Internet Of Blockchains? Why You Should Care about Interoperability and How It Works

Upon the genesis of the computer, they seemed as if they were magic. They could perform complex computations in the blink of an eye while also storing data digitally. Although they were revolutionary for the time, computers were still lacking one key piece of functionality: interconnection. What was the use of having a computer perform computations and holding its digital data if that data could not be shared in the same digital medium. The internet and apps built on top of it connected all computers around the world and created the technological revolution of the early 21st century. An analogous situation has arisen today as a new technology is on the cusp of changing the world.

Bitcoin, Ethereum, Binance, Solana, and many more are all blockchains. They are analogous to the first computers because despite being incredible technological evolutions, they are limited by a lack of interconnection. Interconnection in the blockchain world is known as interoperability and refers to the ability of separate blockchain networks to exchange and leverage data between one another. Without being able to interoperate, blockchain technology is significantly limited.

Limited Data Mobility

Data stored on a private blockchain, a blockchain requiring permission to access, would forever be private even if the owners of the chain and data wish to share it to a public ledger. This can create problems if a company is being pressured to release information about their supply chain, but is unable to in a trustworthy manner because the data is trapped on their private blockchain.

Decreased Decentralization

Chains being isolated from one another inevitably lead to increased centralization. As certain chains become more popular over their counterparts, they will attract more funding and consequently more developers. Eventually, only a select few or even one chain will exist as the main player in the distributed ledger technology space. A company or individual that intends to utilize blockchain would be cornered into using the largest chains because the alternative is a small undeveloped and likely unreliable network. This puts an undesirable amount of trust in the largest blockchains as the arbiters of the technology to the masses.

Some may argue that the process described above of only the largest chains being used is a good thing because in a capitalist way, only the best blockchains will prevail. This thinking is partially correct, but it disregards the true issue with centralized authority. Suppose a bug was discovered in the most popular blockchain that allowed hackers to compromise the network. The entire blockchain user community would be affected and the reputation of the technology could be irreversibly tainted. Alternatively, if there were hundreds of chains that individually accounted for a fraction of the total users of blockchain, a failure of a single chain would be relatively inconsequential.

For an ecosystem with hundreds of chains to exist, they must be able to interoperate with each other. Users will not be forced to choose between one chain or the other because they can easily switch their assets between them. Blockchains will grow more evenly and allow for smaller, more niche chains to exist without being drowned out.

Decreased Specialization

The reason why so many blockchains currently exist is because they, for the most part, have unique purposes. Some chains focus on maximizing transactions per second or TPS while others specialize in smart contracts or decentralization. These features are typically mutually exclusive meaning that it is difficult to have a jack of all trades blockchain. Thus arises the most convincing argument for why interoperability is needed: the existence of chains that specialize in one function.

With interoperability, a user can flip flop between blockchains that fit their current needs. Functionality does not have to be compromised because of features that clash with each other.

Interoperability Projects

There are currently two main projects that have explicitly mentioned they are trying to solve the problem of lack of interoperability with blockchains: Cosmos and Polkadot. It is not essential to differentiate between the two because their process for connecting chains is almost identical.

Both projects claim to be layer zero blockchains because they are creating an infrastructure under the existing layer one chains that allow them to interoperate. To transfer an asset from one chain to another, both projects utilize something called a relay chain. This can be thought of as a central hub that connects blockchains to Polkadot and Cosmos. Out of this relay chain, there are many spokes that connect to various blockchains. This connection is aided by something called a Parachain (Polkadot) or Peg Zone (Cosmos) which serves the role of synching up the external blockchain with the central relay chain.

Other than supporting existing blockchains, both Polkadot and Cosmos enable the creation of new Peg Zones or Parachains which is the same as creating a layer 1 blockchain. In this way, new blockchains can be created and be interoperable from the start.

Conclusion

It is without a doubt that other so-called layer zero projects will emerge with promises to outdo its predecessor’s ability to connect blockchains. Regardless of which project is adopted the most, the aftermath of the success of interoperability will create growth and new uses of blockchain never before imagined to be possible.

References:

Kajpust, Dave. “Blockchain Interoperability: Cosmos vs. Polkadot.” Medium, Medium, 22 Aug. 2018, https://medium.com/@davekaj/blockchain-interoperability-cosmos-vs-polkadot-48097d54d2e2.

Ken Timsit, Cronos. “Blockchain Interoperability Is Essential to Avoid the Flaws of web2.” VentureBeat, VentureBeat, 3 May 2022, https://venturebeat.com/2022/05/03/blockchain-interoperability-is-essential-to-avoid-the-flaws-of-web2/#:~:text=Blockchain%20interoperability%20is%20not%20a,another%20and%20enable%20better%20collaboration.

“Why Is Interoperability Important for Blockchain?” Gemini, https://www.gemini.com/cryptopedia/why-is-interoperability-important-for-blockchain#section-benefits-of-blockchain-interoperability.