Blockchain interoperability refers to the ability of the various blockchain systems to exchange information and make use of it. This has been a significant challenge in the blockchain community since many developers create their own blockchains or blockchain-based applications in isolation from existing platforms.
As recently as the beginning of this year, numerous blockchain experts have claimed that blockchain interoperability is almost nonexistent. Moving value across chains almost always requires users to move their tokens to a centralized (or decentralized) exchange of some sort, trade the assets there, and then withdraw the converted asset onto the new chain of choice.
This process is unnecessarily time-consuming as well as expensive. It relies on counter-parties to a degree that simply would not be necessary if true blockchain interoperability existed.
Why Interoperability Matters
Those in the blockchain sector can agree that interoperability would prove incredibly useful. Blockchains are currently isolated and unable to communicate with each other thanks to their decentralized nature.
Unfortunately, this makes it much more challenging for the mainstream adoption of blockchain technology to occur and reduces the scalability of each particular blockchain.
Bitcoin arrived back in 2009. In the time since then, hundreds of blockchains have joined the market, including both public and private ones.
Very few of these blockchain platforms interact with each other, limiting their usefulness and requiring developers on one blockchain to recreate technologies already in place on other blockchains.
Even nine years after the introduction of Bitcoin, we still do not have a common communication method for blockchains to interact and share information. To make it worse, every network has its own economics and standards.
Types of Blockchain Interoperability
The blockchains making strides toward interoperability do so in two ways. Some chains will relay messages about their condition to another chain, such as in the case of a sidechain or one-to-one peg. There are also cross-chain atomic swaps, which is when users exchange tokens across chains without using a third party.
Challenges to Interoperability
By their very nature, blockchains are not necessarily designed to be interoperable. Instead, the current solution requires the developers of each specific blockchain to work in that particular chain’s interoperability.
This, in turn, requires the desire to do so, as well as the knowledge and tools necessary. Developers must be familiar with various smart contract languages, third-party tools, and APIs.
If interoperability continues to depend on the creators of specific apps and blockchain developers, then experts will call for at least some sort of standardization. Something as small as a common language for smart contracts would make interoperability significantly simpler.
Companies like Crowd Machine aim to do that to some extent with auto-generation of smart contracts, but this may not be enough to achieve interoperability.
How Blockchain Verticalization Requires Interoperability
Some argue that one of the biggest driving factors pushing us toward a need for blockchain interoperability is the way that blockchains are verticalizing. As we specialize the various functions for blockchains, we see blockchains begin to verticalize, creating their own sets of data and information that they record, in addition to the data analytics record.
As each blockchain gets more information and works within itself, the question becomes how these various blockchains will communicate with each other. After all, what is the use of the information stored in the ledgers of various blockchains if only a single blockchain can access it? We end up creating multiple blockchains with the same function.
Are Blockchains of Blockchains the Solution?
Some see the solution to blockchain interoperability as creating a “blockchain of blockchains.” Projects like Cosmos, Polkadot and Block Collider all have the same goal of being the “blockchain of blockchain” of choice.
Of course, for a system like that to work, the particular “blockchain of blockchain” must first gain recognition and be accepted by the cryptocurrency community. With multiple projects vying for the same position there is virtually no way to know which platform, if any, will achieve this goal.
Will the Blockchain Interoperability Alliance Be the Solution?
Another recent attempt to create blockchain interoperability is the Blockchain Interoperability Alliance, which probably shows the most promise out of the various solutions being attempted.
This advocacy group with the goal of promoting interoperability between various blockchain networks was announced late last year. This effort is the result of a partnership between Wanchain, ICON and Aion.
While each of the projects making up the blockchain works toward the goal of interoperability, they do so in different ways. Wanchain is a financial platform that enables the execution of cross-blockchain, private smart contracts. The goal is uniting isolated digital assets.
ICON is a blockchain network that is interconnected, linking independent blockchains to each other without the need for extra intermediaries. Finally, Aion wants to become the common protocol for blockchains, which would allow for more decentralized, efficient systems.
To make the interactions between the Blockchain Interoperability Alliance more useful, every member has a different target region. Wanchain hopes to disrupt China, ICON is based in South Korea and Aion focuses on North America.
The geographic spread of Alliance members should help with adoption of their standards and encourage various markets to work toward the common goals.
What the Blockchain Interoperability Alliance Does
The alliance’s main priority is collaborating in research into interchain communication and transactions. The focus is on developing protocol architecture, sharing research and creating common industry standards.
The alliance feels that collaboration between projects will allow for the introduction of blockchain interoperability best practices, as well as encourage adoption of the blockchain.
One of the alliance’s goals is eliminating the blockchain’s reliance on centralized intermediaries for cross-chain communications. Members also want to address the scalability problems of networks like Ethereum and Bitcoin due to network congestion.
Additionally, they hope to connect private and public blockchains and create application-specific networks that communicate with various other blockchains.
How Interoperability Will Encourage Adoption
As mentioned earlier, those in the blockchain industry strongly feel that the introduction of interoperability will encourage mainstream adoption. This comes from the fact that each blockchain-based protocol developed does a single thing exceptionally well but cannot do everything to the same degree of expertise.
The average person does not want to have to use multiple blockchains or protocols. In addition, it simply is not feasible for each blockchain developer to build a system from scratch that incorporates existing capabilities as well as new ones.
Instead, developers want to be able to use the best features of all existing blockchains and their protocols and use them together for the best possible application. This will only be possible once interoperability becomes a common occurrence.
Then, developers of applications will be able to use the top traits from each blockchain to create applications and software. The average person will begin using these applications, possibly without even knowing that they are based on the blockchain and not traditional development methods.
Interoperability Will Require Standardization
Even with all the efforts being made toward achieving blockchain interoperability, it will simply not be possible until some sort of standardization occurs across the blockchain. Developers will not have to put in extra effort to coordinate their efforts across various blockchains.
Everyone else involved in blockchain technology will know exactly what to expect from the various platforms and protocols.
With standards in place, interoperability becomes simple, and that is one of the reasons that the Blockchain Interoperability Alliance makes standardization one of its main goals. Without having to spend time trying to figure out cross-chain communications, developers have more time for driving value and every project has more capital available since they do not have to waste money.
Set standards can even allow for pool security, which will improve the entire blockchain system’s ability to resist attacks. It should also allow for trust-free transactions of a cross-chain nature.
Interoperability Will Add Convenience
It is not hard to see how blockchain interoperability will make the lives of everyone involved in blockchain technology simpler. Anyone who owns tokens of more than one cryptocurrency has experienced the hassle of needing a specific address for each cryptocurrency.
You cannot just send a random cryptocurrency to a Bitcoin address. Instead, you have to exchange or convert it using another service then return it to another address that is compatible with your currency of choice.
The same problem occurs with logging into certain blockchain services on your browser. Some require you to use MetaMask, others require Civic, and yet others need a completely different program. This requires blockchain users to have multiple extensions and accounts.
With standardization, the blockchain platforms that require you to use a service like MetaMask or Civic will accept either of these or any other one. You would be able to use the identity provider of your choice. Similarly, you could stick to a single wallet if you want.
Although we have not yet achieved blockchain interoperability, numerous projects are working on this and have taken big steps in the right direction. Hopefully, the interoperability we strive for will become a reality within several years. The question just remains: Which project or alliance will achieve the goal?