BLOCKCHAIN AND INTEROPERABILITY
Over the past couple of years, we have seen several blockchain platforms emerge and grow with the need and demand for adoption and integration of blockchain into our daily lives & operations. This is as a result of the evolution of the technology and the positive price action witnessed in the last five years. Most of these blockchain platforms focus on building their current network and ecosystem, which gives rise to question what happens when data, assets or information want to be sent from one blockchain to another.
WHAT IS INTEROPERABILITY?
Blockchain Interoperability is simply the communication mechanism between two or more blockchains. Technically, the idea of “blockchain interoperability” refers back to the capacity of various blockchain networks to exchange and leverage data among each other and to transport particular kinds of digital assets among the networks’ respective blockchains. Simply put, it is;
a. Ability of your computer systems to exchange and make use of information
b. Entailing the ability to transfer an asset between two or more systems while keeping state and uniqueness consistent.
The problem of interoperability has been in question since the year 2016, after Vitalik Buterin spoke about interoperability being a problem “established” blockchain ecosystems should look at.
Since then, we’ve had the creation and growth of different blockchain ecosystems, like Cardano, Avalanche, Polkadot, Cronos etc.
Each of these individual platforms have particular benefits and features that will favour their individual ecosystems and communities, whether in the area of transaction fees, transaction throughput, security or level of decentralization (which addresses the idea of scalability trilemma in blockchain). Therefore, this leads to a level of consideration in architecture and use cases, when choosing blockchain ecosystems to build your web3/ blockchain projects on, even though every blockchain ecosystem has its drawbacks.
TYPES OF INTEROPERABILITY
Interoperability between blockchain to blockchain can be divided into two:
- Digital Asset exchange : this is the ability to transfer and exchange digital assets originating from a different blockchain, without having to make use of intermediaries like CEXs (centralized exchanges). Example; making tron (TRX) spendable in a decentralized application built on Ethereum (ETH).
- Arbitrary data & information : this is the ability to carry out a process on a blockchain and it reflects in another blockchain It may not be value being tracked but events. It also involves, exchange of data and information without worrying about manipulation of data or hacks. Also, synthetic forms of one chain of an asset that can be created and housed by another chain, making it usable on a different chain outside its own.
HOW BLOCKCHAIN INTEROPERABILITY IS ACHIEVED
When it comes to blockchain technology, interoperability helps solve the problem of assets and data interacting across multiple chains. While the exchange of data and digital value between two parties has become a simple process using the same blockchain platform, such as Bitcoin, Litecoin or Ethereum, this is not possible when different parties use different blockchain platforms.
Most existing Layer1 blockchains do not have built-in capabilities to support interoperability between chains and that’s why we have tools, sometimes protocols and technologies, that increase the level of interoperability within the ecosystem.
a. ) Oracles: An oracle is an agent that transfers external data to the blockchain for on-chain use. They are entities that connect the blockchain to the external system, allowing smart contracts to be executed based on the actual (real world) inputs and outputs. Oracles provide a way for the decentralized Web 3.0 ecosystem to access existing data sources, legacy systems, and advanced computations.
Some of the type of data imported include prices, temperature or weather or even flight information. Once entered, this information can be used to automate processes based on real life data.
Oracles may be the same as any smart contract but the difference is that they need to be trusted, either by cryptographic consensus or trusted third parties. They may not be necessarily very accurate.
Examples: Chainlink , DIA (Decentralized Information Asset), BAND Protocol.
Pros: easy to implement and feeds real life data constantly.
Cons: have nothing to do with interoperability within the blockchain directly but make blockchain interoperable with non-blockchain systems. You only trust or rely on an application as much as you can it’s oracle.
b. ) Side chains: Side chain is a type of Layer 2 platform, a separate blockchain network compatible with a single main chain. Each side chain has its own consensus mechanism, security parameters, and tokens. Several large crypto projects such as Polkadot and Cosmos were designed from scratch as a comprehensive cross-chain infrastructure solution with the ultimate goal of building an interoperable “network of networks”.
Pros: can allow for a higher degree of flexibility and scalability
Cons: the above can only happen, given that systems with a significant side chain interoperability component are often designed
to cater to a broader range of enterprise and individual users. Some side chains maybe to increase while another will be different.
c. ) Bridges: A bridge permits independent blockchains to talk with each other. On the Polkadot network, a bridge is used to connect para chains and the primary Relay Chain to different external blockchain networks which include Bitcoin and Ethereum. Polkadot statistics transmits from its major Relay Chain to para chains, connected to which collator nodes gather all of the transactions. Collator nodes talk through a bridge to connect with external blockchain networks. Cross-chain bridges allow you to lock digital assets owned by one party into one chain, “imprint” the same assets into another chain, and send them to an address owned by the original owner.
Examples: Centrifuge, deBridge, Rsk, ChainBridge, Polkadot, Cosmos Gravity Bridge..
Pros: it means greater connectivity and interoperability between various ecosystems.
For businesses, it means better scaling and a far greater reach.
Cons: prime target for hackers and security is still low.
BENEFITS OF INTEROPERABILITY
- Novel Web3 services: The ability of blockchain protocols and applications to mix and match different “lego pieces” is key to creating entirely new Web3 tools and platforms that aren’t possible with legacy industries and business models of Web2. Many experts say that interoperable smart contracts would improve industries by allowing important business information to be sent and received between private and public networks in a customizable and controllable way, in industries such as healthcare, law, real estate, etc. Ultimately, blockchain interoperability will also enable multi-token transactions and multi-token wallet systems, greatly streamlining the crypto user experience.
- More decentralization across the ecosystem: While pure decentralization within individual blockchain networks is a priority for many blockchain projects, the ability to establish network interoperability across multiple blockchains represents an even more advanced embodiment of the promise of blockchain technology in terms of decentralized system and economy. Instead of having a blockchain like Ethereum that handles all the transactions for thousands of decentralized applications (dApps), there could one day have thousands of application-specific blockchains communicating with each other through a central hub.
- Industry collaboration and interoperability: Blockchain technology has a wide range of industry-specific use cases, but ultimately the main benefits come down to data transparency and auditability, method of consensus and smart contract execution. This would subsequently lead to interaction between businesses and organizations where data and value can be exchanged leading to further innovation.
CONCLUSION
Interoperability between blockchain ecosystems is still in it’s early stages and requires more work in it’s ease in processes, transaction fees and most importantly, security. In recent years, the highest hacks in history have been on tools implemented for interoperability, bridges (RONIN, Wormhole and others).
Once, these are achieved and we’re further into interoperability, blockchain would be smoothly implemented into our everyday live.
