Why Multi-Chain Protocols are Better for DeFi – See Case Study
Ethereum remains the leading smart contract network regardless of the competition clouding the DeFi space. However, it misaddressed its scalability crisis, most evident in the outrageous gas fees on many Ethereum-based protocols.
For this reason, many emerging DeFi protocols, working or not, are adopting features or smart contracts that seek to solve at least 2 of the 3 scalability trilemmas encountered in DeFi.
All of these challenges in the DeFi space have led developers to develop a blueprint that could end the situation at the root: the multi-chain DeFi protocol.
Here we learn the basics of the multi-chain DeFi protocol and introduce you to CashFi (CFI), a multi-chain solution.
What is a multi-chain DeFi protocol?
A multi-chain DeFi protocol supports other blockchain networks alongside the native network it is built on. For example, Aave Protocol, a DEX and liquidity pool that supports around 7 blockchain network tokens and over 13 markets.
Aave is generally a complete case study of what multi-chain protocols can offer. In a short time, it has amassed insane numbers – becoming the second largest DeFi protocol behind MakerDAO, according to DeFi Pulse, at the time of writing.
Multi-chain protocols don’t have to bother competition for liquidity, as users participate in the protocol without needing to trade their coins on bridges or spend daunting fees in the process.
Here are some benefits that come with Multi-Chain DEX
One-way transaction model
You don’t need to switch between networks to transact. Multi-chain protocols provide a one-way transaction model capable of retaining investors or users.
For example, compare a store that offers a variety of products and another that only offers one product at a time. If all things remain equal, the store with robust options will keep customers longer than the latter because customers don’t have to travel to pick out the items they might need.
This gives room for more cash
Judging from the first point, the retention time between users, the more liquidity they provide as they will love to try other options using alternative cryptocurrencies. The crypto market is volatile with uncertainties: one crypto could fall and cause impermanent losses, and others could maintain positive exploits. So a multi-chain protocol will likely attract liquidity faster than a normal protocol, especially in this current DeFi space with too much competition.
Reduced transaction costs
Imagine trying to convert your crypto assets to bridges or changing from normal bitcoin (BTC) or altcoin to wrapped cryptocurrencies across multiple platforms. The fee composition will show you the losses you could incur when trading crypto across multiple networks. You could reduce your gas expenses by transacting on an all-in-one platform.
Strong liquidity pool
One thing common with Layer 2 and Layer 3 protocols is the flexibility to create liquidity pools on top of the protocol. Multi-chain DeFi protocols will command twice as many pools or markets in a normal liquidity protocol. The robust nature of multi-chain protocols will lead to more investment and greater rewards and returns.
Introducing CashFi – A Multi-Chain DeFi Solution
CashFi is a multi-chain ecosystem including an NFT launchpad and marketplace, a liquidity staking protocol, CashFi synths, and the $CFI token.
Taking them one by one, we have the NFT Launchpad where anyone can create crypto arts and trade them on different market chains inside and outside the CashFi NFT market.
DEX Liquidity Staking will provide traders with the platform to stake the $CFI token or provide liquidity with other cryptos. Additionally, traders who hold the $CFI token will benefit from CashFi rewards designed for $CFI holders or stakers.
CashFi Synths will feature synthetic assets called derivatives. Synthetic asset trading will be used as an insurance package to maintain a liquidity balance in the event of a shortage in the swap pool.
Typically, CashFi will introduce a low-cost frictionless transfer model to make it easier to navigate from its platform to another. Another easy-to-navigate offering will come from CashFi Liquidity staking, where users can invest in CashFi Synth while locking their assets in the pool.
Find out more information on the CashFi (CFI) website and telegram. You can also read more about presale here.