Best Defi Interoperability Solutions – Exploring Fusion vs Cosmos vs Polkadot

Publikováno: 17.7.2020

#Sponsored #Comparison #Cosmos #Cryptocurrency #DeFi #Fusion #Polkadot

After the famous bull market of 2017, the cryptocurrency market experienced a very long and harsh bear market. Whilst this makes for a complicated period for investors, it’s not a complete tragedy; even if prices have been disappointing, fundamentals, on the other hand, have never been so strong. The blockchain universe has never been as […]

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Best DeFi Interoperability Solutions

These three projects were chosen because they are perfectly positioned to have a major role in the blockchain space of tomorrow. In addition to being infrastructure projects and having development platforms, they are also specialized in interoperability, a niche that will undoubtedly have an essential role as linking mechanisms not only between blockchains, but, importantly, between blockchains and traditional finance.

This article will begin by talking briefly about the three projects, their goals, and what they could bring to the blockchain space if they succeed. Then, the three projects will be compared on interoperability, technology and applications, community involvement, and defi and traditional finance. Comparing these different aspects will assistyour research and help you make the right decisions when adding Defi projects to your investment portfolio.

Fusion

Fusion is an interoperability project with a primary goal of placing blockchain technology at the center of global finance. DJ Qian, CEO and founder of Fusion, is one of the pioneers in blockchain research and mining in China. He’s also the founder of BitSE, the incubator of famous blockchain projects such as Qtum and VeChain. Fusion leverages contributions from its large and dedicated community.

Fusion offers a “true” interoperability based on cryptography through its patented DCRM technology and other unique technological concepts such as the Time-Lock function.

These technological tools allow Fusion to have applications on a variety of scales:

– On a small scale: The unique way of staking using time-lock, or interoperability between different isolated blockchains allows them to communicate and exchange data and value.

– On a large scale: By enabling blockchain applications to conduct any traditional financial operation, the Fusion ecosystem could even be used in the case of Smart Cities; by allowing the different systems of a given city to communicate via network interoperability combined with Multi Triggering Mechanism technology (the next generation of smart contracts).

Cosmos

Cosmos is a similar project to Polkadot, specializing in interoperability, and it has a quality team. The project aims to create an ecosystem that links different siloed blockchains.

From an architectural point of view, Cosmos is composed of the Tendermint core which is common to all the blockchains of the network, and a blockchain development platform called “Cosmos SDK” which supports the programming language Golang. Regarding dApps, Cosmos allows development in Solidity, through the implementation of Ethermint, an EVM based blockchain.

Cosmos hopes to ensure the interoperability of its network through the Inter Blockchain Communication (IBC) protocol. It will also allow connection to live blockchains through peg zones.

Polkadot

Polkadot is another promising interoperability project, its ICO one of the biggest ICOs in 2017, raising $145 million. Almost $91 million of ETH was frozen following the Parity Bug. It’s evident that Polkadot has been through some ups and downs in its time, however, the team is still committed to delivering on the project’s promises.

The Polkadot project is supported by a good technical team led by Gavin Wood, co-founder of Ethereum. Through its interoperability feature, Polkadot will allow the transfer of data and value between the different blockchains of its ecosystem. It is a very development-oriented project and many teams have elected to build on Substrate, Polkadot’s technology for creating Blockchains.

Polkadot is therefore a serious competitor to Ethereum, with the Polkadot team putting a lot of effort into making their platform as developer-friendly as possible.

With the main idea of each project covered, let’s get straight to business and start off the comparison!

The Comparison: Fusion vs Cosmos vs Polkadot

1-Interoperability

Interoperability is the key technology at the heart of this comparison; it is the niche of all three projects so it would be impossible to compare them without drilling down on this specific aspect.

So, are there any differences between the interoperability of Fusion, Cosmos and Polkadot?

The answer is yes, there are fundamental differences. In the introduction to Fusion, it was described as having “true” interoperability. Well, this word was chosen with reason!

Fusion offers a unique cryptographic interoperability solution based on DCRM (Distributed Control Rights Management). A technology that has been designed and developed by a group of highly respected and world leading cryptographers.

DCRM technology uses the LILO (Lock In – Lock out) function to manage your assets in a decentralized way. DCRM ensures the security of your private key through two distinct cryptographic mechanisms:

-Private Key Sharding: The process of sharding the private key into several pieces, so that at no point in time is the key completely visible.

-Distributed Storage: Through sharding, the private key is never completely visible. This is ensured by the distributed storage feature (also called Threshold Secret Sharing), which allows for the distribution of the pieces of the private key between several random nodes. No transfer or assembly of private key shards can occur between these nodes.

Private key sharding diagram

By using the lock-in function, your assets will be mapped, and their private key will be secured in a decentralized way by the cryptographic mechanisms previously mentioned. You can then use your mapped assets in the Fusion ecosystem to interoperate and exchange value and data with other assets (while also benefiting from the suite offeatures offered by the Fusion platform and designed to enable any financial operation,an aspect discussed later in this article). To “Lock-Out”, the distributed control rights are dismantled and the control of your private key is returned to you, at this point you can then freely withdraw your assets.

That’s how Fusion’s interoperability works in a nutshell. Now, let’s explore Cosmos and Polkadot’s interoperability; for this part of the comparison, they will be grouped together as their concepts are quite similar.

Basically, the interoperability of both Cosmos and Polkadot is founded on the concept of a “Relay chain and sidechains”. It is probably more accurate to term this as “compatibility”, rather than interoperability. This is due to the fact that a compatibility system forces the other chains of the system to adopt a certain standard, makingcommunication and exchange less flexible and more complicated than cryptographic interoperability.

Polkadot’s compatibility model is based on a central “Relay Chain” or mother chain, and chains built on top of it called “Parachains”. The chains communicate via chain relays, each parachain can join the ecosystem simply by bonding and holding DOTs (Polkadot’s native cryptocurrency). This helps to strengthen the network and the trust between the chains. Polkadot leverages this trust by establishing a shared security model that facilitates communication and exchange of data and value between the different chains.

The compatibility model of Cosmos Network also relies on a central Hub, the Cosmos Hub and Zones (the equivalent of Polkadot’s Parachains). Cosmos uses the Inter Blockchain Communication (IBC) protocol to connect the central Hub to the Zones. A connection between the Cosmos Hub and a Zone does not require Atom coins (Cosmos’ native cryptocurrency), but uses governance instead, to decide whether the Cosmos Hub should connect to a Zone or not.

Cosmos relay chain/sidechains model – Source : Cosmos whitepaper

As you can see, the Cosmos and Polkadot architecture imposes its own standards, holding a certain amount of DOTs for Polkadot, and governance to decide about connections for Cosmos. This is why this model of communication between chains should be considered as a “compatibility model”. Also, Cosmos does not use a shared security model: chains have to use their own security, meaning there will be different levels of security within the ecosystem and, as a result, trust and communication will be much more complicated.

Concluding the topic on interoperability, Fusion is definitely the winner of this round. It is a project which offers real interoperability based on cryptography, and an architecture that is truly decentralized, imposing no standard to the participants of its ecosystem.

2- Technology and Applications

It’s always important to talk about the features of a Blockchain, but, in the end, if these features do not bring anything new to the blockchain space or are not likely to be widely adopted they quickly become meaningless. This section of the comparison focuses on the general approach of each project, looking at how innovative these projects are and their real world applications.

Fusion provides for true interoperability between different siloed blockchains, but it is not limited to this; the main purpose of the project is to link the blockchain space to traditional financial structures. On the other side, Cosmosand Polkadot both market themselves as the “internet of blockchains”, compared to Fusions broader vision marketing itself as “a cryptofinance platform”.

So, what do these differences really mean? Are the three projects able to achieve their goals?

Yes. Fusion, Cosmos, and Polkadot are all excellent projects, their teams are highly qualified, and they have strong and dedicated communities to support them. So, yes, they can clearly achieve their goals and keep their promises.

However, as you saw in the interoperability section, Cosmos and Polkadot are quite similar in their concepts and in their goals. Both projects are trying to attract developers and projects to build on top of their blockchains, they are trying to make their platform as developer-friendly as possible. They do not state it openly, but their objective is clear: to dethrone Ethereum by building a larger ecosystem that has fewer limits.

The goal of Fusion is even more ambitious, it is not limited to engaging with an already existing market (in the same way that Cosmos and Polkadot are engaging with Ethereum’s market). Rather, Fusion is trying to expand the blockchain market in general, and to link with the traditional financial market.

In addition to interoperability, Fusion offers an unprecedented technology called Time Lock. This protocol level functionality makes it possible for the very first time to use the blockchain to carry out time-dependent financial operations such as: loans, investments, and mortgages. These operations are facilitated by a multiple triggering mechanism (MTM) which is a kind of “next generation smart contract”.

This protocol level technology enables the easy utilization of the time dimension within smart contracts. It also makes it possible to link several smart contracts in sequence, for instance a smart contract could be triggered by an event that occurred in another smart contract. Fusion can therefore carry out complicated financial operations such as derivatives and bonds in a secure and reliable way.

Cosmos and Polkadot also stand out for their blockchain development and dApps platforms. Polkadot uses the language Rust, but also WebAssembly, a language that is supported by Google and Microsoft. Cosmos uses Golang for blockchain development and Solidity through Ethermint for dApps development.

So, when it comes to innovation and real world applications, Cosmos and Polkadot are more focused on blockchain development and replacing Ethereum, whereas Fusion undoubtedly has a larger scope. In addition to blockchain development, the project is building links between blockchain and traditional finance via the tools and the unique technology it has developed.

Therefore, the project that has the most innovative technology and wider scope is Fusion, winning the round once again!

3-Community Involvement

This aspect is very important for any project; it is essential to have a community that is passionate about the development of the project and its technology, a community that does not focus solely on price variations. By joining the three communities on Telegram, you will quickly understand how well these projects are supported by their respective communities.

The teams of Fusion, Polkadot, and Cosmos are aware of this, and work hard to accomplish project milestones, working closely with their communities to deliver on their promises. A good example of this would be Fusion’s open-source community campaign, a program that the Fusion board uses to reward project development. When it comes to community involvement, all three projects are great, therefore, this round ends in a draw.

4- Defi and traditional finance

If you’ve read this far, my guess is that you already know which project is more focused on Defi, and yes, you’re right, it’s Fusion!

Currently, it is impossible to compare different projects without mentioning Defi (or Decentralized Finance), a very hot topic in the blockchain space. Cosmos and Polkadot are not Defi-oriented projects, but, just like Ethereum, it is possible to create dApps specializing in Defi on top of their platforms.

However, when it comes to Fusion, Defi is baked in to their protocol, thereby creating many more opportunities as it is a Defi-oriented interoperability project. As explained earlier, Fusion technology (DCRM, MTM and Time-Lock) makes it possible to carry out, via the blockchain, traditional financial transactions such as: borrowing, lending, derivatives, mortgages, and more.

Fusion is once again the winner when it comes to Defi.

Market Position

The majority of people involved in blockchain are rightly convinced that this technology will change tomorrow’s world. By investing in the ICO of a project, especially knowing the risks associated with ICOs, an investor proves that they supports this particular project and believes in the honesty of the team. This is also the case when the coin is on the market and investors buy it from an exchange. It makes perfect sense to hope that this investment generates long-term profits for early participants.

Comparing the three projects that we are discussing in this article, the situation is somewhat interesting. According to Coinmarketcap Cosmos is currently amongst the top 30 cryptocurrencies by market capitalization. Polkadot is not on the market yet, but it will more than likely be in the top 20 directly after its listing on exchanges. Most surprising of all, however, is Fusion’s very low market cap – just incredible!

It should be noted that in the cryptocurrency market, everything can change overnight, and an undervalued project can quickly correct to its true market cap, meaning it is possible this situation may be temporary.

Fusion’s currently low market cap can be seen as simultaneously good and bad news. Bad news because the market seems unaware of this exceptional project, but good news in that it’s highly undervalued.

As always, please do your own due diligence, however, investment in Fusion certainly has the potential for massive returns and it can be argued that of these three projects, Fusion has the greatest potential for life changing gains.

Conclusions

Cosmos and Polkadot are clearly potential competitors for Ethereum, although their platforms are more developer-friendly than Ethereum’s, meaning they may take part of Ethereum’s market in the years to come. However, on the downside, their interoperability solution is not convenient for projects that would want be part of their ecosystems.

Fusion, on the other hand, is an incredibly impressive project. It offers an interoperability based on cryptography and is therefore very convenient for projects and users of its ecosystem. Fusion also has much broader ambitions than Cosmos and Polkadot; it is a Defi-oriented project and it is targeting a bigger market by trying to link blockchains to traditional finance through the unique technology of DCRM, Time-Lock, and MTM.

Finally, to an investor who has done some research and compared the current market cap of these projects and the technologies they offer, it should be clear that Fusion has much more upside potential than both Cosmos and Polkadot.

Sources

Fusion

Fusion website : https://www.fusion.org/

Fusion whitepaper : https://uploads-ssl.webflow.com/5cbf7269aa4c8ec895500d90/5cd19865da79bd05684babfc_Fusion%20White%20Paper.pdf

https://medium.com/@kczrh/digital-assets-hit-the-wealth-management-main-stream-now-is-the-time-to-know-how-much-is-chain-fd35bb09879f

https://medium.com/fusionfoundation/fusion-time-lock-function-2347b61d91c7

https://medium.com/@fusionprotocol/2-million-fsn-open-source-community-campaign-ed2b8276c94d

https://medium.com/@fusionprotocol/fusion-lock-in-and-lock-out-lilo-function-79dc9a0520a9

Polkadot

Polkadot website : https://polkadot.network/

Polkadot whitepaper : https://polkadot.network/PolkaDotPaper.pdf

https://medium.com/@davekaj/blockchain-interoperability-cosmos-vs-polkadot-48097d54d2e2