Current status of blockchain
Bitcoin is the world's first and largest blockchain to date. This is considered a 1st generation blockchain because it is only used for currency conversion transactions, remittances and digital payment systems. Bitcoin uses the SHA-256 algorithm. Shortly after the launch of Bitcoin, another project was formed called Ethereum. It is considered as a 2nd generation blockchain with Ethash hash code, helping to bring financial applications to the market.
Pause the technology there, let's look at an example. Let's say you buy something while traveling abroad. What if you use VND to pay when that place only accepts USD? Of course. you won't be able to buy it. The solution is that you will swipe your card and pay in USD to the merchant. After that, the card issuer will verify and deduct an amount of VND corresponding to the specified exchange rate. That's how the traditional financial model works. But isn't that the case with blockchain? You cannot use ETH to pay when the seller only accepts ETH. Simply because there is no tool to help them convert from BTC-ETH at that time. If they want to own ETH, you need to convert ETH. Blockchain was born with the desire to solve different problems. Unfortunately, they develop independently and lack inter-platform communication. This has caused inconvenience to the users mentioned above. So in summary, we can easily see that current blockchains have some disadvantages as follows:
Isolation: There is no interoperability between the platforms. In other words, blockchains have no communication with each other.
Slowing the growth of Defi: That lack of interaction has stunted the growth of Defi in particular. It's almost impossible for Bitcoin and other crypto investors to participate in the exciting world of Defi.
Thus, it can be seen that it is the isolation and lack of interaction that causes the blockchain to not develop quickly. And Cross Chain technology will help us solve this problem.
Define
Cross Chain is a technology that helps to increase interoperability between two or more blockchains. Even if those blockchains are completely different in technology, hash code, etc. With the advent of Cross Chain, any coin created in blockchain A can easily be converted to blockchain B.
Through the concept of Cross Chain, you can find a solution to use ETH for payment in places that only accept ETH with the example above.