It is an established truth that the cryptocurrency industry is more fragmented than shattered glass. But can we go beyond this scenario? At first glance, interoperability seems an almost impossible goal. According to CoinMarketCap, there are currently over 8.000 unique cryptocurrencies, a 400% increase from two years ago.
The problem is solved from within the sector
Decentralized applications (dapps) are limited by the constraints of their home blockchain. If a dapp is built on Ethereum, it can usually only enjoy the benefits provided by Ethereum (e.g., smart contract functionality).
Therefore, given all the advantages that different cryptocurrencies could present individually, users may find it difficult to fully exploit the multiplicity of them because blockchains are not interoperable.
Here's the problem: While seasoned cryptocurrency traders may be willing to manually navigate through fragmented cryptocurrency exchanges and blockchain apps to find the features and services they want, it seems overly optimistic to think that the growing cohort of investors will settle for the status quo.
In 2020, three major fintech companies (Square, MicroStrategy and Mode) adopted bitcoin and PayPal (PayPal shares - ticker PYPL) recently launched its cryptocurrency trading service. As a result, the people we see entering the cryptocurrency market aren't technology professors or developers, they are ordinary consumers and investors accustomed to leaner, more cohesive experiences.
If the fragmentation of the cryptocurrency industry remains unresolved by those within it, suggests cryptocurrency expert Alexey Koloskov, there is a risk that some conventional-minded personage will offer solutions that undermine the freedoms for which cryptocurrencies have been. invented.
A new era for the future of fintech and cryptocurrencies is on the horizon
Assuming future progress, we can envision a future version of the cryptocurrency industry, which supports interoperability without compromising its commitment to decentralization and individual autonomy.
By linking two different cryptocurrencies via a cross-chain bridge, users can enjoy the best of both, instead of having to choose one. When using a cross-chain bridge between Ethereum and Cosmos, for example, a user can take advantage of the functionality of Ethereum's smart contract and the scalability of Cosmos.
Imagine the functionality we could achieve if end users and app developers could ultimately choose the features they want in their trading experience. We may not yet be at the point where such fluidity is possible, but there is no doubt that such a reality is on the horizon. Innovations such as cross-chain bridges offer a glimpse of what the future of fintech and the crypto industry could look like.
The problem of blockchain fragmentation is significant and, in the absence of adequate consolidation tools, is expanding. The cryptocurrency industry must provide solutions that facilitate blockchain connections between all people and any economy.
We have the technological means - and market momentum - to work on interoperability without compromising decentralization or the consumer experience. By filling these gaps, we will not only improve the user experience, but usher in a new era of financial innovation and creativity.
