Interoperability is essential in achieving better use cases for blockchain across enterprise and consumer markets
Cross-chain functionality allows for the seamless movement of digital assets and smart contracts — a major selling factor when promoting any technology for mass adoption
The blockchain market has been estimated to reach USD 57.6 billion globally by 2025, a CAGR of 69.4% from 2019. The rapid growth is expected to be a result of the numerous use cases and benefits derived from decentralized technology. From disrupting the financial sector to facilitating seamless business operations, these technologies are increasingly becoming impactful in business operations globally.
Blockchain projects already have the attention of institutional investors
A big part of this growth will involve platforms that deal with enterprises and government sectors, with a highlight on the FinTech sector. Data from institutional investors are encouraging, too, as the industry is now getting much-needed capital to grow their technology and operations.
Before we reach a tipping point toward larger-scale mass adoption, however, it is important to address some of the obstacles the industry is facing. One of the major concerns is the fact that many blockchain platforms are seriously lacking when it comes to interoperability. This is particularly evident between public and permissioned blockchains — the latter being the preferred blockchain type in the enterprise setting.
Interoperability as a paradigm shift toward seamless transactions
The idea of interoperability was introduced not long ago and was actually presented as the paradigm shift that could redefine how blockchain platforms and businesses interact with one another. A 2019 paper from the Institute of Electrical and Electronics Engineers (IEEE) was among the major voices endorsing this new move.
The concept would usher in new levels of interactions between blockchains and among blockchain companies. Cross-chain communication and development would allow for faster processing of digital assets, which is key for to gaining wider utilization and acceptance of blockchain technology. Interoperability reduces transactional friction and inefficiency, which benefits both end-users and platform developers.
Interoperability allows for real-time cross-chain liquidation, data sharing, and certification. Picture a blockchain ecosystem wherein these processes can take place without the need for much intervention. Cross-chain functionality allows for the seamless movement of digital assets and smart contracts, for example, which is a major selling factor when promoting any technology for mass adoption.
What do experts think about interoperability?
With the various different blockchain platforms and protocols, there needs to be a framework in place to ensure effective communication across the different chains. While there are different ways to facilitate the smooth operation across blockchain infrastructure, interoperability still remains very vital. Otherwise, lack of interoperability will result in limited real-world use cases, as well as usability concerns — which would discourage people from better utilizing these platforms.
While in conversation with experts from the blockchain industry in Asia, we all came to the agreement that interoperability across blockchains is essential to making sure that scalability and security are tangible realities in relevant use cases.
One potential benefit of interoperability is in FinTech. There is a need for a link across public and private chains — especially where interbank settlements are concerned. Eric Gu, Founder, and CEO at Metaverse, highlighted that while financial institutions may find the need to operate private chains to ensure the privacy of proprietary data or transactions, there needs to be trust and consensus, which can be achieved through the public chain.
“Interoperability is essential for ensuring consensus in such scenarios. Such processes require auditing and supervision from external parties — for the sake of trust, security, and transparency — and also plays a part in corroborating companies’ internal audits. Such information would need to be placed on a public chain for ease of access.”
Aidaa Wong, CEO, and Co-Founder of Luxchain, pressed on the economic benefits that could come with bringing alliance and public chains together:
“The major conveniences that could come about? Increased speed and boosted security.”
KYC was an example she used to highlight this possibility, which is prevalent in the FinTech industry. She cites how interoperability across different chains will make things more efficient. “Interoperability would do away with the repetitive process of filling in details for KYC for every blockchain platform and will allow for this necessary data to be shared when needed — obviously within the confines of data protection and safety,” Wong adds.
Generally speaking, alliance chains can be used as a means for enterprises to use public blockchains for transactions, while still retaining their private chains for their own needs.
In this case, the public blockchain will come in handy with regard to certification and providing the relevant nodes and security technology for this to happen, ensuring transparency and safety in transactions.
One factor with many public blockchains is the need for a significant number of nodes in a network to maintain strong consensus mechanisms. This serves as a challenge when it comes to high-speed transactions, especially when it involves large amounts of data, and particularly when it is proprietary or when privacy is necessary.
In such a scenario, private blockchains would provide the high performance and speeds necessary for real-use case scenarios among enterprises and other businesses that require such capability.
Wong adds that for enterprise applications to work, there needs to be a framework that includes both the privacy of data for businesses, as well as security through transparency via public blockchains. “It would be beneficial to combine the security of the public chain with the speed of the alliance chain to create a combination that is altogether a better way forward for blockchain technology,” says Wong.
A balance of security, performance and usability
Li Ning, former Technical Director of Alipay‘s Blockchain team added:
“Building interoperability between various blockchains allows for the laser focus on specific needs as a solution that can balance security, performance, and usability.”
Blockchain technology offers many use cases that are transformative and disruptive in nature — with leading examples in FinTech and asset digitization. Interoperability between private and public blockchains will particularly benefit the digitization and authentication of these assets.
Asset digitization is very important as it allows for a much more efficient and transparent way to record all transactions pertaining to the real-world asset — such as when the asset is bought or sold throughout its lifetime. Asset digitization will play a pivotal role in disrupting areas like supply chain, payments platforms, and tracking asset pricing — these also stand to benefit from a strong interoperable network of blockchains.
Decentralized technologies provide a paradigm shift in the way technology affects daily living. As applications in finance, enterprise, and other areas become more prevalent, it will be important to focus on how such decentralized tech can have more meaningful use cases in real-world applications.
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Eric Gu is the founder of Metaverse Public Blockchain, CEO of Viewfin Corp, and RightBTC, also an angel investor in FinTech. Worked as a programmer in Ministry of Finance (Revenue Government services) of Government Ontario in Toronto, Canada for 13 years, gained a solid technical background and financial knowledge; Devoted into Bitcoin/Blockchain industry since 2013. Founded Viewfin Corp. early 2014, Metaverse Public Blockchain summer 2016, and rightbtc.com, also early investor of Mastercoin, Bitshares, Ethereum, Neo, Tron, Cardano, Binance AION and Polymath.
Aidaa Wong is a serial entrepreneur in the AI and blockchain sectors. She is also the co-founder of LUXCHAIN, a blockchain platform for personal luxury goods. Wong co-founded LUXSENS, which is a big data and artificial intelligence (AI) tech company for personal luxury goods. The company has also obtained government and VC funding. It created the world‘s first AI driven index (The Luxsens Global Luxury Index) that analyzes millions of personal luxury goods from different sales channels worldwide. It estimates the selling price and market trends for new and second-hand personal luxury products. By using the luxury index, sellers will know how much they can charge, and buyers will be able to recognize good deals worldwide.
Ning Li, former technical director of blockchain techniques at Ant Financial, was in charge of designing and developing the blockchain platform, and led the team acquiring more than 30 blockchain-related patents. He engaged in internet businesses for over 11 years, acquired lots of R&D and management experience with HPC, OS core components, scheduling of resources for OS and other fields.
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