Some analysts predict that the blockchain sector will be worth more than $69 billion in the next six years. The total market capitalization of all cryptocurrencies is already over $2 trillion. Although blockchain and cryptocurrencies were formerly thought to be primarily for nerds and techies, things have evolved dramatically since then.
Governments, businesses, institutional investors, and individuals are becoming increasingly bullish about the blockchain space as it develops. We have the numbers we supplied to back up our claim.
However, it is fair to argue that both the industry and technology are in their infancy. There are a number of roadblocks in the way of blockchain’s broad adoption.
The lack of interoperability, also known as cross-chain compatibility, is one of the most significant difficulties that blockchain technology confronts today. So, what exactly is it, and what do we stand to gain from it?
The Fundamentals of Blockchain Interoperability
Many things are so frequent that our minds tend to overlook them. This is the case with interoperability, which applies to a wide range of technologies, not only blockchains. To begin, let’s look at some instances of things we’re all familiar with: cell phones, computers, and email.
If only two email platforms built on two distinct infrastructures were not compatible, emailing would be half as efficient and impactful as it is now.What if you couldn’t send an email from one Gmail account to another Outlook account? Emails would not have made it this far into the future, would they?
The same is true of computer and mobile operating systems. What if you couldn’t make a phone call from an iOS smartphone to an Android user? What if two users on Windows and macOS using Zoom couldn’t video call each other? What if it wasn’t feasible to transmit money from Google Pay on Android to Google Pay on iOS? Users would have had a terrible time if there had been no compatibility.
The Success of Blockchain Interoperability
Interoperability between cell phones and email is just as important today as it was in the beginning.The blockchain business is expanding, and a slew of promising blockchains are emerging, each claiming to be superior to the others. Despite this, they’re expanding at the same time since blockchains’ traditional architecture prevents them from communicating with one another.
As a result, blockchains are forced to operate in silos.Each blockchain network contains a unique collection of records and hosts a variety of applications. They employ various consensus methods and take a different approach to blockchain, resulting in fragmented ecosystems that aren’t ready to work together.
Every major blockchain, including Bitcoin and Ethereum, has its own system. However, thanks to technologies like the Harmony blockchain, these blockchain networks can now communicate with one another. Blockchain interoperability refers to the capacity of blockchain networks to communicate and share data with one another.
The question now is why do we require interoperability.
Interoperability Between Blockchains Is Required.
Satoshi Nakamoto built the first blockchain, Bitcoin, to provide consumers with financial transaction freedom who had previously relied on intermediaries. Since then, one of the main focus areas for most blockchain projects has been finance.
Then came Ethereum, which demonstrated that blockchain applications go far beyond monetary transactions. Blockchains have disrupted every major industry since Ethereum’s introduction six years ago, from supply chain to video games, real estate to healthcare, agriculture to entertainment.
Blockchain’s Expansion at a Rapid Speed
As blockchain’s adoption spreads across industries, there are a growing number of blockchains that are only focused on outperforming one another in terms of functionality. Greater scalability, faster block times, increased security, and so on will be among the features.
The Most Important Aspect of Interoperability
Even while these initiatives have superior functionality, they are missing one crucial point: without interoperability, blockchain adoption would be highly segmented and constrained.
Consider the world’s two most popular blockchain networks, Bitcoin and Ethereum. The first is for Bitcoin (BTC), the most extensively utilised cryptocurrency. The second hosts the greatest number of decentralised apps (dApps) and the majority of the billion-dollar decentralised finance (DeFi) ecosystem.
What Should I Do With My Money?
Users of the world’s largest cryptocurrency cannot spend their cash within the world’s largest DeFi ecosystem due to a lack of direct compatibility between Bitcoin and Ethereum. This provides a hurdle to DeFi and cryptocurrency adoption.
Users can’t even directly trade BTC for ETH without using a controlled cryptocurrency exchange. It’s also hard to move tokens like USDT straight from the Ethereum blockchain to another blockchain like Binance Smart Chain, even if both blockchains support USDT or another token individually.
The Blockchain Supply Chain
Another excellent example is the supply chain industry. The potential for blockchain to disrupt supply chain systems is enormous. This could apply to healthcare, food, aviation, luxury goods, or other industries’ supply chains. However, if blockchains are not interoperable, data transfer between them will be nearly impossible.
Companies would be unable to move from traditional infrastructure to blockchain technology as a result of this.When it comes to integrating blockchain into the traditional financial system, interoperability can be a nightmare.This is due to the fact that if two banks utilise different blockchains, their customers will be completely split off from one another.
Transacting between those two banks’ bank accounts would be either too difficult or impossible. This will result in a more fragmented system than the integrated structure that blockchain pioneers desire.This is why blockchains need to talk to one another.
Now we’re faced with a new problem… How can we make blockchains work together?
Solution for Blockchain Interoperability
We aren’t the first to raise concerns about blockchain technology’s compatibility issues. Since blockchain began to make inroads into key businesses, the matter has been extensively explored and argued. All of this has gotten us to where we are now in the blockchain environment.
There are several blockchain networks that provide interoperability solutions to other blockchain networks, rather than just one. Polkadot, Cosmos, and Harmony are some of the most well-known of these options.
Different Blockchain Networks Adopt Different Methodologies.
Polkadot and Cosmos take a similar strategy, establishing a separate ecosystem that can house many blockchains and allow them to connect with one another.
Bridges are one of the three main components of the Polkadot blockchain, allowing it to connect to other blockchains. Cosmos, on the other hand, enables interoperability through its inter-blockchain communication (IBC) protocol. However, there are many gaps in these networks’ construction that are causing them to lag behind.
Harmony, which has lately risen to prominence as one of the most dependable interoperability solutions, uses a somewhat different approach. The platform has been able to integrate Ethereum and Binance Smart Chain into its ecosystem successfully.
What is the Function of the Platform Bridge?
By installing smart contracts across all blockchains and allowing the same set of nodes to read and validate relevant transaction requests across all blockchains, the platform creates a bridge. This is a novel method because blockchains have their own unique nodes that can only validate transactions on one network.
What Are the Functions of the Nodes?
Crypto transactions requesting a cross-chain transfer between the bridged blockchain networks are monitored by these nodes. They authorise the transaction on the blockchain where the request originated and relay the information to the other blockchain once they identify a request.
The equal number of assets are then coined on the second chain.These features are gradually bringing blockchain closer to a future when blockchains may communicate with one another.
Interoperability on the Blockchain in the Future
Interoperability is essential for blockchains to achieve traction in the various industries they potentially disrupt.There’s a glimmer of hope that blockchain interoperability may become more seamless very soon.Not only will we be exchanging crypto assets between blockchains, but we’ll also be sharing other data like supply chain records, health records, and certificates.
Harmony’s vision is to offer the beauty of unwavering unanimity to a global audience of 10 billion people. Interoperability is the only way to achieve that ambition.