Overview
The blockchain had evolved from what it was known for or maybe, what the premier and first blockchain network (Bitcoin) initially portrayed it as. Bitcoin took off as a peer-to-peer blockchain network and as a potential solution to the sudden financial crash that hit major banking and global financial sectors at the time. But more than mining, having a capped (I.e., Limited) total supply, and decentralisation plus transparency at its core, is the evolutionary utility that revolutionised blockchain technology beyond the smoke screen on bitcoin blockchain technology.
The evolving utility of the blockchain from Ethereum in 2017 with the introduction of smart contracts, opened the gateway for more disruption and improvement which also includes interoperability, Layer 2s, and several hard forks among others. With the advent of over 200 blockchains and differences in gas fees, diversities in building atop each layer of the blockchain network, and the unending demand for users’ on-chain mobility from one blockchain to the other, comes the need for interoperability as a lasting solution.
Also read: Blockchain and Cybersecurity: A Powerful Duo
Importance of Blockchain Interoperability
Every active user of the blockchain for transactions beyond the confines of a crypto exchange and the conventional buy/sell knows the hassle they go through when interacting with one blockchain (I.e., how the need to get on another comes with tons of demand– gas fees, restarting the whole circle of transactions) and the time it takes.
Blockchain interoperability introduces expanded use cases plus flexibility, allows more liquidity plus market efficiency, and upscales scalability and network performance from between multiple chains. The growing demand for blockchain users (Either for NFTs, on-chain voting, decentralised finance, and liquidity provision) seems endless with the growing rate of crypto adoption, and the importance of blockchain interoperability is glaring. Blockchain interoperability enables the robustness of communities, developers, and cooperation within diverse protocols, thus fostering innovation and the sharing of ideas, resources, and functionalities.
Decentralisation and scalability top the list of the solution blockchain interoperability onboards. Reducing network congestion on a blockchain perhaps from staking or yield farming, achieving higher transaction throughputs, and spreading loads of data and transactions across other blockchains actualises scalability and decentralisation on-chain.
Core Aspects of Blockchain Interoperability
There are more interactions you can take advantage of with blockchain interoperability provided you are aware of these core features which makes their uses handy. Core features of blockchain interoperability include;
Cross-Chain Communication
DeFi users are familiar with several crypto bridges (Deployed in swapping tokens from one blockchain to the other or some other transactions) and wrapping of tokens like $BTC onto other blockchains. These are samples of cross-chain communication that prove blockchain interoperability. Cross-chain communication facilitates data exchange between different blockchains (E.g., from Binance Smart Chain to Ethereum) — which is achieved through atomic swaps, side-chains, and several crypto bridges.
This enables a seamless transfer of digital assets (Cryptos or NFTs) and data across blockchain Networks.
Smart Contracts Interaction
Open source is a fundamental attribute every blockchain must-have for its smart contracts to be able to seamlessly interact with other blockchains. Even though “Smart contracts” was coined in the 90s by an American computer scientist Nick Szabo, its development became fully introduced after Ethereum was launched with its EVM.
Smart contracts play a vital role in blockchain and remain a core aspect of blockchain interoperability.
3. Scalability, Security and Privacy
The continuous demand for on-chain transactions makes blockchain-based solutions evolve while the major issues being the existence of several non-scalable protocols and the majority prone to hacks and attacks. The ability to handle millions of transaction volumes and multiple on-chain activities with efficiency and the absence of vulnerability is an essential hallmark of interoperability between blockchains.
To prioritise security and users’ privacies, implementation of enhanced encryption, authentication mechanisms, and advanced management protocols over sensitive information is a core aspect that touts blockchain interoperability.
Conclusion
The increasing number of blockchain networks (Over 200 blockchains) is a further attestation and proof that interoperability is not only in great demand but increasing utility in the crypto space.
Unlike the earlier years of blockchain utility and crypto (With lags plus payment delays) and less user-targeted use cases (I.e., Games, entertainment, POAPs, etc.), blockchain interoperability has cut off the antiquated experience that has held it below its possibility that is untapped.
More developments and seamlessness in network connections are aiding inter-chain scalability, revolutionising users’ trading and transacting experience, and fostering crypto adoption on all levels.
Frequently Asked Questions
Will Blockchain Interoperability Lower Gas Fees?
Blockchain interoperability itself does not directly result in the elimination of gas fees. Gas fees are inherent to the underlying blockchain networks and are typically associated with the computational resources required to process and validate transactions.
What Are the Perks of Blockchain Interoperability?
There are a whole lot of benefits of blockchain interoperability. Some of these include combining features from different chains for enhanced functionality, improving scalability and transaction speed, fostering market competition and efficiency, enabling cross-chain collaboration, and also bridging blockchain with traditional systems for broader adoption.
Are There Risks with Blockchain Interoperability?
As an evolving feature of blockchain technology, blockchain interoperability has its risks. Some examples of these include security vulnerabilities and potential exploits. There are also associated risks with smart contract bugs and vulnerabilities, plus challenges in achieving consensus across multiple chains. Systemic risks, regulatory and compliance complexities, and lack of standardised interoperability protocols are also downsides of blockchain interoperability.