The emerging clamor towards decentralized finance (DeFi) space witnessed a significant breakthrough with the introduction of Chainflip. This was initiated bySimon Harman and his team, aiming for a decentralized and chain-agnostic system that promotes native cross-chain crypto exchanges.
In the face of unfavorable circumstances and the pressing need to develop new advantageous products, the idea emerged. The notion enticed Harman and his team greatly but there were obstacles to overcome. The team aimed to avoid having to resort to wrapped tokens, complex smart contracts, or specialized wallets with low slippage, a feat not accomplished previously.
The inception of Chainflip transpired as a potential solution to an evident issue. Taking an example of wanting to buy BTC with $100,000, the options are to turn to a large exchange like Binance or conduct the transaction on-chain. However, the latter process currently lacks the ability to facilitate native Bitcoin transactions without employing wrapped tokens or incurring serious security risks and additional costs. Moreover, conducting a transaction this large on-chain would presently result in a hefty 3% slippage fee.
Chainflip aims to address this issue by making the trading process more seamless by employing the threshold signature scheme to build wallets on different blockchains. Essentially, this mimics how larger centralized exchanges function by enabling cross-chain exchanges relying on withdrawals and deposits from wallets on different chains and carrying out the actual trading process off-chain. This not only simplifies the trading process but also enables the platform to be more user-friendly.
The structural differences in Chainflip’s markets make them less restrictive on liquidity and pricing compared to other similar platforms. They incorporate options like limit orders to maximize the advantages of liquidity on centralized exchanges.
As promising as Chainflip may seem, its relevance and ultimate success lie in the hands of its users. A couple of factors such as speed, gas, pricing, and improvement over the market will determine its appeal to clients.
As perceived by Harman, Chainflip would have been an impossible creation before 2020 given the technological advancements required for its inception. Drawing from a decade’s worth of research and experimentation in the crypto space, Chainflip stands on the shoulders of giants, embodying an evolution towards new ideas.
At the end of the day, it’s emergence and development in a challenging environment shows how an idea can transform and address a problem that once seemed unresolvable. The evolution and revolution in the DeFi space keep proving that there’s always room for cutting-edge technology to come in and change how we perceive and handle finance.
Source: Cointelegraph
