The ability to share data across different blockchain networks can drive blockchain towards mass adoption and evolution. The arrival of interoperability solutions will fundamentally change attitudes towards blockchain.
Startups and tech players are joining hands together to facilitate interaction between networks to ensure that decentralization is fully reached.
Blockchain technology and its disruption across industries ensures transparency, security and a significant reduction in operational costs.
So, what actually prevents blockchain technology from mass adoption.
The answer for this can only be due to issues in interoperability, or more specifically the lack of it.
In this article, we will cover what is blockchain interoperability its various offerings and its real-world use cases.
What is Blockchain Interoperability?
Interoperability has been quite the talk in the blockchain space.
It does not only signify the possibility that blockchain systems could communicate with each other.
It also represents the ability to see, access and share information across different blockchain networks without the need for any intermediary.
Blockchain interoperability is an ecosystem that enables different blockchains to communicate with each other in an easy way.
Interoperable enterprise blockchains includes various functionalities such as:
- integration with existing systems
- initiate transactions on other networks
- conduct transactions with other chains
- transact between deployments on the same chain by integrating apps
Where Is Interoperability Actually Needed?
Cross-chain platforms provides users with flexibility as they are not locked into a single technological solution for addressing the needs of an individual.
Blockchain interoperability is very much needed in areas of supply chain, finance, healthcare, etc. as one blockchain network will be unable to provide all the needs for a transaction.
Blockchain interoperability provides specific value, and proper communication channel so that data from private networks could be routed to other relevant networks for transactions “without having to establish a one-to-one integration”.
Blockchain interoperability will allow disconnected supply chains to interoperate securely without too higher investment cost.
Approaches Of Blockchain Interoperability
There are two main blockchain interoperability approaches:
- network-of networks model
Morover, blockchain interoperability can be further divided into two groups:
- Open protocols: Standardized protocols that allows blockchains to communicate with each other without any intermediaries or trust processes.
- Multi-chain frameworks: Blockchains plugs into framework to become part of the standardized ecosystem and transfer data and value between each other.
Interoperability in blockchain brings the following benefits:
- Smooth information sharing
- Easier execution of smart contracts
- Cooperation on the ongoing development for enterprises
- Possibility for IT staff to develop deeper knowledge of a few prominent blockchain standards
- Opportunity to develop partnerships
There are different methods to achieve blockchain interoperability such as:
- proxy tokens
- swaps, etc.
Blockchain Interoperability Projects
A growing number of interoperability projects have entered the scene to try to bridge the gap between the various blockchains.
Their aim is to facilitate interaction between networks and ensure that the concept of decentralization is fully realized.
There are several initiatives currently developing cross-chain platforms. Below listed here are some of the most notable projects.
Wanchain creates “wrapped” tokens that can be traded on other blockchains, instead of deploying peg zones.
The Wanchain network allows interoperability between blockchains like Bitcoin, Ethereum and EOS.
The network aims to link and facilitate communication between different blockchains as much as possible.
Wanchain allows communication and exchange of value and data between public and private blockchains through storeman nodes and the T-Bridge framework.
The storeman node system combines two cryptographic concepts to ensure security and confidentiality of network transactions:
- secure multi-party computation
- “Shamir’s secret sharing”
Wanchain recently announced the integration of EOS blockchain and the implementation of the T-bridge framework.
Chainlink is a decentralized oracle network, an interoperability solution that facilitates secure and trustless communication between all kinds of blockchain systems.
It mostly involves off-chain data to trigger smart contracts and settlement outputs like established payment systems and cloud backend.
This comes across as very important for many blockchains that don’t have to interact with other blockchain protocols but they need access to externals inputs and outputs.
Chainlink nodes can format messaging and data from public APIs into readable format for smart contracts. These nodes can then connect to any API, whether a blockchain, enterprise system, Web API, or even an IoT device.
Chainlink also cooperate with global interbank data transfer and payment system SWIFT, mostly used by banks.
Cosmos is one of the biggest names among blockchain interoperability companies.
It runs on the Tendermint Byzantine fault tolerance protocol serving as a TCP/IP-like messaging protocol for blockchains.
Independent blockchains, or zones, are plugged into the Cosmos network.
The Zones are all connected to the Cosmos Hub and can interact with each other. New zones could then connect to the network and exchange value thanks to the standardized protocol.
Moreover, Cosmos can also grant zones the freedom to preserve their consensus mechanism.
Cosmos aims to act as an ecosystem of blockchains that can scale and interoperate with each other.
The end goal of Cosmos is to create an ‘internet of blockchains’ that can communicate with one another in a decentralised way.
Polkadot is a multichain, or cross-chain, technology allowing different blockchains to plug into a larger and standardized ecosystem.
Technically, Polkadot is comprised of:
- parachains (i.e., parallel blockchains that process transactions and transfer them to the original blockchain)
- relay chain (i.e., a central component that connects parachains and ensures their security)
- bridges that connect Polkadot to external blockchains.
Polkadot facilitates transactions and data exchange to promote interoperability between blockchains.
Polkadot uses DPoS algorithm and employs required validators which could however, lead to a certain degree of centralization.
Real World Blockchain Interoperability Use Cases
During 2020 we have seen a number of interesting real-world interoperability use cases, such as:
Defi Apps– AVA Labs
AVA Labs is an open-source platform for building and deploying DeFi apps and enterprise-grade blockchain solutions that could be run in one interoperable, highly scalable ecosystem.
Kava Labs has partnered with IRISnet for facilitating the development of distributed business applications. The aim is to further support and promote DeFi application development on each other’s respective distributed ledger technology (DLT) networks.
Financial services– SIA and Quant Overledger
SIA’s private blockchain infrastructure and its banking users can now link up with other distributed ledgers followed by a successful test of interoperability via Quant Network’s Overledger technology.
This integration will bridge permissioned blockchain between SIAchain’s, SIA’s private blockchain infrastructure with 580 European network nodes and other external networks to have crossplatform applications and services covering notarisation, payments and KYC.
Cryptocurrency Transfers– Telos and Transledger
Transledger is a blockchain interoperability platform that aims to facilitate cryptocurrency transfer between separate or even independent DLT networks.
It chose Telos blockchain network to perform cross-chain digital asset transactions with its utility token in a fast and secure manner.
Skuchain network is a blockchain platform for the supply chain that recently launched the DLPC CorDapp.
Skuchain’s DLPC CorDapp allows transactions to take place between its enterprises on Hyperledger Fabric and the respective bank partners on the Corda Network.
Interoperability brings many benefits allowing data and value sharing among different participants while facilitating the execution of standardized smart contracts.
Moreover, it accelerates the development of blockchain solutions while forming partnerships within a single blockchain ecosystem.
Once interoperability among major public blockchains is achieved, users will easily be able to transact on other major public blockchains unlocking diverse functionalities such as:
- smart contracts
- data storage
A true interoperable blockchain infrastructure could definitely become the new backbone of the internet.
This could mark an important step in persuading networks that seamless exchange of data is crucial to the success of in the general market.
As more progress towards blockchain interoperability is expected, interoperability is likely to become a game changer for the blockchain industry.