Interoperability Protocols – The Current Landscape

A close look at the Blockchain space reveals a series of blockchain projects that operate largely in distinct silos. The reality is that blockchain technology is yet to realise widespread real-world adoption, however as we accelerate towards maturity a key infrastructure level requirement will be the ability for information to be transmitted in real time from blockchain to blockchain and even off-blockchain to old world systems. Anecdotally we need to look only as far as the internet to conceive the value that interconnectivity can generate.

The main methods of interoperating at current, allowing the transfer of value and data, uses tools such as oracles or central exchanges. These require some level of trust, ceding that there can be central points of failure. Though cumbersome these options at least allow us the ability to freely use different chains and trade value. This though does not truly align with the principles of a trustless ecosystem and the problem remains, how do we create a trustless transfer of value and data between these distinct silos?

In September 2017 the space was introduced to the idea of “Atomic Swaps”. This was perhaps the first introduction of interoperability without ceding trust to a 3rd party. They essentially worked through hash time locked smart contracts, where the parties involved must send the currency to be swapped to the smart contract within a specific time. This essentially allows the platform to act as an escrow service and not a potentially fallible third party. The pitfall here is that there has to be a 2nd party to execute the action and was only compatible with certain chains.

With the advent of Atomic Swaps and growing number of chains, the need for interoperability becomes more apparent, with protocols taking on the challenge to solve for the barriers in a trustless manner. Technologies focused around interoperability can be summarized as:

  1. Notary Schemes
  2. Relaychain and Parachains
  3. Cross-Chain Hash Locking
  4. Multichain Weaving

For details on these technologies please refer to the Methods of Interoperability Infographic.

The below table helps illustrate the current landscape by looking at which projects are utilising technologies as described above. It also further seeks to clarify  the nuances to interoperability technologies in their aim of achieving connectivity. These nuances can be broken down as follows:

  1. Instruments of interoperability
    • Value transfer
    • Access to Data – Knowing the states of member chains – i.e. Proving data relative to another network, effectively allowing smart contracts and applications to leverage this “knowing”.
      • Full state of member chains as part of the protocol’s data (Trustless & immutable)
      • Verifying the state based on verification by a validator (Trust required based on validator verification)
  2. Methods of interoperability
    • Centralised hubs
    • Validator based (Verification via Validators, 3rd party)
    • Work based (Verification does not require validators)
  3. Limitations of interoperability
    • Conditional requirement to participate – i.e. requires smart contract or requires change to core protocol
  4. Additional unique features offered by some projects to member chains who participate in their network:
    • Scalability and Shared Security – though this is not a core requirement of interoperability, as this should be the domain of member chains themselves, it should be acknowledged that Polkadot and Cosmos to a lesser extent are providing this service.

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