Despite its many efforts, the crypto industry is struggling to build a truly decentralized Blockchain. Recent financial scandals involving FTX and other exchanges are good evidence of the degree of centralization. But that could all change this year. As the crypto market begins to recover, we could have appeared a new concept of modular Blockchains.
How Modular Blockchains Work
The Blockchain has grown tremendously since the first was created in 2009. New challenges have arisen, but only workarounds have been created since. According to Corner Telegraph, it could be that in 2023, we will see definitive and revolutionary solutions appear. One of the biggest problems that modular Blockchains would come to solve is the interoperability between different Blockchains. To switch from the Ethereum Blockchain to that of Bitcoin, you must use a centralized exchange. This exchange manages 93.6% of the bridges between Bitcoin and Ethreum with its Wrapped Bitcoin (WBTC). This ultra-centralization exposes it to severe regulations.
Since 2021, we have witnessed the emergence of a new generation of Blockchains. They improve decentralization and inter-chain security. Thorchain’s RUNE is one of the first Blockchains of its kind. Threshold, which offers a private portal for Bitcoin on Ethereum, is coming in the first quarter of 2023 with an improved concept. It will act like BitGo but without being centralized.
How life-saving can these new protocols be?
The ultra-centralization of procedures goes against the philosophy of cryptocurrencies. In addition, it attracts the attention of regulatory authorities. Paxos paid the price recently with the ban on issuing Binance USD. A protocol like LayerZero for example works differently from others. This omnichain interoperability protocol enables the development of applications such as DEXs. These will then be able to interact with monolithic blockchains like Ethereum. On the other hand, Celestia, layer 1 built using the Cosmos SDK, supports the execution of smart contracts. However, it does not support transactions and data accessibility controls.
The crypto industry needs to reinvent itself to weather the bad winds that are blowing right now. Several countries and regulatory bodies have decided to ban completely no matter their shape. Knowing this, can the new modular Blockchains change anything?
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