How Does Ethereum Interact with Other Blockchains?
Ethereum is an open-source blockchain platform that allows developers to create decentralized applications (dApps) and smart contracts. It interacts with other blockchains through various mechanisms including interoperability protocols, bridges, and wrapped tokens.
Interoperability Protocols
Several protocols facilitate communication and data transfer between Ethereum and other blockchains. Examples include Polkadot and Cosmos, which allow different blockchains to communicate via a shared network architecture.
Cross-Chain Bridges
Bridges enable users to transfer assets between Ethereum and other blockchains seamlessly. For instance, the Ethereum-to-Bitcoin bridge allows users to convert ETH to wrapped Bitcoin (WBTC) and vice versa, maintaining the value and liquidity of both assets.
Wrapped Tokens
Wrapped tokens, like WETH (Wrapped Ethereum) and WBTC, encapsulate assets from other blockchains as ERC-20 tokens on Ethereum. This allows users to use these assets within Ethereum's ecosystem, effectively enhancing liquidity and trading options.
Decentralized Finance (DeFi)
Ethereum-based DeFi applications frequently interact with assets on other blockchains, enabling a variety of financial services such as lending, borrowing, and swapping. This cross-chain interaction contributes to a more integrated and liquid global financial system.