The Importance Of Interoperability Within Blockchain

While still a relatively young system, blockchain has grown into an international phenomenon, with its impacts being seen in industries that touch on everything from finance to education. Yet, while blockchain continues to develop at record paces, with a prediction of $20 billion annual revenues by 2024, it does have some potential roadblocks to overcome.

Two of the main preventative factors that currently plague large blockchain systems are scalability and a lack of interoperability. Scalability is currently being overcome, with the turn towards proof-of-stake solutions providing comprehensive methods of overcoming low transaction speeds. Yet, possible solutions to blockchain’s interoperability problem are only just starting to come to light.

In this article, we’ll be taking a look at cross-chain interoperability, demonstrating why it’s so important for blockchain, and looking at potential solutions.

What is Interoperability?

Generally speaking, interoperability within business is the ability for one company or service to interact with another, even if they do not originate from the same point. When referring to blockchain, this is the act of one chain being able to communicate with another chain.

A great example of interoperable systems is email accounts. No matter which provider you use, you’re still able to send an email from a Gmail account to a Yahoo Mail account. This is an interoperable system, which helps significantly boost the utility of the service that it impacts.

Cross-chain technology is the set of tools that blockchain ecosystems use to send data from one chain to another. While interoperability is incredibly important for boosting usability, it is something that many major blockchains, like Ethereum and Bitcoin, struggle with.

Why is Interoperability Important?

Blockchain has taken the world by storm over the past few years, now permeating into almost every single major industry. While this advancement comes with increased funding and faster development, it has also meant that interoperability has become a central problem for developers.

While different blockchains are developing quickly, they are doing so independently, with interoperability being a second thought. This lack of communication between different blockchains restricts users of both systems, meaning that there is a certain difficulty when forming a direct link between these systems.

As blockchain gears itself up to become a fundamental pillar for systems like financial banking, interoperability is one of the most important issues that it currently faces. While the scalability issue was solved by the creation of proof-of-stake protocols, interoperability is a challenge that currently bears the most importance.

Without interoperability, we would be stuck in a system where one user couldn’t transfer money to another’s bank simply because they bank with a different system. This unsustainable practice has to be surmounted if blockchain wants to continue its expansion into dominating fields.

Advantages of Blockchain Interoperability

As blockchain becomes more interoperable, the amount that each chain can do will expand as the system draws from different sources. Typically, a movement towards interoperability results in:

• Boosted success of blockchain – With more utility, interoperable systems will ensure that blockchain can be successfully applied to a range of different fields. Overcoming critical problems of single-operation chains and furthering them with the established benefits of blockchain will see this system flourish.
• Data sharing – Creating pathways for different chains to communicate across will ensure that data is more easily passed within the blockchain. This will become an asset as blockchain expands into more fields, especially those that require the mass movement of data. This will provide blockchain access into industries like trade, healthcare, and more.
• Multi-token transactions – Without using a decentralized exchange, cross-chain pathways will open the doors towards multi-token transactions. This will increase the usability of blockchain and ensure that users have an easier time when navigating multiple protocols.
• Security – Cross-chain technology will allow major blockchain systems to integrate advanced security protocols into their daily operations. This can be done without drastically restructuring the blockchain itself, making this an excellent way of creating a safer and more secure system.
• Privacy – Interoperability affords blockchain an increased level of data protection. Especially within systems like healthcare, where confidentiality is vital, integrating privacy protocols through cross-chain technology will allow for expansion into new fields.
• Low costs – By linking chains together, they can process transactions at greater speeds, lowering gas fees as queues become a thing of the past.

Moving to an interoperable system has more benefits than solely these, with this interconnected ecosystem providing the perfect foundations upon which blockchain can continue to innovate and move into more fields. 

Cross-Chain Technology

Introducing new blockchains into an ecosystem through cross-chain technology can significantly help to boost what a chain can achieve. While some blockchains are excellent at particular tasks, like Ethereum’s fantastic set of developer tools, they pale in comparison to the functioning of other systems.

Continuing with Ethereum as an example, it has become the go-to blockchain for building dApps. Out of the 3,998 total dApps available right now, 2,945 of them are on Ethereum. But, due to low transactions per second figures for Ethereum, people using this blockchain also have to suffer through costly gas fees for using this service.

As there is a large queue of pending transactions on Ethereum, people have to pay a fee to push their action to the front of the queue, ensuring that it is recorded in the next block that is created. While Ethereum is notoriously suffering from this scalability issue, cross-chain technology could be the solution.

Whole blockchain ecosystems have sprung up that intend to boost the interoperability of other blockchains. One of these, Syscoin Platform (SYS), provides high throughput, with cross-chain access for tokenized assets allowing for interoperability without requiring atomic swaps or an intermediary. 

Solutions like Syscoin allow systems like Ethereum to link to other chains, boosting their scalability as they can then rely on features from blockchains that can process transactions more effectively. Avoiding some of the limitations that are often associated with cross-chain interoperability, Syscoin establishes a bi-direction bridge with Ethereum by using a dual-contract two-way peg.

Additionally, Syscoin is soon set to release NEVM (Network-Enhanced Virtual Machine), which, by using parallel processing, will allow projects to access much more processing power than just Ethereum. With more power comes the ability to launch more comprehensive programs with more significant calculations and simultaneous running of complex calculations. Equally, NEVM will allow all of this to be done at lower fees than Ethereum typically charges as a gas fee, using interoperable chains to bring parallel processing to these projects.

Moreover, Syscoin as a platform primarily consists of original source code from Bitcoin core, meaning that is it able to comply with Bitcoin’s proven security model, while also delivering a higher level of security to its interconnected chains. 

Using these integrated blockchain providers, Ethereum can then make use of chains that have better transactions per second rates, helping overcome their scalability issue and boost the effectiveness of their own chain.

Final Thoughts

Inventing creative solutions that provide blockchain systems with a higher degree of interoperability will lead to the whole ecosystem developing further utility. From solving central issues that plague some of the most successful blockchains to leading to further features developing, interoperability is one of the most important current goals for this system.

As solutions like Syscoin rise into popularity, we’ll begin to see blockchain rapidly expand into a number of industries. With a promising plan for future development, it’s no wonder that blockchain is predicted to be worth $163 billion U.S. dollars by 2027.