Blockchain Interoperability Explained

2022-04-14, 03:38

Blockchain technology is arguably the most revolutionary innovation of the 21st century. The system of blockchain makes it secure enough for developing other technologies, however, there is an isolated nature each blockchain possesses. Each blockchain is an independent ledger of transactions that can interact with the outside world but not with another blockchain.

The first blockchain to exist was Bitcoin when Satoshi Nakamoto utilized blockchain technology in the creation of the world's first cryptocurrency. Blockchain technology is the building block of all cryptocurrencies. Beyond cryptocurrency, tech creators are exploring the application of blockchain in different facets of human engagements.

The next step in blockchain innovation is developing a system of connection between blockchain networks. This concept is known as blockchain interoperability, and the purpose is to enhance the functionality of the blockchains. Essentially, the concept of blockchain interoperability or cross-chains is to facilitate communication and engagements across different blockchains. In this post, we will explore some of the blockchain interoperability solutions available.

Background Information About Blockchain Interoperability

At the moment, every blockchain is built with its characteristics. The purposes, consensus mechanism, semantics, hashing algorithm, and programming languages of blockchains all differ. Hence, there are no linkages between the blockchains.

As blockchain becomes a mainstream topic in the technology space, there is a need for more collaborative efforts to enhance blockchain user experiences. Hence the need for interoperability among blockchain projects.

Some of the benefits of blockchain interoperability include：

· Facilitating multi-token transactions through the creation of multi-token wallets.

· Creation of more robust smart contracts.

·Decrease in latency which translates to increased speed of transactions.

· Allow blockchains to communicate with each other without intermediaries further enhancing decentralization.

Considering the main purpose of blockchain interoperability is to facilitate communication between blockchains, cryptocurrency exchanges are the platforms that fulfill that purpose. However, they are a third-party system that interoperability aims to eliminate.

Apart from the exchanges, some other blockchain interoperability solutions include：

Sidechain
It describes a blockchain that is built on another blockchain (main net). The sidechain operates independently of the blockchain and with its own consensus mechanism. It interoperates with the main net through Sidechain Consensus Protocol (SCP) or Cross-chain Transfer Protocol (CCT). The sidechain requires a third-party validator to validate transactions between the main net and the sidechain.

Ethereum is the most prominent example of a mainnet that hosts different sidechains. Some of the sidechains on Ethereum include Solana, Polygon PoS, xDai, and POA.

The delimits of the sidechain include less decentralization as the mainnet serves as the coordinating agency for the transactions between the different sidechains. Some of the third-party validators that the sidechain requires are prone to committing fraud.

Projects Creating Blockchain Interoperability Solutions

Polkadot
Polka Dot can be described as a blockchain of blockchains. This blockchain facilitates interoperation between blockchains that were built with the same architecture. The blockchain consists of the Polka Dot relay chain, and the parachains. According to a Coindesk report, the first five parachains have gone live and they are, Acala, Moonbeam, Parallel Finance, Astar, and Clover.

The parachains are parallel chains created by users, and they facilitate an interconnectedness in the Polka Dot ecosystem. There are different categories of parachains such as;

· Independent Token Economies: They operate with their tokens and their ecosystems.

· Common good Parachains: These are the common parachains that operate within the Polka Dot ecosystem.

· Smart Contract Parachains: These parachains are platforms for building smart contracts services.

· Parathreads: These are early-stage parachains that do not require constant connectivity to Polka Dot.

The final layers of the Polka Dot network are the bridge parachains. The bridge parachains allow transactions to occur between Polka Dot parachains and other networks such as Kusama, Bitcoin, and Ethereum.

Blocknet
This is another blockchain interoperability, solution provider. It is an open-source decentralized network that allows developers to build blockchains. It is at the forefront of blockchain interoperability, as the protocol facilitates the development of dApps.

Wanchain
The project is channeled towards building decentralized bridges that connect the world’s siloed blockchain networks. Wanchain is a cross-chain interoperability project with different types of bridges. About 14 connected networks are connected through the different bridges on the Wanchain cross-chain.

The different bridges available on Wanchain include

· Direct Bridges: It does not require any relay chain for transactions to occur across different blockchains. Assets are simply moved from source blockchain to destination blockchain.

· Layer 2 Bridges: This bridge is built on the popular Ethereum main net. The purpose is to create a connection for sharing assets between sidechains on the Ethereum blockchain. With the layer-2 bridges, digital assets do not need to pass through the layer 1 blockchain.

· NFT Bridges: Using the lock-mint-burn-unlock technique, this bridge facilitates the movement of NFTs from one blockchain to another. The bridge ensures the locking of the NFT in the source chain before the NFT is minted in the destination chain.

Cosmos Blockchain
This interoperability project can be likened to an internet of blockchains. The Cosmos ecosystem consists of interconnected dApps and blockchains.

Essentially, the blockchain runs on the Inter-Blockchain Communication protocol, and it allows users to transfer digital assets and tokens across the different blockchains on the platform.

What Next

Blockchain interoperability solutions are the key to opening up blockchain technology for wider adoption. Just like the internet, prior to the introduction of the Transmission Control Protocol/Internet Protocol (TCP/IP), the lack of interconnectedness limits the expansion of blockchain technology.

As more solution providers keep creating blockchain interoperability projects, it is advisable to invest in such projects as they are creating the next direction for blockchain technology.

Author: Gate.io Observer: M. Olatunji
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* This article represents only the views of the observers and does not constitute any investment suggestions.
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