With the popularity of blockchain technology, a large number of blockchain enterprises have appeared, and a large number of different chains have also appeared. What followed was the birth of a new technology - cross-chain technology.
Cross-chain, as the name implies, is a technology that enables value to cross the barriers between chains and conduct direct circulation. So how to understand cross-chain?
A blockchain is a type of distributed ledger. A blockchain is an independent ledger, and two different chains are two different independent ledgers, and the two ledgers are not related. In essence, there is no way to transfer value between ledgers, but for a specific user, the value stored by the user on one blockchain can become the value on another chain, which is the circulation of value.
It is rather obscure to say this, and it is convenient for us to understand it by currency exchange. The RMB is an independent currency, and the US dollar is another independent currency. The renminbi cannot be directly converted into the US dollar, and the US dollar cannot be directly converted into the renminbi. Therefore, the dollar cannot directly enter the renminbi ledger, and the renminbi cannot directly enter the dollar ledger. Only someone who is willing to buy RMB/USD and sell USD/RMB can complete the currency exchange and realize the cross-ledger flow of value.
Alice has US$100, she came to China and needs to use RMB for transactions. So she has to find someone who is willing to exchange foreign currency with her, such as Bob, Alice sells $100 to Bob, Bob receives the $100 that Alice gave him, and according to the exchange rate at that time, gave Alice 657 RMB.
From the account book, the entire foreign currency exchange process is like this.
First, Alice has $100 on the dollar ledger, and Bob has $0 on the dollar ledger;
Alice has 0 yuan on the RMB ledger, and Bob has 657 yuan on the RMB ledger.
Alice then transfers $100 to Bob on the dollar ledger,
Bob transfers 657 RMB to Alice on the RMB ledger.
As a result, the value of $100 in Alice's original account on the US dollar ledger was transferred to Alice's account on the RMB ledger, which was 657 yuan.
During this process, the value of RMB 657 that Bob had on the RMB ledger was transferred to Bob's account on the USD ledger, which was reflected as $100.
During the entire exchange process, transfer transactions occurred simultaneously on the two ledgers.