- Moonbeam as the bridge between Ethereum and Polkadot
- Glimmer (GLMR), Moonbeam’s native utility token
- Challenges Moonbeam might face
The Polkadot Parachain Auction was one of the major events in late 2021. Moonbeam, the second project to win the Auction, attracted investor interest due to its compatibility with Ethereum smart contracts.
During the Auction, investors can cast votes using Polkadot’s native token DOT. The project with the most deposits wins the on-chain auction and is allocated with a parachain slot. Parachains are individual Layer-1 blockchains running in parallel on Polkadot.
Why is Moonbeam important?
We all know that in the future, with more applications and use cases for blockchains, there will not be only one major blockchain network. Instead, the blockchain industry will increasingly move towards a multichain approach.
A multichain solution does not only involve different blockchain networks running individually, but also indicates that assets can interact and integrate across multiple blockchains. In short, different blockchains should be able to communicate with one another without the need for intermediaries.
With its launch, Moonbeam is the first fully operational parachain on Polkadot bringing cross-chain interoperability with the Ethereum network.
How does it work?
Moonbeam Network is an EVM-compatible blockchain that operates as a parachain on the Polkadot network.
Moonbeam makes it easy to build natively interoperable applications. Its EVM compatibility allows Ethereum-based applications to be deployed on Moonbeam and allows developers to deploy existing Solidity smart contracts and DApp frontends to Moonbeam with minor changes.
As a parachain, Moonbeam will also provide Polkadot developers with easy-to-use functional modules, so that the application ecology of the Ethereum chain can be transferred to the Polkadot ecosystem easily. At the same time, Moonbeam can also benefit from the security, scalability, interoperability and governance of Polkadot.
Glimmer (GLMR) is the governance and utility token of the Moonbeam network. The main use cases of GLMR are to pay gas fees on Moonbeam, node staking and governance by voting. For a detailed breakdown, see ‘About Glimmer’.
It is worth noting that 80% of all gas fees on Moonbeam will be burned and the remaining 20% will be deposited into the treasury, which can be allocated via on-chain governance to “further adoption and engagement within the network”.
In this case, the value of GLMR will be affected by asset interactions and transaction numbers on the Moonbeam network. Therefore, the number of applications built on the Moonbeam network and how active they are will be crucial.
Expectation and Challenges
Currently, there are many DeFi projects on Moonbeam Network, spanning from decentralized exchanges (DEX) to borrowing and lending. Moonbeam plans to build a full DeFi ecosystem, similar to Binance Smart Chain (BSC).
Moonbeam is fully compatible with Ethereum, which is equivalent to rebuilding the Ethereum ecosystem on Polkadot. As a smart contract platform, the quantity and quality of applications represent the degree of ecological prosperity. For existing Ethereum DApps, this is the easiest cross-chain deployment solution. Currently, this seems to be Moonbeam's biggest advantage, and it could attract a large number of Ethereum DApps to utilize Moonbeam.
However, in the long run, Moonbeam’s success may be limited by, and heavily dependent on the development of Ethereum.
EVM-compatible: Being EVM-compatible means that Ethereum smart contracts can be deployed on the compatible chain. Pros include lower gas fees on the compatible network, tapping into Ethereum’s existing user base, and developers are able to use the same programming language (Solidity) to write smart contracts.
Interoperability: Enables blockchains to communicate, share and access their data with one another.
Solidity: A programming language for writing and implementing smart contracts on blockchains. It is the primary language on Ethereum.
DApp frontend: Coding and creation of elements of the DApp which will be seen by the user and contribute to user experience.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
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