DAR Publishes In-Depth Report on Interoperability Projects
“Blockchain interoperability” is a phrase used to describe the ability to transfer information from one blockchain to another. Today, there are hundreds of blockchain networks entirely disconnected from each other, which creates inefficiencies.
You are reading this article on Medium. Imagine having to switch your network connection if you now want to share it on Twitter. Neither service benefits from the other as their communities are siloed, and Medium might waste resources if it built its own version of Twitter and vice-versa. This is the state of blockchain networks today, where this lack of communication makes it difficult for the technology to truly scale, specialize and become more user friendly.
We believe this problem will be solved soon. Much has been written about the potential for interoperability solutions to the scalability, fungibility, governance and applicability of digital assets. This was a hot topic last year and now, blockchain interoperability projects are collectively valued close to $4B USD based on the aggregate value of their networks. This collective network value is indicative of the interest the community has in the topic.
Interoperability is interesting because it can also improve market efficiency. We are confident that some of the interoperability technologies under development will be deployed this year. This will essentially enable existing projects to outsource core functionalities in their platforms to highly specialized tokens. If, for example, a decentralized application requires a stable token or a privacy token for payments within its app, it can outsource that aspect of the protocol through an interoperability service, rather than having to develop its own set of sub-tokens. This enables the party outsourcing the service to test the various technologies available in the market today.
We spent an extensive amount of time reviewing eleven different projects, including Polkadot, Aion, ICON, Cosmos, Wanchain and Metronome. It is clear that certain projects are much closer to enabling cross-chain interoperability than others, as some have little technology to show at this point. Still, the highly technical nature of this subject deceives many investors, and we expect some highly capitalized projects tackling this issue to lose market share.
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