How important is interoperability in the development of the blockchain industry today
Today, there are a huge number of diverse blockchain ecosystems. The ability of these networks to interoperate with each other is called interoperability, which is expected to enable a wide range of blockchain-enabled technologies to be implemented. Namely:
- Custom Web3 Services: The ability of protocols and blockchain applications to mix and match different “pieces of lego” is key to creating entirely new Web3 tools and platforms that are not possible in traditional industries and business models of the Web2 era. Interoperability of blockchains will be able to ensure transactions with multiple tokens, which will greatly simplify the work of crypto users.
- Higher Degree of Decentralization: While decentralization within separate networks is a top priority for many projects, the ability to network across multiple blockchains represents an even more advanced embodiment of the promise of technology towards decentralizing systems and economies.
- Enhanced cross-industry collaboration: Blockchain technology offers a wide range of industry use cases, but ultimately the main benefits come down to data transparency, smart contract enforcement, and decentralized consensus. Once the blockchains used by different organizations and industries can interact with each other, independent markets and business applications that were previously considered completely separate can more easily transfer data and value, and as a result, efficiently exchange information and drive innovation.
How is the compatibility of crypto networks achieved?
Most of the existing Tier 1 blockchains lack built-in features to support inter-blockchain interoperability. However, today there are many tools aimed at increasing the level of interaction:
- Sidechains or Layer 2 solutions: These are separate networks that are compatible with one main chain. Each sidechain has its own consensus mechanism, security options and tokens. These sidechains usually have specific use cases that improve overall processing efficiency and ecosystem independence. Several large crypto projects, such as Polkadot and Cosmos, were developed from the ground up as end-to-end cross-network infrastructure solutions with the ultimate goal of creating an interoperable “network of networks’’.
- Oracles: In the context of blockchain technology, oracles bridge the information gap between environments inside and outside the network. Decentralized oracles like Chainlink and API3 play a pivotal role in transferring off-chain data into smart contracts and facilitating blockchain interoperability by ensuring that different ecosystems link to a common source of truth.
- Bridges and Atomic Swaps: Bridging between blockchains allows a digital asset owned by a party to be locked on one chain, while an identical asset is “minted” on another chain and sent to the address of the original owner. In contrast, atomic swaps allow users to decentralized exchange of tokens from different blockchain networks. Both solutions are automatically activated through the use of smart contracts and play a central role in ensuring the smooth transfer of value between chains. An example of a project working towards the implementation of atomic swaps is Bitcoin Ultimatum. Early next year, the team plans to start work on the integration of atomic swaps, which will ensure the implementation of smart contracts not only on the BTCU network, but also with other popular blockchains. Thus, the project intends to simplify the interaction of crypto networks and increase security in the process of transactions.