Cross-chain Swaps are Reviving Investors’ Interest in Cryptocurrency
Crypto-based decentralized finance–or DeFi, for short–experienced a major boom during the first half of 2020. COVID chaos is certainly responsible for some of that increase. Many people responded to the pandemic by taking a closer look at their financial and political institutions and by searching for reliable online platforms to diversify their assets.
But COVID may have accelerated a DeFi trend that was already well underway. According to one report, the crypto lending market had already hit $8 billion in total lifetime loan originations by the end of 2019. Higher DeFi use seems to go hand-in-hand with a larger and more diverse group of users, with data site CoinMarketCap reporting substantial increases in web traffic from female users and 18-24 year olds. BlockFi, a DeFi company known for its interest-bearing crypto accounts, attributes much of its substantial post-corona growth to newer crypto users. In short, interest in DeFi is not just a trend among hardcore crypto HODLers–it’s an important and practicality-based part of crypto joining the mainstream.
Though some new crypto users may never move beyond Bitcoin, the growth of DeFi presents a unique opportunity for innovation in the entire crypto space. Growing exposure to these platforms helps boost the profile not just of core cryptos like Bitcoin but a wide class of coins designed to operate on decentralized applications (DApps). Many DeFi platforms and exchanges use their own token, such as Binance’s BNB (check out Swingby’s Self-custody BNB staking competition to earn your share of $150,000 USD), to enhance user functionality. As new users encounter DApps and other areas of the crypto world, it’s become clear that increased DeFi adoption is setting the stage for greater DApp usage in general. Exposure to many kinds of tokens and platforms is a positive step forward for even further crypto usage. A diverse crypto ecosystem built upon a diverse set of tokens and DApps is key to unlocking blockchain’s true utility for mainstream users, letting them switch between different platforms to meet different needs.
If more and more people are using diverse tokens and accessing DApps, and more and more people are turning to DeFi, then it seems like a given that investors should be paying more attention to cryptocurrency. But that hasn’t necessarily been the case–and a big part of investors’ hesitancy stems from the inherent difficulties of using a diversified blockchain wallet. Swingby is seeking to change all that with a new approach to cross-chain swaps.
Why isn’t DApp diversity attracting investors to crypto? Market volatility is one significant issue. And while asset volatility usually isn’t a dealbreaker for experienced investors, crypto’s blockchain technology creates extra obstacles.
While trades for stocks and other traditional financial assets don’t require any immediate physical settlement, spot-traded crypto transactions actually require that crypto changes hands. This process can lag, especially when the blockchain networks supporting the trade are overloaded. By the time the transaction completes, one or both assets involved may be priced much differently thanks to market volatility. A trader holding US dollars who wants to hold a utility token for a DApp in order to use the DApp or do business with its users often has to carry out a slew of steps, including exchanging fiat for Bitcoin on one exchange, moving it to a different exchange where they have access to the desired token’s trading pairs, and exchanging their Bitcoin for the token.
To get their original USD back, they have to do the entire process in reverse. Market volatility means they can lose substantial capital during each time delay created by another step, a loss that can be compounded by platform fees and by additional time delays created by KYC/AML procedures in new exchanges.
Some traders have gotten around these obstacles by limiting their crypto trades to a single token. But this “all eggs in one basket” approach runs counter to the well-established trading principle that investors need to diversify their holdings. Crypto markets are not all the same–even Ethereum and Bitcoin, two of crypto’s most prominent tokens, often respond differently to market conditions. Traders can incur large losses or miss out on large games when they stick to a single token.
Swingby is a cross-chain swap protocol that lets crypto users, whether they’re serious traders or casual newcomers, utilize many tokens at once to fully unlock token and DApp diversity. These cross-chain swaps take place on the Swingy Skybridge, a decentralized custody protocol for crypto assets. Assets are protected using a unique threshold ECDSA signature scheme, essentially using the Swingby community to stake tokens and generate portions of a key to hold assets. This secure and decentralized asset storage system lets users deposit tokens on the Skybridge and swap them over to tokens available on the other side of the bridge. There’s no special wallet app or exchange order book to navigate, and swaps execute as fast as the underlying blockchains process them.
Swingby’s first bridge, between Bitcoin and the Binance Chain, is already operational. Traders can use the bridge to create stablecoin units on the Binance blockchain that are pegged to the value of Bitcoin, essentially acting as depository receipts for Bitcoin stored on the Swingby blockchain. As Swingy continues to expand, users will be able to offer pegged stablecoins between most major cryptocurrencies.
Swingby’s security, speed, and ease of use has major implications for the DApp ecosystem and the investors and crypto users tied to that ecosystem. Skybridges let users holding one crypto quickly access the benefits of a different crypto. This interoperability makes DApps far more user-friendly and dynamic, which in turn drives DApp adoption rates and increases demand for all types of tokens. Investors who want to get involved in the booming DApp marketplace are no longer limited to a short-sighted, single-token approach. Instead, they can swap their tokens between chains to interact with different DApps and token marketplaces.
DApps Are Here to Stay
The chaotic past few months have only sped up a marked growth trajectory in the world of decentralized finance and DApps–and have set crypto users’ need for cross-chain interoperability in sharp relief. Solutions such as Swingby not only increase DApps’ usability, but also drive long term innovation in the space by allowing more flexible use cases and more efficient and powerful investor involvement. More powerful investor involvement will expand this economy further and unlock even more utility for crypto users, driving forward the DApp revolution.