Why Essential Onchain Assets Are Expanding Across Blockchains

The Problem with Blockchain Silos
To understand the value of expanding onchain assets across blockchains, it is important to evaluate where they stand in the absence of a multichain strategy. Until relatively recently, it was not uncommon for a digital asset to be tied to a single chain, meaning the asset exists and operates solely within one blockchain network rather than maintaining support across multiple. Several inherent challenges and limitations are posed. Most notably, single-chain assets are not able to interact with other blockchain networks or digital asset ecosystems. They are put into a blockchain silo, with no interoperability support to enable the direct transfer or use of the asset on different chains. For example, a single-chain asset built on Solana would only be able to be exchanged on the Solana network and would not have the ability to transfer to another blockchain ecosystem, such as Ethereum, without the help of an external – often complex – bridge. This introduces significant limitations to an asset’s scalability, liquidity, and adoption.

Scalability, liquidity, and adoption are perhaps the three most important aspects contributing to an asset’s long-term success. This trio refers to the ability to expand and efficiently handle large volumes of transactions, to be traded or converted into cash quickly and without losing value, and to be exposed to new users who begin trading the asset. But each of these abilities are narrow within a blockchain silo, as the asset is subject to the transaction speeds, gas fees, user base, and resources that one ecosystem can provide.

For example, the Ethereum and Solana blockchains are each widely recognized for a specific strength. Ethereum is valued for its more established, decentralized and liquid ecosystem, while Solana is gaining in popularity due to faster transaction speeds and lower fees. A single-chain asset only benefits from the strengths of the blockchain it is confined to and cannot leverage the benefits of multiple chains in terms of scalability, liquidity, and adoption. Inversely, the asset is more likely to be impacted by any challenges the host chain is facing (security, slow transaction times, high fees, etc.). Blockchain silos curtail an asset’s ultimate growth and utility, as well as its potential for widespread adoption.

Blockchain silos – and their limitations – are similar in many ways to pre-globalization economies. Separated by centuries and a significant degree of technological advancement, the two share a few parallels in terms of impact on financial systems. Before globalization connected countries around the world through the movement of goods, services, technology, and capital, economies were largely siloed. With minimal international trade, individual economies lacked necessary integration and interaction with those outside themselves – ultimately limiting the potential for growth and prosperity. A similar isolation is now seen within blockchain silos. The restriction of a digital asset to a single chain prevents it from capitalizing on the resources of various blockchain networks, as well as exposure to new traders who would both benefit from and contribute to the asset’s value. This prevents these assets from reaching their full potential within the increasingly global crypto financial system.

What Does “Natively Multichain” Mean?
To get away from the challenges posed by single-chain assets, various cross-chain solutions, such as external bridges and wrapped assets, were introduced to facilitate transfers across different platforms. While these solutions are effective, they are often complex and introduce an additional, time-consuming step. To streamline transactions and bolster the versatility of assets, the concept of “natively multichain” is now embraced.

Assets that are natively multichain are supported by interoperability protocols and have inherent interoperable characteristics, meaning they can function and be transferred across blockchains without relying solely on external bridges. It also means assets preserve their native properties on each chain and are not altered during a transfer. This multichain strategy limits liquidity fragmentation, adds transparency, increases access and simplifies the user experience—all of which encourages greater adoption and onchain activity.

In essence, assets that are natively multichain are much like us when we utilize a passport for a (much needed) vacation. Assuming you haven’t let it expire or forgotten it on your kitchen table, a passport gives you the ability to travel seamlessly between countries. None of your “native properties” must change in order to do so – you are still a citizen of your home country, you maintain identifying factors like your name, and you have the ability to go back to your starting point. Similarly, a natively multichain asset can move seamlessly between blockchain networks without needing to change any of its properties. And just like how you participate in different cultures and economies when you travel, natively multichain assets are able to interact with different blockchain ecosystems and experience their various, unique benefits.

Benefits of Going Multichain
The benefits of going multichain help all investor types: enterprises, governments, and mainstream users. A few key improvements include:

• Improved Accessibility: In a multichain setup, investors have greater flexibility and are able to manage and transfer a wider range of assets across all chains. Blockchain silos are effectively no longer a problem.

• Greater Liquidity: Multichain capabilities helps solve the problem of liquidity fragmentation. Instead of having multiple versions of the same asset spread across different chains, native tokens allow for a single, unified pool of liquidity. This can lead to more efficient markets and better pricing.

Overall, multichain strategies and interoperability demonstrate a significant step forward for the digital asset economy. Similar to how the advent of the internet connected people in a previously inconceivable manner, interoperability will introduce the essential infrastructure for the next generation of internet applications. Multichain will bolster a global blockchain system free of silos and in which blockchain networks coexist and interact. The shift from a single-chain to multichain approach addresses critical barriers that previously threatened crypto’s growth and now opens up endless possibilities for the utility of onchain finance.

About the Author
Article authored by Robinson Burkey, Co-founder of Wormhole Foundation