Market Overview

How Cross-Chain Swapping Will Power Innovation In Decentralized Apps And Finance

How Cross-Chain Swapping Will Power Innovation In Decentralized Apps And Finance

Satoshi Nakomoto originally described blockchain based-cryptocurrency as a kind of peer-to-peer “electronic cash,” meant to supplement or even replace fiat financial institutions that in 2009 seemed less trustworthy than ever. In 2015, the crypto world was introduced to Ethereum, the first major blockchain protocol to include significant smart contract functionality.

Smart contracts let Ethereum developers build decentralized applications (“DApps”) that could execute complex transactions on top of a decentralized blockchain network. DApps use their tokens less like cash analogues and more like gas in an engine, charging transaction fees for developers and users to access the application. Since 2015, the number of DApps, according to tracking website State of the DApps, has seen massive growth from 24 registered DApps in April 2015 to over 3500 by June 2020.

DApps and “electronic cash” are two of the most significant models for blockchain-based cryptocurrency, and many experts believe that they’re not inherently contradictory use cases. crypto users with access to a wide range of tokens can utilize a diverse range of specialized DApps while also using appropriate tokens as “electronic cash” in transactions and purchases.

This rich crypto landscape seems closer than ever with the recent popularity of decentralized finance (“DeFi”) DApps and platforms. Spurred by the institutional distrust and financial chaos of COVID-19, DeFi usage has exploded among both advanced crypto users and crypto newcomers looking to store, lend, and borrow fiat and crypto funds. Valuation of tokens stored on DeFi platforms surged to $1.65 billion as of June 26th, and tokens associated with DeFi DApps and exchanges have largely out-performed Bitcoin in the past few months.

Crypto last saw this kind of mainstream interest in late 2017 and early 2018, when exploding Bitcoin prices caused a rush on markets and ultimately a speculative crypto bubble that popped, leaving some strong platforms and wiser crypto users behind but also plenty of failed companies and disillusioned token holders. The DeFi boom means that crypto is coming to a similar crossroads, where usability questions and market forces will ultimately decide whether increased DeFi adoption is a fluke or a real step towards greater DApp and crypto adoption.

How can crypto emerge from this crucial moment on top, offering its users a genuinely better and more trustworthy experience than financial, technological, and political institutions that have faltered? Cross-chain capabilities, which let crypto users switch between different blockchain platforms without giving up unacceptable amounts of time and resources, will likely be key to crypto’s DeFi staying power. Let’s take a closer look at why cross-chain capabilities are key to crypto’s path forward, and how a new protocol, the Swingby Skybridge, could launch these capabilities into the future.

The Challenge of Scalability

Cross-chain capabilities ultimately tie into another pressing problem in the world of blockchain: scalability. Crypto’s 2017-2018 market highs threw its scalability problems into sharp relief, with a single Ethereum trading game rendering the platform nearly unusable for large swathes of time and Bitcoin transactions sometimes taking nearly a day to complete.

Potential mainstream crypto adopters may not trust their original financial institutions, but a DeFi ecosystem that grinds to a near-halt whenever it experiences a slight boost in popularity is hardly an appealing alternative. Though the 2020 DeFi surge has demonstrated the impressive scalability strides made in the crypto world since 2017, it’s also shown warning signs that scalability issues could become a serious obstacle again if adoption continues.

The market chaos of “Black Thursday”, when COVID-19 news spurred massive crypto sell-offs, caused several DeFi applications to stop functioning properly and popular DeFi platform MakerDAO to lose millions of dollars of users’ capital (MakerDAO now faces a class action lawsuit). Over-reliance on the Ethereum network was cited as a major factor behind many DeFi DApp failures on Black Thursday, as the network became so congested, slow, and expensive to use that many DApps couldn’t properly access it.

MakerDAO’s catastrophe is a warning to other DeFi developers: a DApp optimized for one network scenario can fail when transaction sizes and user caps shift, creating a much different network scenario. To be reliable in times of crisis, DeFi applications need to be able to scale.

Swingby and Cross-Chain Utility

How can cross-chain utility mitigate scalability issues and other major obstacles to DApp and DeFi functionality? Currently, changing one token into another can be slow, complicated, and costly, often requiring multiple transactions through several exchanges. Transaction fees and delays combined with market volatility means that token holders have to think very carefully about whether they want to obtain a new token to access a DApp--they could lose substantial value along the way. This ecosystem encourages an “all eggs in one basket” approach to DApp development and use, which then leads to congestion on major platforms such as Ethereum and illiquidity on less popular platforms.

Swingby is a protocol for swapping cryptocurrencies directly from one blockchain to another, without the delay and cost of constantly going through exchanges. They enable these direct swaps by relying on a decentralized network of node operators (rather than a single custodian, who would require trust and oversight just like a currency exchange or bank). Swingby distributes open source software that lets anybody with a computer operate a Swingby node.

The nodes stake SBY tokens to earn the right to join a group who collectively generate private and public keys for cross-chain transactions. The node operators earn transaction fees in return for their stakes, and the public and private keys let Swingby users move pegged stablecoins between blockchain protocols. Swingby is launching a Binance bridge that will let users swap their Bitcoin for a Binance token (BTC.B) pegged to Bitcoin’s value and vice versa. In the long run, however, there are virtually no limitations to possible Swingby bridges, with most major coins and DApps available for potential Swingby bridging.

Cross-Chain Swaps Prove That DeFi Growth Can Continue

DeFi and DApps are primed to shape our future for the better, but the profile boost they’ve received from the chaos of the past few months will only be sustainable if major challenges surrounding scalability are solved. Swingby’s cross-chain swapping protocol lets users move easily and securely between chains, lifting congestion burdens on popular protocols while bringing new interest and traffic to under-utilized ones.

Using a decentralized proof-of-stake protocol that doesn’t ask users to trust in centralized custodians, Swingby is showing a path forward for truly decentralized finance and more reliable, usable DApps.


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