Why Blockchain Interoperability is Important and How does it Work

Beginner’s Guide / 14.07.2020

Blockchain adoption into different sectors within the global community has been booming over the years. Safe to say, blockchain technology provides a decentralized, secure, straightforward, low costing, and fast operations wherever people employ its use. However, its adoption by the regular masses is still on a low. 

A significant issue leading to this is the lack of ways to communicate between blockchains. As a result, the talk on blockchain interoperability is spiking as the ultimate solution for its evolution and mass adaptation. The move to implement the idea leads to further dismissal of the opinion that blockchain is a passing wave. 

This article will look at what it is, the benefits, issues, possible solutions, and critical players implementing it.

What is Blockchain Interoperability?

Blockchain interoperability refers to blockchain users’ ability to access and share information from one blockchain to another without intermediaries’ needs. 

Blockchain interoperability is divided into three primary levels to facilitate its functionality. These are:

  • Foundational Interoperability Level: The layer that allows data exchange without the need for interpretation between blockchains.
  • Structural Interoperability Level: The layer enables data exchange between blockchains with a distinct design and aligned movement. Unlike in foundational, structural interoperability allows data interpretation without interconnection.
  • Semantic Interoperability Level: The layer that allows sharing, analysis, and usability of data between blockchains.

For interoperability to be functional, there is a need to meet specific requirements. It requires a cross-blockchain communication protocol (CBCP), an element derived from the cross-chain communication protocol (CCCP). Secondly, two or more mature blockchains that can utilize the protocol. Thirdly, applications that will gain from a blockchain interoperability approach.

Why is Blockchain Interoperability Essential?

Blockchain interoperability comes with several benefits. Here are some of the reasons why the concept is essential to blockchain users. 

  • Enabling interactions between different blockchain networks in addition to smooth sharing of information across them. There will be an assurance of data security since only parties with decryption keys will have access to shared information.
  • Developers and engineers will get the chance to learn deeply about different blockchain structures instead of having basic knowledge about them.
  • Moreover, interoperability will enable users to perform functions on different blockchains without limitations that come with blockchain’s functional protocols.
  • Blockchains interacting offers them a platform to create partnerships that will help in innovations of new projects.
  • Blockchain interoperability will enable the transfer of different tokens and coins with the innovation of a multi-token wallet system that users can utilize across different blockchains.
  • Interactions between blockchains can provide solutions for existing problems within the technology, creating a platform for developing chains in the future.
  • Since users can communicate and transact directly, there is no need for third-party intervention.
  • It will enable faster and smoother execution of smart contracts.
  • It will facilitate the introduction of dApps that will increase the value of the blockchains.

Challenges Facing Blockchain Interoperability

Currently, blockchains are independent and isolated entities that rarely interact with each other. Communication between blockchains needs to overcome a few obstacles based on the differences in their characteristics. Such barriers include consensus algorithms, transaction media, and target audience, among others. Sorting out these differences will ensure that once information sharing happens, one party will have a comprehensive understanding and interactions with another.

Suggested Solutions

Developers working to make blockchain interoperability the next big thing have suggested two meaningful solutions for the problems differences in blockchains pose.

Open Protocols

Open protocols are standardization protocols that allow blockchains to share data and interact without third parties’ needs. 

Atomic Swap is the most popular open protocol suggested for blockchain interoperability. They are an open-source crypto exchange that allows users to transfer cryptocurrencies wallet-to-wallet.

They aim to curb problems that centralized exchanges have, including cyber-attack vulnerability, mismanagement, and government regulations. They can be either on-chain or off-chain.

Multichain Frameworks

MultiChain technology allows the formation of private blockchains whose concept is more complex than that of open protocols. Blockchains can transfer financial-based data and value once they join the framework. 

They utilize API and command-line interface for functionality. Several companies are employing the technology to aid in interoperability, including Cosmos and Polkadot.

Projects Working on Blockchain Interoperability

Cosmos

Cosmos is a decentralized network that utilizes Inter-Blockchain Communication to allow blockchains to run independently under its consensus. Independent blockchains are zones, which can transfer data to other zones through hubs under a standardized protocol. They are yet to achieve scalability during interoperability. 

However, the projects are promising. It is not strict on membership, and it is already live. It runs on a fault tolerance protocol called Tendermint Byzantine.

Ark

The network focuses on exploring new blockchain innovations, and interoperability is now at the top. The project aims to put scalability and adaptability on the front row. It further enables the creation of new blockchains within the network. 

Ark supports different programming languages, including JavaScript, Ruby, and Python. The feature makes it attractive to computer engineers who prefer choosing a specific language.

Polkadot

The network utilizes multichain technology in the formation of parachains for uninterrupted interactions. Subchains are different from each other, conducting transfers with other chains independently. 

Scalability is a crucial aspect of the Polkadot network. It facilitates both token and data transfer aiming to achieve more in terms of blockchain interoperability.

Author’s Note

Blockchain technology is ever-evolving, and interoperability is a significant step in the right direction. It will provide a platform for communication among blockchains and increase rates of adaptation by people worldwide. 

Notwithstanding, the projects working on blockchain interoperability have a long way to go. The results so far are promising as they focus on solving issues surrounding different industries globally. These ambitious efforts show there is much that the blockchain future holds. 

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.