The idea that tokens native to one blockchain could be effortlessly used on another blockchain has always been a lofty one. Blockchains have the ability to make data access readily available to anyone at any time. However, as the number of blockchains increases, so does the degree to which a blockchain user may experience fragmentation. A Dapp on the Ethereum blockchain, for example, cannot easily facilitate a payment request on Ripple.
A number of ICO issuers are attempting to build cross-blockchain bridges, and Bitcoin's lightning network, Ripple, and WanChain are all promising some level of cross-compatibility; the cryptocurrency sphere has been awash with those seeking to solve this problem.
"We believe users could really benefit from this new feature in the way they conduct their business, allowing them to be quick and cost-efficient," POA Network announced via its Medium page. "By creating the POA Bridge, we are allowing POA and other sidechains access to bigger markets and more liquidity."
The project runs on a user interface Dapp, and is a modification of the existing open-sourced Parity bridge. The bridge links between two Ethereum-compatible networks via EDCCs (or smart contracts) on both ends. Per the announcement, "The POA cross-chain bridge simply serves as a method of transferring POA native tokens from the POA Network to Ethereum network in a quick and cost-efficient manner … The POA to Ethereum transfer will result in the creation of a newly minted token on the Ethereum blockchain known as POA20."
POA20 is an ERC20 token that will represent the native token on the Ethereum blockchain. If and when the POA20 token is returned back over the bridge, the original sidechain token is unlocked and the POA20 is burned.
While not true coin transferal, this process – which is akin to cross-border payment transmittal – allows for interconnectivity between any ERC20-compatible blockchains. Per an example provided by POA, cross-connected bridges can be used in operations where a blockchain could benefit from delegating certain tasks to a faster or more established blockchain, such as for a cross-chain token sale.
In this scenario, the Ethereum-connected EDCC would monitor for contract crowdsale events and would prompt the POA-connected EDCC to produce tokens accordingly. The Ethereum side would collect the funds for the sale and enact the crowdsale contract, while the POA side would create the native coins and enforce the token contract. Transactions are performed trustlessly, as they are under the auspice of the trusted POA Network.
By removing the challenges of issuing native tokens while simultaneously collecting crowdsale contributions, investors in ICOs can reduce the uncertainty that goes with protocol coin distribution. This level of delegation can facilitate a new level of blockchain interactions – from moving Dapp calculations to cheaper blockchains to asset migration.
The POA announcement reads: "We're also very excited to see what our developer community can do with this technology and are optimistic about the road ahead. Ethereum was the first cross-chain bridge we chose to build, but the future possibilities are endless."