This article will help you understand what are the applications of digital currency cross-chain technology?

php editor Strawberry will introduce you to the application of digital currency cross-chain technology. With the development of the digital currency market, cross-chain technology has gradually become an important means to solve the interoperability between different blockchains. Cross-chain technology enables digital currencies to realize cross-chain transfer and interaction of assets between different blockchain networks, thereby breaking down the barriers between various blockchains and improving the liquidity and flexibility of digital currencies. This article will introduce you to the application scenarios and actual cases of digital currency cross-chain technology in detail, helping you better understand the development and application prospects of this cutting-edge technology.

What are the applications of digital currency cross-chain technology?

1. Asset swap and transfer

Due to the rise of a large number of public chain projects, the number of digital assets has also become huge. However, transactions and exchanges between different digital assets have always been an important application scenario of cross-chain technology. The exchange and transfer of assets can include token exchange between public chain digital assets, as well as asset exchange or transfer after the off-chain assets are digitized and uploaded to the chain in the alliance chain or private chain. Off-chain assets can be tangible assets, such as gold and oil, or intangible assets, such as securities and stocks. These exchange and transfer processes rely on cross-chain technology.

With the continuous expansion of blockchain application scenarios and the rapid development of alliance chains, the exchange of digital assets can no longer meet people's expectations for blockchain technology. Now, with the emergence of sovereign public chains such as national digital currencies, and the on-chaining of traditional assets in commercial alliance chains, more specific needs have been put forward for the exchange of assets between different chains. The emergence of these new chains provides more sophisticated solutions to cross-chain needs.

2. Data sharing

The data here includes evidence data stored on the blockchain such as certificate data and on-chain certificates for data operations, as well as index data, original data, etc. stored in Retrieve data off-chain. Unlike traditional data sharing systems that can accommodate massive amounts of data, the data stored in the blockchain system needs to be endorsed by the blockchain. However, different blockchain systems have differences in data formats, storage methods, endorsement methods, etc., which results in the inability to authenticate each other in different systems. In order to solve this problem, standardized data formats and interfaces need to be developed so that different blockchain systems can interoperate and recognize each other. This will promote the sharing and effective utilization of data across systems and enhance the application value of blockchain technology.

3. Business collaboration

In business scenarios related to different blockchain systems, the goal of the alliance chain is to realize the sharing and interconnection of business data and the complementation of business logic. With the development of alliance chains, the number of enterprise-level alliance chains is gradually increasing. However, business data, business logic and business scope in the same business scenario are scattered in blockchains with different value systems. This makes it urgent to expand different areas. Business collaboration capabilities between blockchains.

How does digital currency cross-chain technology work?

There is no single method on how to use cross-chain technology. Different networks may take different approaches to blockchain interoperability to facilitate transactions across multiple chains without involving third parties or centralized solutions. Here are some methods for cross-chain communication.

·Atomic Swap

Atomic swap is not a true form of cross-chain communication because the two chains do not actually communicate with each other. But the mechanism allows users to coordinate cross-chain transactions, facilitating one cryptocurrency to be traded directly with another cryptocurrency in peer-to-peer transactions.

·Stateless SPV

It allows smart contracts advanced enough to verify a subset of proof-of-work history. Stateless SPVs can fit a variety of use cases because they are relatively cheap.

·Relays

Relays allow smart contracts on a specific chain to verify events occurring in other chains. Relay can verify the entire history of the chain and specific headers on demand. The relay approach trades off the security of the relay and the operational cost. However, relays are often very expensive to operate.

·Merge Consensus

This method uses relay chains to allow two-way interoperability between chains. In order to enforce merge consensus, it needs to be built into the chain from scratch. Projects such as ETH2.0 and Cosmos use merged consensus.

·Federation

A group of selected trusted parties can leverage the federation to confirm events on one chain on another chain. Alliances are powerful, but they require trust in a third party. This is its main limitation, as it breaks every essence of blockchain decentralization.

In short, the blockchain industry is still in its infancy. Just like the internet in the nineties, most people are still unaware of the transformative potential that blockchain has, and the future is one of many different coexisting blockchains rather than a single global "blockchain" Rule them all. In the future, more and more different blockchains will continue to emerge, so everyone will also need effective cross-chain communication methods. If blockchain technology is truly going to become mainstream and gain widespread adoption, the infrastructure needs to be ready to meet everyone's needs. . Cross-chain technology is very important knowing that bridging the existing gap between different blockchain and crypto tribes is absolutely necessary.

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