The decentralized industry is abuzz with the phrase “blockchain interoperability.” It is arguably a core faucet of blockchain technology and vital for future success. The phrase describes what blockchain has to achieve before we consider the technology successful in all aspects.In this article, we will delve further into the process of blockchain interoperability and discuss why the above platforms are possibly leading the way in achieving the required results.
What is Blockchain Interoperability?
On its own, interoperability in technology means the ability of computer systems to exchange information. Therefore, blockchain interoperability should simply mean the ability of blockchain systems to exchange data. That is not the case. Blockchain makes interoperability complicated.In blockchain interoperability, developers must find ways of consistently transferring assets and data between contrasting systems. Blockchain has numerous disparate networks, which makes it hard for them to operate harmoniously as they currently are. This poses a problem to the success of blockchain. Luckily, we have ready solutions innovated by platforms such as Fusion and Cosmos in their attempt to make seamless the exchange of data and assets in the decentralized industry.
What are the Objectives?
Enterprise adoption is the unofficial focus of blockchain in 2020. It has the potential to create even more platforms with different systems. It was therefore no surprise when blockchain interoperability also became an area of interest in the decentralized industry.The goal of interoperability is to create an environment where new and existing blockchain can coexist, exchanging data without interfering with the operations of other blockchains.Having understood blockchain interoperability and its goals, we can adopt Richard Brown’s five essentials of an interoperable working system. They include:Integration with existing blockchain systems.Have the ability to initiate and carry out a transaction between different blockchain (mainchains, sidechains, and other sub-chain types).Seamless interchain transactions.Easy to interchange one platform for another.
Real Examples of Blockchain Interoperability
Interoperability is necessary for the success of industries adopting blockchain technology. It is especially important in industries that are fragmented, for example, the supply chain industry. It is broken down into various departments at various levels, with a constant exchange of data and assets between them. Having a fully interoperable blockchain encourages streamlined operations within supply chains.Another industry that stands to gain from interoperability is academia. Interoperability will encourage collaborative projects by making them easier to execute through interoperable platforms.Other sectors, such as Finance also stand to gain greatly from interoperability. Payment solutions from different banks or wallets, using different currencies based on different blockchains can be supported via interoperable platforms.The fashion industry can also celebrate the success of blockchain interoperability. One of the major challenges in the fashion industry is the counterfeit of luxury goods. With a robust, interoperable system, the fashion industry can safeguard its goods, authenticating genuine items. This will make it easier for consumers to identify the original from the counterfeit.With increasing innovation, we are likely to see more use cases, especially where the value chain is important.
Some of The Leading Contenders
As earlier mentioned, some platforms are leading the race to provide the best interoperable system. Each of these platforms has an interoperability formula that involves a connecting system and multiple side system; however, each has its unique take.Some of the projects making the best progress include:
The platform is an interoperability solution focusing on global finance. According to their website, Fusion is working on becoming “the most connected ecosystem in the cryptocurrency landscape.” It hopes to use its connectivity to create an exchange, to manage licenses and royalties, and to enrich digital assets. Fusion hopes to create an environment where developers can build applications that solve real business problems.(Disclaimer: The author works for Fusion)The platform recently released its Anyswap protocol. It is the engine that will potentially drive Fusion to success. AnySwap uses Fusion terms as Decentralized Control Rights Management (DCRM) to achieve ‘true’ interoperability. The DCRM system allows Fusion to carry out cross-chain and cross-system transactions.On security, Fusion offers distributed key generation. In this setup, the private keys with control of assets in the platform are never revealed during the entire transaction. Fusion achieves this by private key sharding and distributed storage. The platform also supports cold wallets for the safety of digital assets.To achieve its goals, Fusion has been collaborating with other leaders in various industries. Their latest collaboration in the blockchain industry is with smart contract solution experts, Chainlink. Their collaboration will see the platforms provide a plug-and-play component for blockchain interoperability.In terms of market cap, Fusion arguably has the lowest among this list top five; however, the company has managed to build a working protocol with impressive results. With such strong progress, there is a real expectation that market cap will rise exponentially with the expected success of Fusion.
Cosmos is among the biggest names in the blockchain interoperability ecosystem. The platform has its take on interoperability, running on the Tendermint Byzantine Fault Tolerance Protocol.Its architecture consists of several different blockchains known as ‘zones.’ These zones are attached to a central blockchain known as the ‘Hub.’ Each zone is powered by a Tendermint core, which gives them high performance and enhances the security of each zone. Cosmos allows each zone to maintain its consensus mechanism, a crucial factor in the success of interoperability.One of the drawbacks of the Cosmos project is what it imposes on other blockchains. It uses a governance model to determine the connections within the Cosmos ecosystem. This makes the architecture more about compatibility than interoperability. Shifting to a fully decentralized model of governance may help with the problem; however, it may likely not be possible at this stage of its development.
Polkadot falls under the same category of ‘compatibility’ as Cosmos. The two platforms operate a network that involves a central hub or connector and multiple side chains. In the case of Polkadot, parachains (blockchains that become part of the Polkadot ecosystem) are connected to a relay chain, the central connector between the different parachains.As in Cosmos and Fusion, each chain can have its unique characteristic. Unlike Fusion, however, the parachains are expected to abandon their own consensus mechanism for Polkadot’s consensus mechanism. Aside from this requirement, developers have the freedom to create the structure and function of their blockchains.Polkadot’s relay chain system may deviate from the goal of interoperability; however, it still has excellent features. The parachain system allows communication between the relay chain and the parachains. Each parachain can join the ecosystem by holding DOT (the native cryptocurrency) or by bonding. The system helps create trust and security within the ecosystem. Through this system, Polkadot establishes a model that enables the secure exchange of information and value between the different parachains.
The platform has a very interesting take on interoperability. While other blockchain platforms focus on inter-blockchain interoperability, Chainlink takes us a step further. The platform provides a plug-in system that connects centralized platforms to decentralized platforms. It does this by providing an API that can link the merits of centralized systems to a smart contract executable in a decentralized system.The Chainlink system uses an intermediary, an Oracle, also known as ‘middleware,’ to translate real-world or centralized data to smart contracts on its blockchain. Chainlink eliminates the problem that may arise from using a centralized oracle by having multiple nodes and oracles. The platform also includes extra security features to robustly secure transactions on its ecosystem. You can get an in-depth, 5-minute analysis on Chainlink further explaining its functions via this link.Chainlink holds an interesting position in the decentralized industry. Full migration from centralized to decentralized platforms may not be possible instantaneously. Users will have to gradually shift. This will make it inevitable for blockchain to have plug-ins or solutions that can enable a working environment with centralized networks.
The platform is another cross-chain solution for digital finance. Wanchain is creating a ‘digital bank’, similar in function to normal banks but with a decentralized twist. It hopes to build a decentralized framework where users can exchange digital assets across different blockchains. Through its ecosystem, Wanchain is also providing an environment where intermediaries can create their own financial services and build a financial market.In a bid to attract developers to create dApps and run ICOs on their platform, Wanchain created a system whereby projects created on the platform inherit its cross-chain capabilities. This makes Wanchain stand out from the rest of the top five; however, it also suggests that the platform is leaning towards compatibility and interoperability.Another noteworthy point for the platform is its privacy protection. Wanchain uses ring signature and one-time accounts, ensuring that all transactions carried out on their platform are private and secure. The ring signature system is popular among privacy coins. It’s among the reasons behind the success of Monero.
Blockchain is entering a new phase of its existence. Enterprise adoption is set to dominate 2020 going forward. The technology still requires some fine-tuning before it is adopted by the masses. Luckily, developers are working round the clock to create solutions that will give users a centralized feel without centralized drawbacks.Interoperability has emerged as an essential in the road to mass blockchain adoption. Platforms such as Fusion, Cosmos, and Wanchain are setting the pace for the decentralized industry. As discussed, they all have their unique approach to interoperability; however, the goal remains largely the same. With their advancing systems, blockchain interoperability will succeed.