Cardano tackles Ethereum's DeFi tokens

By: Bharggavi Ssayee

May 21, 2021 1:45 PM

Cardano will soon allow holders of Ethereum standard tokens to convert them for use on its own network.

The creators of Cardano never miss the opportunity to remind everyone. Ethereum suffers from its costs and congestion. The “gas” fees paid to validate transactions are rising sharply.

The solution, therefore, is to migrate to another blockchain, for publishers of decentralized applications as well as for investors. Cardano is therefore developing a bridge between Ethereum and its blockchain.

Ethereum is expensive? Migrate your tokens to Cardano

This bridge will take the form of an ERC20 converter, like on Tezos. Ethereum tokens are based on a standard, the ERC-20. Cardano therefore wants to offer the holders of these tokens the possibility of converting them for use on its own infrastructure.

Interconnections of this nature already exist. Protocols like Wrapped BTC thus make it possible to convert Bitcoin for use on Ethereum. Cardano is therefore developing a comparable solution for its network.

"By enabling the migration of ERC20 tokens to Cardano, we are committed to providing a value proposition that leverages the advantages of Cardano over Ethereum", explains Francisco Landino, project manager for IOHK.

And what are these advantages? Cardano's "higher transaction processing capacity and lower fees versus the high cost and often congested Ethereum traffic." "

Cardano currently supports ADA and native tokens. In the future, it will therefore be able to accommodate other tokens based on the ERC-20 standard. This is the whole purpose of its converter, the tests of which are being finalized.

ERC-20 tokens converted in "a few clicks"

Concretely, the converter will allow issuers and their users to manage the migration of ERC20 tokens to Cardano. Ethereum tokens are converted "with a few clicks" and therefore transferred to Cardano.

For this, a special native token is issued on the blockchain. This token keeps the same value and works like an ERC20. The conversion works both ways. A user can convert their token again to transfer it to Ethereum.

Cardano specifies that it is working on the migration with several partners, including SingularityNET. Its AGIX token will therefore work on both Cardano and Ethereum. This is a first step. The publisher does not intend to stop there.

Currently, eligible tokens are only those for which the partners are custodians. But “we will achieve greater interoperability (…) when Plutus smart contracts run on the main grid. “Smart contracts are indeed the major development planned for 2021 on Cardano.