Interoperability

In general, interoperability can be defined as performing multiple operations of the same type on a different system. Blockchain interoperability is defined as the process of operations between two or more blockchains. In layman's terms, blockchain interoperability is a communication mechanism between two or more blockchains.

Technically, blockchain interoperability can be defined as the ability to see, access and share information across different blockchains. Many blockchains want to implement interoperability to simplify the process and transparency. Implementing this process will increase the speed, blockchains´ communication and efficiency throughout the Web 3.0 ecosystem.

This will allow users to quickly exchange data and assets across blockchains, increasing flexibility for all users. No longer will you need to be locked in behind the boundaries of one blockchain, and smart contracts will work across multiple blockchains. These advances will have positive implications for everyday users.

Blockchain Interoperability Solutions

In the future, all blockchains should include built-in features that enable simple blockchain interoperability. Unfortunately, today's blockchain technologies still lack these core features. Over the past few years, developers have introduced several alternative methods to achieve blockchain interoperability. These special tools can connect blockchains and facilitate the data transfer between them.

Sidechains:

Sidechains are blockchains designed for compatibility with a single "mainnet". This network approach provides the basis for many blockchain interoperability projects. Each blockchain has its own system, consensus mechanism and security parameters. Each blockchain serves different purposes and provides different benefits to users. Linking these sidechains into a single "Mainnet" creates an interoperable blockchain offering more flexibility and security than a single chain alone.

Oracle:

Oracles are technologies that connect blockchain data with the off-chain world. Smart contracts on blockchains often require information from the off-chain world in order to function properly. Oracles provide a precise way to give these on-chain mechanisms the data they need, and thus help smart contracts work properly.

Notary Schemes:

These transactions rely on third-party notaries. A trusted centralized exchange (CEX), known as a "notary," deals with the lack of trust between two parties. The notary can be the CEX network or the CEX itself. The honesty of the notary is the only factor that affects if the notarization scheme works well.

This system contains a centralized component, which are CEXs such as Coinbase or Binance.

Bridges and Swaps:

Bridges and Swaps provide users with a simple means by which to transfer assets across blockchains.

Cross-chain Bridge

As the name suggests, a cross-chain bridge connects two blockchains in a way that allows assets to be efficiently transferred from one chain to another. The technology works by locking an asset on one blockchain and then creating an identical one on the other blockchain. Even if the asset is not actually moved from one chain to another, the buyer gets a new token / coin of the same value and can no longer access the old one. The original locked asset is burnt.

Atomic Swaps  

They allow traders to exchange assets across blockchains in a decentralized way. Like the cross-chain bridge, these transactions are completed within a smart contract structure, which makes them fair and relatively secure.

These are just some of the types of creative solutions that could revolutionize communication between blockchains.

Blockchains that address interoperability:

PROs

  • Collaboration between blockchains
  • Better scaling
  • More decentralized ecosystem
  • Improved Web 3.0 services

CONs

  • Vulnerability
  • Data manipulation
  • Vulnerability of smart contract

Conclusion

Currently, there are several alternative methods for addressing blockchain interoperability. These methods include SideChains, Notary Schemes, Bridges and Swaps. These tools facilitate the interconnection of different blockchains and the easy data transfer between them. However, these methods differ in decentralization and trustworthiness. For this reason, it will be important to develop features that enable easy blockchain interoperability, and ensure secure and trusted data transfers in the future.

Analyst Opinion

Interoperability is essential for the entire crypto world and its greater adoption. It has come a long way in the last few years and more and more developers are getting into it.

A handful of potential “golden geese” might exist in the form of the Cosmos and Polkadot blockchains that hopefully continue to demonstrate a stable and interoperable blockchain protocol. I look forward to a time when these systems render the whole crypto world  a more user-friendly place.

Ondřej Tittl

Ondřej Tittl

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