Blockchain interoperability: In a nutshell
The term “blockchain interoperability” refers to the capacity of multiple blockchain networks to share and exchange data and move different forms of digital assets between their separate blockchains. Once diverse blockchain networks and assets are connected and merged in an interoperable system, they can readily plug into and combine.
This network interoperability might pave the way for developing innovative new goods and services that combine the advantages of many blockchain networks.
Let’s look at the notion of blockchain interoperability in more detail.
An introduction to blockchain interoperability
The phrase “blockchain interoperability” comprises two words: blockchain and interoperability. Where blockchain is defined as a method of storing data so that it is difficult or impossible to alter, hack, or deceive it.
Let’s check what does interoperability mean and what does it imply?
Interoperability may be described as the capacity to perform many operations of the same type. The mechanism of functions between two or more blockchains is termed blockchain interoperability. In layman’s terms, it is the mechanism that allows two or more blockchains to communicate.
Blockchain interoperability may be described as the capacity to see, access, and exchange data across several blockchains or blockchain networks. Interoperability is something that many blockchain initiatives aspire to incorporate to make their processes more accessible and more transparent. In addition, putting this mechanism in place will boost the communication pace of their blockchains.
Different types of data and transactions are stored on each blockchain. Interoperability allows blockchains to share and access data while also communicating with one another. Blockchain interoperability refers to the capacity for blockchains to share and communicate with one another.
Significance of blockchain interoperability
The ability of multiple blockchain networks to communicate and integrate will determine the success of blockchain technology. As a result, blockchain interoperability refers to various blockchains sharing to facilitate information exchange.
The potential to see and access the data across many blockchain systems is known as interoperability. For example, if someone sends data to another blockchain, shouldn’t the receiver be able to read, interpret, and react to it with minimal effort? However, this is currently impossible because information cannot be transferred across the Bitcoin and Ethereum blockchains.
This is addressed by cross-chain technology, which aims to improve interoperability across blockchains. As they attempt to establish platforms that allow users to communicate with one another without using a third party, emerging initiatives are progressively adopting the notion.
Interoperability on the blockchain should help eliminate the need for intermediaries or third parties associated with centralized systems. Furthermore, multiple decentralized networks’ ability to communicate with one another without the necessity of intermediaries should assist in the development of genuinely decentralized systems.
But why is that?
Interoperability of blockchains is critical since it will make it easier for individuals to transact on other blockchains seamlessly. You can only interact on one blockchain at a time, which is either Bitcoin or Ethereum. It is, however, impossible to transmit data across two separate chains.
Because of the interoperability of blockchains, a variety of functionalities should emerge. For example, users will be able to make payments across several blockchains. In the future, a fully functional blockchain interoperability venture should be at the center of the digital economy.
Due to the emergence of multi-token wallet systems. Users will be able to rely on a single wallet system for token storage and transfer across several blockchains due to this breakthrough.
Advantages of blockchain interoperability
Following are the advantages of blockchain interoperability that you should consider.
- Customized Web3 services
The flexibility of blockchain protocols and apps to mix and match different “lego pieces” is critical to developing new Web3 instruments and platforms that aren’t conceivable with legacy industries and business models from the Web2 era.
Many experts believe that interoperable smart contracts have the potential to transform sectors such as healthcare, law, and real estate by allowing essential business data to be transmitted back and forth across private and public networks in a configurable and controllable manner.
Multi-token transactions and wallet systems may be enabled through blockchain interoperability in the future, dramatically simplifying the crypto user experience.
- A highly decentralized ecosystem
While many blockchain initiatives prioritize pure decentralization inside individual blockchain networks, the capacity to develop network interoperability between various blockchains is an even more progressive realization of blockchain technology’s promise to decentralize institutions and economies.
Thousands of application-specific blockchains might one day connect through a decentralized primary hub rather than one blockchain like Ethereum processing all transactions for thousands of decentralized apps (dApps).
- Improved cross-industry collaboration
The significant benefits of blockchain technology are data openness and verifiability, smart contract execution, and decentralized consensus, which have a wide range of industry-specific applications.
Independent marketplaces and business applications that were previously deemed wholly distinct will be able to more readily transfer data and value if blockchains utilized by different companies and industries can connect.
This implies that enterprises and communities that don’t usually connect will be able to share information, use one another’s strengths, and promote creativity more quickly and efficiently.
Disadvantages of blockchain interoperability
Following are the disadvantages of blockchain interoperability.
- The reverse flow of blockchain is not viable.
A blockchain that has been registered on a network is unable to return to its original place. As a result, validating the information before submitting a beginning node is critical.
- Interoperability between two networks is not possible.
Interoperability across blockchains within the same network is presently possible. However, Ethereum and Ripple, for example, cannot communicate with one another. This flaw must be addressed soon to ensure a bright future for blockchain interoperability worldwide.
- Highly restricted
The interoperability of blockchains is a highly constrained procedure. Though this function protects data security when sending data, it may also make things more difficult for users.
Interoperability is required for blockchain to attain widespread acceptance across multiple industries. More than just moving crypto assets between blockchains necessitates interoperability. However, it must now make it easier to share other types of data, such as financial records, supply chain records, certifications, etc. Cross-chain solutions are still in the early stages of development, but they are a promising indicator of a future with improved blockchain interoperability options. As diverse blockchain protocols and IT behemoths envisage the route to blockchain disruption through interoperability, optimism reigns supreme.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.