From the humble birth of Bitcoin, a vast sea of blockchains has since emerged with numerous use cases. From Ethereum, Avalanche, and BNB Chain, to Tron, Solana, and Polygon, the options and functions of blockchains available today are many and counting. Finding the right blockchain for you, whether you’re a builder of a Web3 project or a crypto investor, can be a hassle, and you’ve probably already noticed how die-hard into one particular blockchain a group of crypto enthusiasts can be.   

In recent years, we are however seeing a surge of projects refocusing their strategies to involve several different blockchains, so-called multi-chain strategies. There are quite a few pros to choosing this as a Web3 project, but like anything, it has its cons too. In this article, we’ll dive deeper into what multi-chain means, why many choose to go down the route, and what effects it can have on a project.    

Why Chains Matter

When developers set out to build a blockchain, they usually do so with the blockchain trilemma in mind. Simply understood, the blockchain trilemma states that a good blockchain consists of three important elements: scalability, decentralization, and security. The problem is that scalability and decentralization are usually held back by security concerns, and security is easily compromised by scalability. In that sense, most blockchain projects choose to focus their efforts on two of the elements or attempt to deploy innovative solutions that seek to solve the trilemma in its entirety, like utilizing sharding, side-chains, or para-chains to improve scalability without compromising security.

In that sense, individual blockchains will try to solve the trilemma in different ways, which usually leads to wildly different results. While some chains utilize blockchain interoperability and parallel chains to run multiple transactions in tandem and improve scalability, others “bundle up” multiple transactions in one to increase throughput. Each blockchain network has its own strengths and weaknesses, and what blockchains you are exposed to may affect the outcome and usage of your products, as well as the potential user adoption of them. Depending on the sector you’re in, you may have specific needs like transaction speed, gas fee requirements, or you may need a blockchain that is EVM-compatible to develop products like dApps and NFTs. For some, the sheer exposure one chain has vs. another is enough to make the decision on the best place to be, and the tech is developed in tune with the chosen chain. 

Amongst the blockchains available today, many are forks of previous chains, often with the goal of upgrading the previous code in one way or another. For example, BNB Chain is a fork of Ethereum that uses Proof-of-Stake Authority (PoSA) instead of PoW, like Ethereum used before, or PoS, like they use today. This allows BNB Chain to operate with high scalability and security while giving some concessions on decentralization.

So Should You Put All Your Eggs in One Basket?

Whether you need a multi-chain strategy or not depends on your project and how far in your process you’ve come. For some projects, sticking to a single chain can be the right choice, while for others, it will turn out to be a growth limiting factor or even a security concern.

One of the main advantages of utilizing a single chain is simplicity. All things being equal, launching your project on one chain instead of two or three is simpler with regards to development and liquidity management. Being on one chain instead of multiple allows you to keep all your liquidity and developmental resources in the same place. But it does pose certain risks and challenges as well. Having your project tied up in a single chain gives it a single point of failure. If you’re strictly on Cardano, and Cardano goes belly-up, your project could very well go belly-up with it. In the same vein, utilizing a single chain strategy will usually entail limited flexibility and exposure when changes happen in the space or new and exciting chains or trends emerge.

Mirroring this, utilizing a multi-chain strategy usually entails increased complexity. While moving from BNB to Avalanche can be quite straightforward since they’re both EVM compatible and the coding will be very similar, moving from an EVM chain to Algorand can prove to be more complex. Another drawback can be that a multi-chain strategy also entails splitting your liquidity between multiple chains, which can result in lower liquidity and volume for the individual trading pairs, and thereby the risk of higher price volatility. On the other hand, being on multiple chains will increase security since you’re not putting all your eggs in one basket, and heighten your growth ceiling, since you’re exposed to a larger and more diverse user base.

In that sense, whether your project needs a multi-chain strategy or not depends on multiple factors. For newly launched projects with budgetary constraints and limited liquidity, launching on one chain can prove to be simpler, cheaper, and better. If your project has the budget and the liquidity, and if you’re approaching your growth ceiling on one chain, expanding to multiple chains can gain you more exposure, security and flexibility.

It’s important to note that there are derivative risks associated with deploying a multi-chain strategy since this usually entails that your users will need to find a way to bridge their tokens from chain to chain. While this is simple enough at its most basic, it’s probably safe to say that you’re never more exposed than when you’re using a blockchain bridge.

Blockchain Interoperability

Is the future multi-chain? Probably. And today, it’s easier than ever to move your funds from chain to chain by making use of the plethora of bridging options present in the space. Blockchain interoperability does come with risks since blockchain bridges are traditionally some of the most exposed and abused attack vectors for bad-faith actors in the space. This is first and foremost because blockchain bridges usually prove to be valuable targets. Usually, users will need to lock their tokens on one end of the bridge to mint tokens on the other end, which means that there’s usually quite a lot of crypto locked up in a well-visited blockchain bridge. In that sense, hackers can usually net 10s or 100s of millions by successfully exploiting a bridge. At the same time, blockchain bridges tend to have weak spots that can be exploited by bad-faith actors.

Last year, Chainanalysis concluded that bridge hacks accounted for close to 70% of all cyberattacks in crypto. With that in mind, if your project has a multi-chain strategy, one of the most important parts of that strategy ought to be centered around which bridging protocol you employ for your project and promote to your community. By doing proper due diligence, you can potentially save your project a lot of heartbreak (and tokens).

When choosing a protocol for your bridging needs, you should look at several factors. For instance, it makes sense to look at how long the bridge has been operational. Does it have a history of hacks? Is the code audited by an independent third party? Who runs the bridge, and what are their security procedures if they’re compromised? These are all highly relevant questions to include in your due diligence.

Hopefully, developers will one day code a perfect, impenetrable bridge protocol, and we can all move our funds around as we please without giving it any second thought. Until then, we should always exercise caution when utilizing bridging solutions. 

In Conclusion

Whether your project needs a multi-chain strategy depends on your project's needs, ambitions, and budget. While it can quickly prove to be more expensive and complex than being on a single chain, and while a multi-chain strategy places higher demands on liquidity and developmental resources, multi-chain projects gain flexibility, exposure, and a higher growth ceiling. While multi-chain projects need to consider the risks that come with utilizing bridging protocols, they can take important steps to protect themselves by doing proper due diligence and choosing the right bridging protocol to employ.