- The Ethereum Foundation proposed unifying all Ethereum ecosystem blockchains under a single umbrella, the Ethereum Economic Zone.
- The EEZ will help users send crypto directly to different chains (within the ETH Ecosystem) as if they were present in the same blockchain, no bridges and no third-party protocols, just direct transfers.
- Even though every L2 and EVM-compliant is technically part of the Ethereum ecosystem, they exist in fragments.
- Even if you know how to bridge funds, it still costs extra to bridge them and then send them to a different chain.
- MCMS Founder Erez Almog found that around $1 billion is lost every year due to crypto sent to the wrong addresses.
The Ethereum Economic Zone
The Ethereum Foundation proposes an economic zone that aims to unite every other layer two, three, and Ethereum EVM-compliant blockchain into a single entity, so that if any user sends cryptocurrencies directly between chains, they do not have to go through blockchain bridges or any swapping.
The result would be less lost crypto and less hassle for the user sending crypto to different blockchains.
Till now, Ethereum has existed as the largest DeFi ecosystem, but there are several layer tools and layer trees that often exist in virtual silos with only a few unreliable blockchain bridges connecting them. As a result, whenever a crypto token was sent from one blockchain to another without proper bridging, it would be likely lost in the transaction.
According to Erez Almog from MCMS, at least $1 billion per year was lost in these transactions.
Another benefit of the Ethereum economic zone would be that it would help projects directly access almost $40 billion in liquidity, which was previously fragmented across different blockchains.
The same liquidity would also help new users through different cryptocurrencies, cashing out on newly acquired ones, and staking their cryptos via a single interface.
Why Bridge Transfers are Unsecure, Expensive, and Complicated?
To transfer a cryptocurrency to another user, say from A to B on a different blockchain, the user first has to swap blockchains through a bridge, where a token, such as USDT, is bridged from, say, Ethereum to Polygon. Then the crypto has to be sent from the Polygon address of user eight to the Polygon address of user B, costing another round of fees.
Blockchain bridges help transfer cryptocurrencies from one chain to another for the same user or within the same wallet, so that the crypto can then be sent to a user on the transferred blockchain.
Not only is this process inefficient, but it also costs more money and is complex for newer users to adopt.
However, they post challenges for new users who don’t know how to securely transfer crypto between different chains or swap cryptocurrencies. These are mostly new users, and in our investigation, we found that several hundred users face this issue daily.
Benefits for the End User
Less Complex
The new ecosystem is expected to solve several issues, with complexity being at the top. Any user sending cryptocurrency to any other user within the Ethereum system just needs to paste the address and then the crypto is directly sent to the end user.
Cheaper
Generally, it would cost less if cryptocurrency is directly sent from address A to address B rather than routing the same through a different bridge and then sending it
High Liquidity
The combined liquidity of the Ethereum Economic Zone is expected to be around $40 billion. This would help both crypto projects access a larger liquidity base, and users could easily switch from one cryptocurrency to another without having to worry about liquidity for newer tokens.
Easy Access to Different Features
Each blockchain in the Ethereum ecosystem offers different features: the Ethereum Blockchain offers high security, whereas Layer 2s like Base offer fast, cheap transactions.
Higher Security
Blockchain bridges are not as safe as native blockchains because they are independent blockchains in their own regard and do multiple operations to transfer cryptocurrencies from one chain to another.
Sometimes these changes are a lot less secure than their parent or connected chains. An example is Ethereum, which was hacked via a blockchain bridge called Ronin, resulting in a $625 million loss in June 2022. Ronin just had 9 validators securing the bridge, compared to around 1 million in native Ethereum.
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
