The Benefits of Cross-Chain Liquidity
Our mission at Magpie Protocol is to enable seamless and trustless liquidity at the best price across all blockchains.
You may already know some of the obvious advantages of cross-chain liquidity, such as moving crypto assets from one chain to another, but there is actually a lot of importance resting on cross-chain technology. Today, we will examine why the future of crypto depends on it.
What is “Cross-Chain Liquidity”?
In the traditional sense, liquidity refers to an asset’s ability to be bought and sold without affecting its price too much. But when we talk of cross-chain liquidity, we mean the ease at which an asset can be moved between blockchains.
The sky’s the limit when cross-chain liquidity is fully integrated into crypto, and here at Magpie, we are ready to fly.
The essence of cross-chain liquidity is that it enables interoperability between chains. In other words, it creates a degree of confluence between blockchains.
Imagine each blockchain was totally separate and there was no way for assets to be moved between them or for them to communicate, a significant event on the Ethereum chain (good or bad), such as the merge, would have a minimal effect on other chains, such as the Bitcoin network, Cardano network etc.
With cross-chain liquidity, funds can easily move between chains. Resultantly, chains are more coordinated and benefit from the growth and innovation of one another.
Cross-Chain Liquidity Advantages
Let’s use the Ethereum merge to explain how cross-chain liquidity could benefit both users and blockchains.
For those who do not know, the merge was an upgrade on the Ethereum network which moved its consensus mechanism from proof-of-work to proof-of-stake. One of the main benefits described by the proponents of the upgrade was that it was more environmentally friendly, and for many individuals and institutions, environmental sustainability is a massive concern. Therefore, they would prefer to use a more environmentally friendly blockchain whenever necessary. So they might like to use Ethereum for all crypto interactions, but it’s not the most suitable network for everything.
For example, the Bitcoin network provides the most robust store of value and P2P transaction system and Monero delivers extra privacy compared to the Ethereum network.
Remember that this is only a single example of how a blockchain could be leveraged for its advantages with cross-chain liquidity. Each blockchain serves a different purpose, each with its own benefits and limitations. For cryptocurrency to fulfil its potential, users must be able to move assets between chains freely.
We have established that cross-chain liquidity means you can benefit from the specific advantages of every blockchain, which includes fees, privacy, or earnings from DeFi or GameFi. In the future, this could be anything from utilising a blockchain dedicated to purchasing real-world assets like real estate or stocks, to a chain designed for social networking.
Before we move on, we need to touch on one of the most pressing issues in cryptocurrency — the scalability issue, mainly on Ethereum. One of the main drivers of the problem is that other chains do not have the liquidity to accommodate institutional-sized orders.
Cross-chain liquidity helps fix this by allowing funds to flow across networks. The easier it is for assets to move across chains, the more liquid other chains will become, attracting larger investors and taking some of the demand off the Ethereum network.
Current Limitations
To enjoy the fruits of liquidity across blockchains, you can start immediately.
Just Google: Ethereum to Solana bridge; Bitcoin to Ethereum bridge; Ethereum to Arbitrum bridge; or Cardano to Bitcoin bridge…
The list goes on, but do you see the problem here? Bridges are fragmented like blockchains, which means users must navigate many bridge dApps to facilitate swaps and often do not receive the best price.
The solution? Magpie Protocol.
Here at Magpie Protocol, we aggregate liquidity from a range of DeFi bridges.
Consequently, our users enjoy many advantages; for example, we offer highly secure transactions without the need to lock or mint tokens. In addition, aggregation means users quickly receive the best prices rates for their swaps. But the most important advantage could be the ability to carry out swaps from multiple chains all from one dApp, so users do not need to learn how to use numerous bridges.
