Axelar (AXL) derives its value from the ability to connect different blockchains and virtual machines.
They claim Axelar connects over 30 blockchains, including Ethereum and Binance (BNB). Blockchains Axelar connects include Avalanche, Cosmos, Polygon, Moonbeam, Fantom, Arbitrum, Osmosis, Celo, Juno, and Kujira.
Basically, Axelar is a protocol that allows decentralized apps (DApps) built on one blockchain to connect to assets on other blockchains. For example, an Ethereum DApp could use Axelar to process Binance (BNB) and Polygon payments.
A Turing Complete Interoperability Network
Moreover, they claim Axelar can allow DApps to send and receive arbitrary messages with one-click. Additionally, they claim Axelar is a Turing-complete interchain network. To explain, Turing complete means a machine or app can solve any computational problem, no matter how complex.
Hence, a Turing Complete virtual machine (digital computer) can process any transaction or support any program. They claim the Axelar Virtual Machine is Turing Complete. Additionally, they claim the Axelar Virtual Machine (AVM) can automate complex interchain tasks, such as connecting to new chains and manage interchain DApp deployments.
Theoretically, the AVM can deploy a DApp on several blockchains at once. It could also process payments on all those blcockchains. The AVM can work on many blockchains because it creates a programmable interoperability layer on top of blockchains. This layer is the Turing-Complete interchain network.
They claim Axelar’s network can move complete assets, for example, stablecoins with one click. Axelar calls this General Message Passing. They claim an Axelar app they call Squid can transmit any token between blockchains with one click. For example, Squid could transmit Bitcoin (BTC) between Binance and Polygon.
Does Axelar Fix one of Cryptocurrency’s greatest weaknesses?
In contrast, many existing cross-chain solutions can only move wrapped assets such as stablecoins. To explain, a wrapped asset is a token that makes payment in another currency or token kept in an account. For example, Tether (USDT) makes payment in US dollars.
Thus, Axelar claims to have rectified one of cryptocurrency’s biggest weaknesses. Stablecoins and synthetic assets do not contain the assets they claim to represent. For example, Tether contains no US dollars. Instead, they keep the dollar in a trust account. Meanwhile, Wrapped Bitcoin (WBTC) stores Bitcoin in the blockchain.
If the system cannot make payment. The wrapped asset becomes worthless. For example, the TerraUSD (UST) stablecoin collapsed in May 2022 when speculators realized it did not contain US dollars.
Potential Uses for Axelar
Potential uses for Axelar include cross-chain swaps and trades. They also claim Axelar can help a decentralized finance (DeFi) app use assets stored in multiple blockchains for loan collateral.
Another potential use for Axelar is stablecoins that can make fast payments from several blockchains. For example, A Cosmos app could make payment in Tether (USDT), which operates on Ethereum. They also claim Axelar can convert any asset into currency for Web3 games.
Plus, Axelar could integrate nonfungible tokens (NFTS) into cross-cahin games and DeFi apps. They even claim Axelar can convert Wallets into super DApps that link users and functions across many blockchains.
Finally, Axelar can power decentralized autonomous organization (DAO) governance across multiple blockchains. Hence, they claim Axelar can build a DAO that operates on several blockchains at once. Current DAOs can only operate on one blockchain. To elaborate a DAO is an entity that administers a blockchain or a platform.
Two Potential Security Holes in Axelar
I think there are two potential huge security holes in Axelar (AXL). First, Axelar is a sidechain or interchain.
A sidechain or interchain is a less-encrypted network that connects multiple blockchains. Hence, Axelar relies on a less-secure network hackers could penetrate.
Second hackers can takeover DAOS through fraud. To explain, Axelar uses proof-of-stake consensus in which holders of the Axelar token vote on decision.
On 20 May 2023, hackers created 1.2 million fake votes that allowed them to take over Tornado Cash’s (TORN) DAO, CoinTelegraph reports. This gave criminals the power to mint TORN and steal money from Tornado Cash. For example, the hackers withdrew 10,000 TORN tokens (worth $33,390) through voting.
Hence, Axelar uses a system of governance that hackers could takeover. Thus, Axelar could put many tokens at risk.
What Value Does Axelar (AXL) offer?
They claim Axelar supported over 30 blockchains that processed $2 billion worth of transactions with over 70 validators on 13 June 2023.
For example, Axelar (AXL) was CoinMarketCap’s 18th most trending cryptocurrency on 14 June 2023. CoinMarketCap gave Axelar a 38.63₵ Coin Price, a $112.90 million Market Cap, a 24-Hour Market Volume of $2.65 million, and a $412.559 million Fully Diluted Market Cap on 13 June 2023. They base those numbers on a Circulating Supply of 291.957 million AXL and a Total Supply of 1.068 billion AXL.
Hence, there is a strong demand for Axelar. I think Axelar offers an interesting DeFi tool However, Aexlar is one of protocols that could find itself without a market if the US Securities and Exchanges Commission (SEC) bans cryptocurrency sales in the US. The largest market for many of the tokens Axelar will use is in the USA.
I consider Axelar an interesting cryptocurrency to watch because it could create one giant network and virtual machine that operations on many blockchains. Hence, the Axelar Virtual Machine could become an operating system for the blockchain that centralizes the blockchain. I don’t know if there is a market for such a solution, but it could be lucrative if it works.
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