Multichain vs Cross-chain – Similarities and differences.

Multichain and Cross-chain are two types of concepts that refer to the objective that has been developed about creating an ecosystem of blockchains that achieve interoperability. This concept would facilitate the creation of new decentralized application protocols and at the same time make it easier for the user to navigate and transfer digital assets through blockchains. Let's see what multichain and cross-chain are and their main similarities and differences.

What does Multichain mean?

The term multichain refers to the decentralized applications that have been deployed on multiple blockchains that share similar smart contract technology. Ethereum, Avalanche, Polygon, BNB Chain, are all compatible with the Ethereum Virtual Machine (EVM) which allows developers to launch multichain dapps. Although initially most of the development in the cryptocurrency space was based on the Ethereum mainnet, now the focus has shifted to layer 2 blockchains, such as Optimism and Arbitrum, sidechains, such as Polygon, or alternative layer 1 blockchains, such as Solana and Avalanche. Given the Blockchain technology is limited by the Scalability Trilemma, which states that blockchains cannot scale without compromising security or decentralization, developers have created Alternative blockchains that accept different commitments to achieve more scale, security or decentralization. Developers are also choosing to develop applications on layer 2 blockchains that use rollups and testing to enable vertical scalability while maintaining the security of Ethereum.

What does Cross-chain mean?

Cross-chain describes the communication between blockchains and is the natural evolution of multichain. In cross-chain architectures, Blockchains are not isolated chains, but are interconnected. Cross-chain interconnection is made possible by cross-chain bridges and interoperability protocols such as Ren Protocol, Multichain, and Connext, which have pioneered the concept of xCalls, the ability to securely formulate cross-chain smart contracts.
Cross-chain protocols can work in two different ways:

1. Cross-chain blocking and minting.

When we want to move a token from chain A to chain B, the tokens do not actually leave the origin blockchain (chain A), but instead are locked into a smart contract on the origin chain, and a “wrapped” representation or version is minted of the tokens on the receiving chain (chain B). Since tokens wrapped on chain B are locked as collateral on chain A, a process managed by the interchain bridge, The original tokens are subject to bridge risk. For example, if the collateral locked in a bridge's smart contract is stolen as a result of a hack, the wrapped tokens will become worthless.

2. Cross-chain liquidity networks.

Cross-chain protocols using liquidity networks are based on liquidity pools that already exist in both the sending and receiving chains, so there is no minting of assets involved. Instead, users deposit liquidity at the bottom of the source chain and then, receive assets from the receiving chain fund. Although cross-chain bridges using liquidity networks are more secure, their functionality and scale are more limited since liquidity is required on both blockchains.

Multichain vs Cross-chain: Similarities and differences.

Both multichain and cross chain involve existence and activities on multiple blockchains, but differ in their ability to actively communicate with each other: In a multichain scenario, no communication between chains, bridges and interoperability protocols. This is because blockchains can maintain their security assumptions, provided by different validators, only by themselves, and cannot oversee the security of another blockchain that has not been built for their specific purpose. The benefits of a cross-chain infrastructure is the ability to make all applications, liquidity and data compatible with each other, removing barriers between isolated blockchains. Since a layer 2 blockchain like Optimism can only securely interact with Ethereum (or the L1 it is built on), Communication between layer 2 also requires cross chain protocols. For example, if a user wanted to move tokens from Optimism to Arbitrum, they would have to go to Ethereum first, wait 7 days, and then to the final rollup.

Popular use cases.

Cross-chain communication is popular in some major use cases, including bridges, wallets, and dapps.

1. Bridges.

Bridges are some of the applications that can be built on interoperability protocols. The bridge connected, for example, is the safest and one of the cheapest for allow users to move tokens across multiple chains. Other examples are Axelar and Wormhole, although they are more reliable solutions, since they rely on a set of validators, a third party that must be trusted, to complete transactions, unlike Connext, which is a solution that minimizes trust. .

2. Wallets.

Several cryptocurrency wallets have introduced built-in features to move tokens across multiple blockchains using interoperability protocols. Some focus on trustless connections like Ethereum and Starkware (the Argent wallet), others or move across entirely separate chains like Ethereum and Solana (Clover).

3. Decentralized applications (DApps).

Other dapps that have successfully started implementing a cross chain strategy include Superfluid. Superfluid is a platform that allows creating money flows, or a constant flow of tokens that continually changes every second, through blockchains. For example, a DAO could initiate a flow of USDC from a secure chain like Ethereum, and a user could decide to receive it on a cheaper chain like Polygon.