Despite the promise of decentralised systems, many blockchains operate in isolation, creating significant challenges for users and developers. Blockchains have unique architectures, consensus mechanisms, and data formats. There is also no universal protocol for communication between blockchains – which can lead to fragmentation, and ultimately a lack of blockchain interoperability.
These were some of the issues raised at a panel discussion at the 2024 London Blockchain Conference. Becky Ligero (CoinGeek Reporter) moderated the discussion with Clem Chambers (CEO of Online Blockchain), Irina Benfrid (B2B Partnerships Lead at Rubic Finance), Ty Everett (CEO of Project Babbage), and Evelyn Nomayo (PhD Researcher at Trinity College).
Watch their discussion on key interoperability blockchain challenges
What is interoperability in blockchain?
When we talk about blockchain interoperability, we refer to the capabilities that different networks have to seamlessly exchange data, communicate, and transfer assets among themselves. With the rapid growth of blockchain solutions, interoperability in blockchain is becoming a greater focus for developers looking to avoid fragmentation, while also increasing blockchain adoption and proving robust use cases. robust use cases.
Why is blockchain interoperability so challenging?
The panel began by addressing why interoperability in blockchain is difficult to achieve. This is not surprising, with blockchain interoperability involving various blockchain networks interacting and communicating seamlessly across multiple chains.
Chambers attributed the issue to fragmentation – currently, numerous developers are creating unique standards and tokens in pursuit of superior solutions. This competitive landscape has led to a lack of coordination between blockchains, thus affecting blockchain interoperability.
Similarly, Benfrid pointed out that the influx of diverse entities into the blockchain space, each with their own goals and priorities, has compounded the fragmentation. She highlighted that blockchains are often tailored for specific use cases, which necessitates the development of mechanisms to bridge them.
Everett, bringing a developer’s perspective, emphasised the importance of standardising developer tools as a step towards introducing interoperability in blockchain. Without such standards, developers are forced to rebuild applications for each blockchain from scratch, which makes for an inefficient process.
While he advocated for a single-chain solution, such as the BSV blockchain (known for its low fees and scalability), he acknowledged the coexistence of multiple blockchains as the current reality.
Types of interoperable blockchain solutions
Currently, there are several ways interoperability in blockchain is being utilised. These include:
- Cross-chain bridges – Blockchain protocols allow for the movement of data and tokens across chains.
- Cross-chain messaging – In a similar vein, certain interoperability blockchain protocols enable secure messaging alongside the transfer of tokens.
- Inter‑blockchain communication – Another solution for transferring assets and data across chains in a secure, decentralised way through a standardised messaging protocol.
- Atopic swaps – This solution bypasses intermediaries through the use of time-locked contracts, providing peer-to-peer trading between different blockchains.
- Relay‑chain architectures – Certain relay chain and messaging protocols are already creating a blend of interoperability and security.
- Sidechains and layer‑2s – Additional networks working alongside the main blockchain networks to offload some of the transactions.
Blockchain interoperability use cases
The panellists also explored several real-world use cases for blockchain interoperability, including:
- Cross-chain asset transfers: Users can utilise interoperability in blockchain to transfer digital assets between blockchains and leverage specific advantages, such as lower transaction fees or faster processing times, while retaining access to their original assets.
- Payments and everyday transactions: Blockchain interoperability allows for using digital assets to make various everyday purchases, such as buying a product from a vending machine. By enabling efficient and cost-effective transactions regardless of the type of asset, interoperability in blockchain can make payments more practical and widespread.
- Interbank settlements: Interoperable blockchains facilitate seamless communication between banks using different protocols, thus reducing delays and enhancing financial efficiency.
- Smart cities and public safety: Interoperability is vital in smart cities, where various systems, such as traffic management and emergency response, must work together. For instance, integrating these systems by harnessing the potential of interoperable blockchain solutions can lead to faster incident responses.
Benefits of blockchain interoperability
There are tangible benefits of introducing interoperability in blockchain on a wider scale, such as:
- Better user experience and improved liquidity: By doing away with the need to switch between interfaces to access each chain, developers can enable users to transfer their assets more freely from one application to another.
- Scalability through specialisation: Using chains specialised for a particular purpose, whether that’s privacy, governance, or speed, allows developers to achieve blockchain interoperability, which can sustain decentralisation and assist with scaling.
- Platform flexibility: Having modular integration between chains (both public and private) means greater security, but also greater flexibility for organisations when it comes to choosing a platform.
Security and interoperability: blockchain’s benefit duo
Arguably, the biggest benefit of greater interoperability in blockchain is increased security. Benfrid stressed the importance of rigorous security measures, sharing how her project survived two hacking attempts. She emphasised the need for regular audits and robust protections to build user trust.
Chambers, meanwhile, described the overall security landscape as a “nightmare”, pointing out that current systems are too complex and risky, particularly for those holding large sums. While Everett proposed solutions like split key architecture and threshold signatures, Chambers argued that these approaches remain impractical for most users.
Increasing blockchain operability, on the other hand, can be a great way to bridge the security gap by taking some of the complexity out of verification processes and ensuring systems can better communicate with each other.
Challenges of interoperability blockchain
Of course, blockchain interoperability is not without its challenges – both when introducing it across solutions, and in terms of the trade-off organisations are sometimes faced with as a result.
Lack of standardisation – As highlighted in the panel, there are still gaps when it comes to having standardised protocols which enable interoperability in blockchain. This means integrating multiple projects is still more complex and slower than would be ideal.
Complexity of scale – While interoperable blockchain solutions can allow for more sustained growth, maintaining various layers, bridges, and messaging channels can affect network performance as they scale.
Privacy and security concerns – Without specifically embedded privacy safeguards, cross-chain messaging runs the risk of exposing sensitive information; in fact, cross-chain bridges have historically been frequently targeted.
Scalability and innovation in interoperability blockchain solutions
The scalability of interoperable blockchain solutions also sparked debate. Chambers argued that scalability will naturally improve as demand grows, citing historical advancements in technology, such as increases in hard drive storage capacity. However, he acknowledged that the blockchain industry currently lacks innovative applications that could drive such demand.
Everett, who was also on board with the need for innovation, highlighted the advantages of the BSV blockchain, including its ability to handle high transaction volumes at low costs. He also stressed the importance of unified standards to simplify development and promote blockchain interoperability and innovation.
Nomayo, an expert on latency issues, focused on how different consensus protocols contribute to delays in interoperable blockchain development. She proposed federated learning (a decentralised approach to training data) as a solution for predicting and reducing latency while preserving privacy.
The future of blockchain interoperability
More than simply the next technological leap in the industry, blockchain interoperability is building those all-important connections that enable multiple chains to work seamlessly together.
Users, organisations, and developers alike can benefit from the flexibility, scalability, and potential for innovation that interoperability in blockchain offers, especially when backed by robust standards, expert design, and tight security.
Learn more about blockchain interoperability and gain a deeper understanding of blockchain technology by attending our next conference – register now.
