Blockchain Interoperability Could Significantly Reduce Crypto-to-Crypto Transaction Costs

Blockchains might soon be able to communicate with each other because of projects like Metronome and Cosmos. According to a recent Bloomberg report, both Metronome and Cosmos have reached key “developmental milestones.” Lucas Nuzzi, lead technical analyst at Digital Asset Research, stated:

“We are very close to achieving interoperable blockchains, and this has the potential of changing the entire cryptocurrency market."

Lucas Nuzzi

Per the New York based researcher, the development of interoperable blockchains could pave the way for the emergence of numerous blockchain-powered apps. Additionally, it could potentially increase the value of cryptocurrencies as more people and businesses begin to adopt them, Nuzzi added. 

Cryptocurrency Exchanges Might Lose Business

Cryptocurrency exchanges might also be affected due to the development of interoperable blockchains. Recent data shows that the top 10 digital currency exchanges will earn approximately $1 billion from transaction fees annually. Currently, traders who want to buy Ethereum (ETH) usually have to use a cryptocurrency exchange to convert their Bitcoin (BTC) to ETH, or any other crypto of their choice. When one cryptocurrency is exchanged for another, the digital funds are transferred or moved from one blockchain to another, in this case from the Bitcoin blockchain to the Ethereum blockchain.

One of the major issues with trading cryptocurrencies this way is that the process can be very slow and the transaction fees can be very high. Reportedly, once interoperable blockchains emerge, transaction fees might be significantly reduced, or even eliminated. In order to resolve these issues with current blockchains, the “built-to-last” cryptocurrency Metronome (MET) will enable users to transfer their MET coins from the Ethereum blockchain to the Ethereum Classic (ETC), Qtum, and Rootstock blockchains. 

Although this type of digital funds transfer can be done using many of the current blockchains, MET coins will not reportedly have to be converted into any other coin or token as they are moved from one blockchain to another. Meanwhile, the Cosmos project will allow crypto traders to exchange Bitcoin (BTC) for Ether through its decentralized exchange (DEX). This could potentially eliminate the requirement of having to go to a centralized exchange to conduct the transaction, which is often slow and costly. 

Slow Transition to Full-Fledged Blockchain Interoperability

The Cosmos project offers a “decentralized network of independent parallel blockchains” and is called the “internet of blockchains.” Developers of Cosmos claim that their DEX will be as fast, if not faster, than the current centralized exchanges. The Cosmos team has revealed that most of their development work is done, and the beta version of their network will be launched some time this summer. 

The project leaders of both Cosmos and Metronome have acknowledged that to achieve full-fledged blockchain interoperability will take time. Lex Sokolin, fintech director at Autonomous Research LLP, has attributed the expected slow transition to interoperable blockchains partially due to the different approaches by regulatory authorities to regulating cryptocurrencies throughout the world. Sokolin noted:

“Perhaps building interoperability into the protocol at this stage is a useful solution, but until economic activity actually shifts into public crypto, it’s a battle for the merely imagined future. Real economic activity cannot shift into the chains until regulation is settled.”

Lex Solokin

Crypto Market-Maker Altonomy Receives $7 Million in Funding from Polychain Capital

Altonomy, a New York-based cryptoasset trading, advisory, and asset management company, has completed a $7 million fundraising round from Polychain Capital, a leading hedge fund and venture capital firm.

Co-founded by Ricky Li, a former Manager of Research and Product at the CME Group, Altonomy has also received funding from 7 Blocks.

Additional Capital Will Allow Altonomy to Have More Inventory

Commenting on how the additional capital could help Altonomy’s business operations, Li said: 

As a liquidity provider for altcoins, more funding will allow us to have more inventory, taking larger exposure and managing risk more effectively.

Li added that the extra funding would allow Altonomy’s trading desk to provide better services - as the platform would not need to “put constraints” on customers at settlement.

Funds May Be Used to “Source Liquidity for Customers”

Olaf Carlson-Wee, the Founder and CEO at Polychain Capital, remarked:

As a long-time user of Altonomy’s trading services, it was an easy decision for us to invest in their business when the opportunity became available.

Carlson-Wee, a former Product Manager and Head of Risk at Coinbase, also mentioned that the additional funding would help “source liquidity for customers, regardless of token type, order size, market cap, or whether the asset trades on centralized or decentralized exchanges.”

According to Coindesk, Li had suggested to investors in January 2019 that they “liquidate enough ETH so they would have at least two years of runway.” However, Li is now anticipating that cryptocurrency prices may continue to recover - after enduring a long bear market that lasted throughout 2018.

Altonomy Introduces Cloud Service for Crypto Mining

In addition to providing crypto trading and asset management services, Altonomy introduced a new product last year, called the AltMiner. According to Li, AltMiner’s cloud service allows Altonomy’s bigger investors to mine various cryptocurrencies.

Altonomy’s management claims that the AltMiner has a “superior return profile” with the “newest generation of miners, low electricity costs and a secure hosting site.”

During an interview with CryptoGlobe in May 2019, Lee explained how Altonomy’s crypto trading services were developed and their potential benefits.

One of Altonomy’s main services, called electronic execution, allows mining firms, investment companies and crypto exchanges to “enter and exit positions as an outsourced execution desk.”

As a high-frequency market-maker, Altonomy also provides liquidity for various tokens to several crypto spot and derivatives trading platforms.