Blockchain networks are being developed at a rapid pace, with advancements in Layer 1, 2, and 3 technologies. However, there is a need for interconnectivity across these blockchains - that's where Omnichain comes in. Let's explore Omnichain technology, what it is, and how it's used to connect blockchains.

What is Omnichain Technology?

Omnichain technology is built on the principle of interoperability, which refers to the ability of different systems, devices, or applications to exchange and use information. Omnichain technology aims to achieve seamless communication and data exchange between different blockchain networks. It acts as a bridge, allowing users and applications to leverage the strengths of various blockchains without being restricted to a single ecosystem.

The concept of omnichain emerged as a response to the limitations of isolated blockchains. While individual blockchains offer unique functionalities and security features, their inability to communicate with each other hinders the overall potential of blockchain technology. Omnichain solutions started gaining traction with the rise of Decentralized Finance (DeFi) and the need to move assets seamlessly across different DeFi protocols built on separate blockchains.

How Omnichains Work

Imagine you want to send Bitcoin (BTC) on the Ethereum network to use it in a DeFi application. Here's an example of how an omnichain solution might work:

You lock your BTC in a smart contract on the Bitcoin blockchain.
The omnichain protocol (e.g., LayerZero) mints an equivalent amount of wrapped BTC (wBTC) on the Ethereum blockchain. Wrapped tokens represent the original asset locked on another chain.
Your wBTC is now available for use on the Ethereum network for DeFi applications.
When you want to redeem your wBTC back to BTC, you initiate a transaction on the Ethereum network, burning the wBTC and unlocking your original BTC on the Bitcoin blockchain through the smart contract.

The Technical Side of Omnichains

Omnichain technology is not a single, unified solution. It is a mix of different tools, working together to achieve interoperability between blockchains. Here are some key technical concepts involved:

- Interoperable Protocols: These protocols define communication standards and message formats to facilitate interaction between different blockchains. Examples include Cosmos' Inter-Blockchain Communication Protocol (IBC) and Polkadot's Relay Chain.

- Sidechains and Federated Sidechains: Sidechains operate as independent blockchains attached to a main chain (like Ethereum) through a two-way peg. Federated sidechains rely on a set of trusted validators to secure the bridge between the sidechain and the mainchain.

- Atomic Swaps: This technique allows for the direct exchange of cryptocurrencies between different blockchains without relying on a centralized exchange. Atomic swaps rely on cross-chain hashed timelock contracts (HTLC) to ensure the atomicity of the transaction, meaning that either the entire exchange is completed or it is cancelled.

- Decentralized Oracles: Decentralized oracle networks, such as Chainlink, play a crucial role in Omnichain ecosystems. These oracles provide tamper-proof data feeds from the real world to multiple blockchains, enabling cross-chain applications to access and act upon the same trusted information.

Applications of Omnichain

- Cross-chain DeFi: Users can borrow assets on one blockchain (e.g., Ethereum) and use them as collateral for lending on another (e.g., Solana), maximizing returns across different DeFi protocols. An example of a Cross-chain DeFi platform is DefiChain.

- Supply Chain Management: Omnichain solutions enable secure and transparent tracking of goods across complex supply chains, improving efficiency and also the ability to track products on the supply chain.

- Cross-chain Gaming: Gamers can own and trade in-game assets (NFTs) across various blockchain-powered games, fostering a more interconnected gaming experience.

- Decentralized Identity (DID): Decentralized Identity enables users to control their digital identities across different applications and blockchains, streamlining user experiences in the Web3 world.

Omnichain Platforms

Several platforms are pioneering omnichain solutions, including:

- Cosmos: Cosmos enables atomic swaps, allowing users to directly exchange cryptocurrencies across different blockchains without relying on centralized exchanges.

- Nomad: Nomad provides a secure bridge between Ethereum, Avalanche, Moonbeam, and other blockchains, facilitating cross-chain communication.

- THORChain: THORChain offers a decentralized liquidity network for cross-chain asset swaps, without the need for intermediaries.

- Entangle: Entangle - the omni-chain connector empowers developers with a robust suite of infrastructure and tools, enabling them to connect their applications to various blockchains and leverage the unique strengths of each.

Omnichain technology is being actively developed and implemented by various projects and organizations in the blockchain space, like Cosmos, Polkadot, and Chainlink. As the demand for cross-chain interoperability continues to grow, Omnichain will play a vital role in the future of the decentralized web (Web3) by enabling seamless collaboration and data exchange between different blockchain networks.

Stay Updated!

The web3/blockchain industry is constantly evolving, if you want to grow in this space, you have to learn everyday and stay updated. Here are some resources you can use:

Building Omnichain ERC-20 Tokens with LayerZero: Avalanche Hack House - Denver

BanklessHQ: A blog by Ryan Sean Adams with insights on DeFi, DAOs, and the future of finance.

Messari: For in-depth research reports and analysis on blockchain projects.

Coin Bureau: A YouTube channel that provides educational content on crypto and blockchain topics.

You can also connect on X (Twitter) with Vitalik Buterin - the co-founder of Ethereum, and Camila Russo - a DeFi journalist.

Thanks for reading! Do you have questions about Omnichains? Share them in the comments 😎