What is Crosschain Token (Altcoin)
Definition/Example
- A cross chain token is a type of cryptocurrency that can be use on multiple blockchain and also operate on cross chain bridge. So we could say that they aren’t native to a single blockchain.
- A cross chain token can include some wrapped token and a token specific for cross chain bridge.
- Some explanations here, wrapped token allow it’s original token to be use on others blockchain and cross chain bridge is a protocols that help other blockchain to work with another blockchain.
- Please understand this, a cross chain bridge is not a token, it’s a protocols. That bridge has its own cross chain token that operates inside it and some even use existing token to operate.
- Some examples for cross chain bridge is Wormhole bridge and Synapses bridge.
- Some examples for cross chain token (including wrapped token) is Wrapped Bitcoin (WBTC), Anyswap (ANY) and Rainbow Bridge (RBW).
Usage
- As it already stated, cross chain token is used to operate on multiple blockchain and pretty much allow the interaction of blockchains with blockchain without to much underlying issues.
- In other words, the usage of cross chain token is to solve interopplskejsks... Damn this long and complicated word. Let’s try again, it help to solve interoperability, finally.
Pros and Cons
Pros:-
- The interaction of blockchain with blockchain using cross chain token enable an access to more features to the user. Each blockchain has its own feature and via cross chain token usage, both or more features from another blockchain can be access single handedly using cross chain token.
- The usage of cross chain token also might help a blockchain issues with scalability. Pretty much it spread the work load of another blockchain with other blockchain especially is processing transactions.
- Cross chain token also provide a steady supply of liquidity pool for user. Instead of relying on one blockchain to liquidate a crypto asset, both or more blockchain can work together to provide a liquidity to their native crypto.
Thanks for the article from Annabelle Darcie for helping me in this section…Hello Darcie, if you don’t want me to use some content from your article, please contact me via the response section.
Cons:-
- Some cross chain token (especially a wrapped token) is often centralized because the minting (create new token) and burning (destroying some existing token) process was done by a single entity or company.
- The security behind cross chain token is kinda questionable if you ask me. One of the reason is because if the cross chain bridge that help to operate cross chain token operate, some of the token will be stolen via a hack on the system.
- Most of this bridge that help to operate cross chain token use an Automated Market Maker (AMM) in their system. One thing that hacker really love about AMM is the token pool (A large chunk of crypto that is either hasn’t been sold or buy). They will try to hack that thing like there are no tomorrow.
Other/Conclusion
- Most of the problem that cross chain token had are directly link toward the cross chain bridge that it operates on. So basically the token is not the problem but the system that it works for is the problem.
- Some website suggested that the AMM usage should be change with the peer to peer system to avoid another hack on this cross chain bridge happening again.
- I gotta say the they should also implement a proper system in cross chain bridge operations. If you ask me why, try to search a cross chain bridge related hack and you will find a lot. Even 2022 saw a staggering 1 billion U.S. dollar in total loss from cross chain bridge that was hacked. 1/3 of the total lost in hack for cryptocurrency last year.
- I couldn’t say much about cross chain token because this token is kinda new for me. I didn’t even know that some wrapped token can be a cross chain token. I only realized this when I was researching for this article. But as people usually stated, the more you know the better it is (especially for me).
I gotta admit Google Bard help me a lot in researching for this article…Disclaimer, I don’t use Google Bard to simply copy and paste information, I use it to get the appropriate context about the information I get. I don’t want people labelling me as an AI reliant writer😂.
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