What is Multichain? A Comprehensive Guide to How it Works

Jaemin Jin · November 3, 2021
What is Multichain? A Comprehensive Guide to How it Works


  • Blockchain is expanding fast from centralized systems like Bitcoin and Ethereum to multichain environments that span all the way across Layer 0 (base layer protocols), Layer 1 (blockchain base layers like Bitcoin), and Layer 2 (networks built on top of the underlying blockchain). 

  • Addressing scalability issues leading to faster transaction times and cheaper gas fees that lower barriers for entry are key steps towards mainstream adoption of multichains.

  • Every project is different based on the priority needed for a particular blockchain, decentralization needs, or security level required. Magic Labs allows developers to blend into their chosen framework rather than imposing one, facilitating integration in multichain technology.

As blockchain technology surges ahead, Bitcoin's secure transactions and Ethereum’s smart contracts set the pace. Today's environment is seeing innovative applications from decentralized finance (DeFi) to non-fungible tokens (NFTs). 

But what is the real buzz now? It’s multichain - an exciting evolution where multiple blockchains operate in unison, widening opportunities for mainstream adoption. 

But what is multichain? That's exactly what we'll cover here.

Let's dive in.

#Layers in the blockchain

Before diving into multichain, let’s first go over the three layers in the blockchain ecosystem: layer 0, layer 1, and layer 2.

Enabling various interoperability, Layer 0 (L0) acts as the foundation among blockchain networks.

Think of it as a blockchain of blockchains. It supports different types of blockchains and allows them to interoperate with one another (e.g. Polkadot and Cosmos).

Today, if you ask anyone outside of the vibrant crypto community to describe blockchain, most would mention: Bitcoin (or maybe Dogecoin). Bitcoin and Dogecoin are both layer 1. Layer 1 (L1) plays an essential role in blockchain development, being a blockchain itself that functions as the base layer for various decentralized applications.

Layer 2 (L2) is a network built on top of the underlying layer 1 blockchain. They are designed to help scale the underlying blockchain, for instance, by handling the computation of many transactions off-chain and submitting a single proof so that users can enjoy fast transaction speed and low gas cost for using the network.

#Enter multichain

A multichain world represents the world of multiple blockchains spanning layer 0 to layer 1 to layer 2.

We believe multichain is already here.

Check, a site that offers usage metrics on blockchains and protocols, today versus a year before today.

Crypto Fees chart, 1 year ago

A year ago, Ethereum, Bitcoin, and protocols built on Ethereum represented nearly the entire list. Today, new players — L1s outside of Ethereum, protocols built on separate L1s, and various L2s — have gained popularity.

Crypto Fees chart, today

This is not to say Ethereum combined with its ecosystem of protocols is losing its dominance, but rather the total addressable market is being realized faster. This trend is just getting started. Time will tell, but we do not see this as a winner-takes-all-market.

By the way, if you are a developer wanting seamless plug-and-play authentication as well as non-custodial key management options for your project, give Magic a try for free.

 In this progressive era of multi chain technology evolution, this trend has only begun to show its potential. The future holds many mysteries - but one certain thing remains: it's unlikely going to be dominated by any single digital asset or protocol. 

Currently, the adoption of multichain seems to be mainly driven by problems stemming from network congestion in high-demand blockchains. This means that since there is so much demand to use the blockchain unless you pay really high gas fees, your transaction will take a long time to be completed. 

As a result, other blockchains that focus on scalability (fast transaction times) with low costs of entry (cheaper gas fees) have benefited. Of course, this provokes the question: is it acceptable to compromise security and decentralization for scalability? Is it making the right tradeoffs in the blockchain trilemma model? We will dive more into that in the next section.

As part of this exciting phase in blockchain development and game development using blockchains, Magic aims to bring Web3 into the mainstream while focusing on multidimensional aspects. This starts with focusing our lens from a purely UI/UX perspective.

Scalability and cheaper gas fees as the two main factors that need to be addressed to onboard the next billion Web3 users.

Scalability enables fast transactions. Fast transaction time is already a massive UI/UX improvement. Just look at Amazon losing revenue for every hundred milliseconds of latency. Unless everyone goes down the rabbit hole of how blockchains actually work, people will simply not wait and drop off. Time is precious.

Cheaper gas fees lower the cost of entry for the mainstream. Currently, the “mass” are priced out of using Ethereum (hopefully ETH2 + L2s will address this) for a few reasons:

  • Not understanding or appreciating the cost of using a highly secured and decentralized blockchain which does not justify the high cost they need to pay to use the blockchain

  • Not having enough capital to use chains with high demand

Thankfully, there is great progress in L0s, L1s, and L2s working in tandem to address those issues and level the playing field for everyone.

#Multichain is a choice

What should the right mental model be for deciding which blockchain to pick over another? Is the blockchain trilemma model the only one to look at? There are different implications that you may run into when you compromise one aspect over another. At the same time, this is not completely binary. It is more like playing around with the levers based on your preference or requirements. How much speed does your application need? How much decentralization is enough? How much security is required?

Let’s go over some hypothetical scenarios with respect to the trilemma model:

  • Your application does not benefit from the network effect of users that already exist in the blockchain. You are also concerned that you may experience network congestion issues during busy times even in scalable blockchains that could affect your app’s experience. It would make sense to launch your own blockchain on L0. This likely means you would first be prioritizing speed and security over decentralization.
  • You are launching a DeFi application and your #1 priority is tapping into the blockchain with the most liquidity and the network effect of DeFi users. Fast transaction speed and low gas cost are nice-to-haves. It would make sense to launch your application on a blockchain with the most liquidity and many DeFi users. People would be most comfortable providing liquidity to the blockchain that is secure and decentralized.
  • You would like to tap into a diverse set of user bases. It would make sense to launch your application on multiple chains with different sets of user bases. If the user base is the top priority, perhaps the trilemma model does not matter as much.
  • You are launching a NFT game application and you care about fast transaction speed and low gas cost. It would make sense to launch your application on a highly scalable chain that offers low gas cost. This likely means you would be prioritizing speed over security and decentralization.

It does not always have to be systemically related. There could be one blockchain community that really aligns with your ethos and you are also aligned with their vision that they are chasing towards and you would like to be part of their journey. Or you may strongly care about developer experience, and the blockchain project that offers the best developer experience according to your criteria may be attractive to you.

In the end, multichain is a choice.

#Magic and multichain brings us closer to mainstream adoption

At Magic, we serve developers.

Magic is empowering developers with the tools needed to put them in the best position to succeed. This is why we are committing to supporting the multichain ecosystem.

We are here to support developers when they have made their choice.

Multichain opens up so many more possibilities and enables us to think bigger — mainstream adoption. Mainstream adoption starts with onboarding.

Magic started out in the world of Web3. We have been laser-focused on helping companies from gaming to NFT marketplaces to media, onboard millions of mainstream users to decentralized apps and platforms, like:

Currently we support 25+ blockchains, with more coming in the pipeline.

If you’re interested in learning and discussing multichain in more depth, join us on the Magic Discord! If you’re a developer looking for plug and play auth and non-custodial key management, try Magic out for free.

#Frequently Asked Questions

#What is the difference between cross-chain and multichain?

While multi-chain and cross-chain interact with different blockchains, they serve distinct purposes. Multi-chain involves using multiple blockchain networks for various functions to harness their unique strengths - one might provide security while another ensures scalability. 

On the other hand, Cross-Chain refers to the ability to transfer data or assets between these disparate blockchain networks, enhancing interoperability among them; it essentially acts as a bridge connecting different chains by facilitating the free flow of assets and information.

#What are the benefits of multichain?

Multi-chain architectures provide numerous benefits in blockchain technology. They offer flexibility by allowing decentralized applications to utilize various chains based on their strengths and suitability - one chain could prioritize security while another offers scalability. Multi-chain models can also mitigate risk as problems with a single chain won't cause the entire system to fail.

#Is Coinbase wallet multichain?

Yes, the Coinbase Wallet is multi-chain. It supports multiple cryptocurrencies that are built on different blockchain networks, such as Bitcoin (BTC), Ethereum (ETH), and various ERC-20 tokens, which all operate their own unique blockchains or exist on a network like Ethereum's. This wallet allows you to store diverse crypto assets from varying chains in one place making it very versatile for user needs.

Let's make some magic!