cap (59/280).
- BSC’s DeFi TVL is equal to 44% of BSC’s total ecosystem capitalization (35.7/80).
⇒ Average at ~30% to calculate DeFi TVL in the remaining ecosystems.
Sushiswap TVL = 7% of DeFi TVL ($4.3 billion / $59 billion).
⇒ Take an average of ~7% to calculate Sushiswap TVL in the remaining ecosystems.
So if successfully deployed on BSC and Polkadot – the two ecosystems attracting the most DeFi cash flow today, how much can Sushiswap expand?
This is a personal opinion and TVL may depend on many other factors.
Let’s make a case for Sushiswap to successfully deploy and attract users on the remaining chains. I can estimate that TVL can increase by $3.5 billion (light yellow background), this is the target I would expect if Sushiswap’s performance on other chains remained unchanged.
Trends and development of Cross-chain & Multi-chain
From a personal perspective, Cross-chain tool has a significant contribution in the development of Multi-chain, because Cross-chain will help us to transfer assets between chains.
I will summarize the development of Cross-chain and Multi-chain through the following 3 stages:
Phase 1: The appearance of Cross-chain tools on the new ecosystem
In phase 1, to attract assets from other ecosystems, newly developed ecosystems such as Binance Smart Chain and Polkadot are implementing Cross-chain bridge.
And allows you to transfer assets from other chains to your chain, especially attracting users from the Ethereum chain – the chain with the strongest development of DeFi platforms.
Binance Smart Chain also implements Binance Bridge that allows brothers to move from another chain to the BSC chain. Not only BSC, each ecosystem will gradually deploy its “bridge” tool when Solana has Wormhole, NEAR has Rainbow Bridge, etc.
Rainbow Bridge, Binance Bridge and Wormhole Bridges.
I consider this to be phase 1 because most of the supporting tools are created by those ecosystems themselves and most of them only focus on bringing the number of users from Ethereum to their ecosystem.
Phase 2: Appearing projects specializing in the field of Cross-chain & Multi-chain support
By phase 2, you will see that there are many projects specializing in the field of cross-chain bridges for you to use. It will be easier for you to interact and transfer your assets to more chains on just one platform.
AnySwap, Multi-chain.xyz are two prominent projects in the field of Cross-chain Bridge, they support up to 10 chains, mainly chains built on Ethereum’s EVM.
These are projects that help you transfer assets between many chains such as Ethereum, BSC, Fantom, … without having to do it on many different bridges.
In addition, you can also use Cross-chain Bridge right in Coin98 Wallet – one of the first wallets to support In-app Bridge and help users store assets on 22 blockchains.
Currently, Coin98 Wallet’s Cross-chain Bridge is supporting the bridge between:
- SPL (Solana) <> ERC20 (Ethereum).
- ERC20 (Ethereum) <> TRC20 (Tron) <> BEP 20 (Binance Smart Chain).
- Avalanche C-Chain <> Avalanche X-Chain.
This will be the decisive stage before projects plan to deploy on other chains. You should pay attention to whether the native token from the project is used a lot on the new chain.
If you see tokens being used a lot in Yield Farming, Pool or AMM, then there is a high chance that the project will deploy on those chains because they already have a large number of users already using Cross-chain bridge to circulate tokens. .
Phase 3: Multi-chain integration becomes indispensable for the DeFi project
In my opinion, the market is currently between the 2nd and 3rd stages when more Cross-chain tools are born. At the same time, large and potential projects in the market are also gradually implementing Multi-chain.
Once a project implements Multi-chain in the market, it means they want to reach new users and popularize their products to the market.
I can somewhat conclude that, if successfully deployed on other chains, the projects will have higher applicability, attract more users as well as bring more cash flow to the projects.
What opportunities for investors?
To get good investment opportunities, please pay attention to big projects in important fields such as AMM DEX or Lending but have not yet implemented Multi-chain, because they will be trending and potential projects. First Multi-chain implementation.
So how to predict which projects will deploy Multi-chain?
- Monitor the social media activities of potential chains like Binance Smart Chain or Polkadot.
- Before deploying in new chains, they will develop a Cross-chain tool to help you transfer assets to those chains, or have AMA conversations with the development team to announce the cooperation before officially implemented.
- Following and listing DeFi projects in many different ecosystems, you will see that some emerging ecosystems are missing very important areas such as Lending or AMM DEX.
- Therefore, projects that have “matured” in the original ecosystem will tend to find a way to deploy and attract users on other chains, similar to how Sushiswap did.
I will summarize some experiences for you:
- Deploying Cross-chain & Multi-chain is only a matter of time for projects to reach new users.
- Pay attention to the big projects in the Ethereum ecosystem, they are the teams with the potential to deploy on the new ecosystem.
- Pay attention to projects operating in the foundational field of an ecosystem such as AMM DEX, Lending, Stablecoin or Synthetic.
- Follow the social networking sites of ecosystems such as BSC, Polkadot or Solana to keep up with AMA or Cross-chain tool information of projects.
These are the “alerts” that help you easily search for “hidden gems” before they officially deploy Multi-chain.