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Blockchain Interoperability

If the future of blockchain is multi-chain then interoperability between chains will be key. Image: Shubham Dhage / Unsplash

What is Blockchain Interoperability and Why it Matters

Jay Speakman by Jay Speakman
July 26, 2022
in Education
Reading Time: 4 mins read
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Blockchain interoperability refers to the ability to exchange information from one blockchain to another. There are three main methods of achieving this. These methods include sidechains (a type of parallel blockchain), off-chain networks (networks that connect to a blockchain but do not live on it), and oracles. Oracles are third-party sources that provide external data for a blockchain.

Open protocols

Blockchain interoperability is the ability of different blockchain networks to exchange information with each other. Each chain has its own blockchain, but with the right interoperability solution, economic activity can be recorded on multiple chains. Consequently, data from one chain can be transmitted to another without compromising security. This interoperability solution is crucial to the success of cryptocurrencies and other new digital assets. In short, blockchain interoperability allows you to send and receive information from any other network without the need to translate data.

The first step to creating an open platform is to understand how these networks interact. Blockchain interoperability is a key element of the future of cryptocurrencies, as it is a critical component in the ecosystem. To do this, a blockchain must support a protocol. Many cryptocurrencies have open protocols, but not all of them support them. Open protocols would allow applications to make payments on one blockchain while transferring funds from another.

Multi-chain frameworks

image 58
Image: Nareeta Martin / Unsplash

Blockchain developers can integrate multiple blockchains into a single ecosystem through the use of multi-chain frameworks. Such frameworks offer a set of common APIs, native assets, and data streams for all participating blockchains. This type of architecture also offers scalability, confidentiality, compliance, and ease of use. The frameworks enable developers to use various programming languages and provide standardized information and data formats for the blockchains.

Several projects are now underway to enable blockchain interoperability between different types of chains. Each project takes a different approach to cross-chain technology. While some focus on interchain communication, others focus on scalability. Ultimately, all are working toward the same goal: an interconnected blockchain world. As these projects progress, more options will become available. Let’s take a closer look at a few of them.

Cross-chain atomic swaps

As a component of blockchain interoperability, cross-chain atomic swaps are a way for two parties to transact between multiple blockchains. They do not require the use of a third-party exchange to process these transactions. Instead, users can execute processors themselves. Atomic swaps are temporary and are triggered when one party fails to meet the other’s deadlines. The one-hour time limit for the transaction allows the deposited coins to be returned to the original owners.

While interoperability is beneficial, not all blockchains are compatible. Currently, the most common blockchains don’t fully support atomic swaps. The lack of interoperability has impeded efforts to develop more interoperable systems. Because of these difficulties, some competing blockchain projects have been reluctant to embrace blockchain interoperability altogether. 

This is an unfortunate side-effect of the decentralization of the internet.

Privacy concerns

image 59
Image: Dayne Topkin / Unsplash

Interoperability between blockchain networks is an important part of blockchain technology, and it can facilitate the transfer of digital assets, data sharing, and smart contracts. While blockchain interoperability can benefit many industries, it is not yet possible. While some competitors have expressed their willingness to support interoperability, others are afraid that it will weaken their own networks. Let’s look at the privacy concerns that accompany blockchain interoperability.

HTLC vulnerabilities: These attacks can expose payment path identifiers and make transaction parties public. The HTLC vulnerability, while not very severe, can make payment paths visible. Table 4 summarizes the vulnerabilities and attacks that affect blockchain interoperability. The table also lists the different strategies that mitigate privacy concerns with blockchain interoperability. While this table is by no means exhaustive, it does highlight some potential areas to focus on.

Speed of transaction processing

Interoperability, also known as cross-chain interoperability, can help solve this issue. While blockchains differ in their systems and programming languages, they can interoperate to exchange data and move unique digital assets. As the amount of digital assets increases exponentially, blockchain networks cannot function in isolation. In many cases, users will seek out alternate networks due to the speed of transaction processing, fees, and incentives offered by alternative networks.

Final thoughts

While the interoperability of blockchain networks is a good thing, it is not without its drawbacks. Data and transactions must be validated before they can be used for new applications. Moreover, interoperability is only possible between different blockchains on the same network. For example, Ripple and Ethereum cannot exchange data with each other. Consequently, interoperability should be a top priority for new products and services that are based on  blockchains.

Jay Speakman
Jay Speakman

I write about blockchain, crypto, NFTs and other disruptive technologies and innovations.

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