Top 5 Interoperability Solutions

Top 5 Interoperability Solutions

A considerable amount of resources are being expended to solve blockchain interoperability. That is the ability to communicate securely across independent blockchain networks. Innovators believe that interoperability will enable blockchain to lead other industries into the Web 3 era. It will make cross-chain transactions more user-friendly, improve smart contract utility and break down barriers preventing project collaboration. Achieving this will help the technology take one more step toward its decentralized aims. So why did it become such a problem in the first place?

The Path to Interoperability

For blockchain networks, scaling is an essential consideration. Their capacity is measured in transactions per second (tps). Industry leaders Bitcoin and Ethereum acted slowly to increase their capacity, allowing many competitors to flourish. An incredible amount of innovation has taken place on these alternatives, but none of them can properly communicate with each other. Tribalism arose in the form of excessive competition between different platforms. Eventually we began breaking down the barriers as it was clear interoperability was vital to the ecosystem's success. New projects have the advantage of being able to plan interoperability from the start. Many established blockchains must now decide how they will join the collective of interconnected chains themselves.

Top 5 Interoperability Solutions

There are several approaches to achieving blockchain interoperability. Still, they all share one common goal: creating an internet of blockchains where they can work together without compromising on security or efficiency. So what are the top five interoperability solutions?

1. Interoperability by Design: Some projects thoughtfully implemented cross-chain mechanisms into their concept very early. They act as a base layer to other technically compliant blockchains launched around them. This approach allows for a virtually infinite degree of scaling potential. Lisk provides this sidechain-focused model. With Lisk's Sidechain Development Kit, you can quickly launch additional blockchains to scale capacity as needed. Other examples include Polkadot, with its parachain architecture.

2. Cross-chain bridges: Bridges have become very popular in the last few years but have introduced new attack surfaces and centralization. A smart contract can be used to lock an asset on one chain and mint a "wrapped" replacement on a bridged chain. The wrapped token is then transferable on the bridged chain. This helps facilitate decentralized exchange and finance use cases. Popular Bridges include Binance Smart Chain, Tezos Wrap Protocol and Solana Wormhole.

3. Sidechains: These are entirely independent Blockchains that communicate directly through a two-way peg. This peg allow for tokens to be transferred between the parent blockchain and sidechain. They have a complete consensus mechanism such as Delegated Proof-of-Stake and are responsible for their own security. They can also completely isolate their dApp and operate without disruption if there are issues with an interconnected chain.

4. Oracles: Oracles provide knowledge between on-chain and off-chain environments. Decentralized oracle services like Chainlink gain consensus on off-chain data and then offer it to dApps. This is crucial in helping isolated blockchain networks acquire a single source of truth. Many use cases rely on this stream of data. Exchange rate information is the most common use but other types include verifiable random numbers and public API data.

5. Atomic Swaps: Hashed Timelock Contracts are used for atomic swaps, which enable two-way peer-to-peer decentralized trading. They enforce predefined conditions governing the success of a transaction, thereby ensuring that both sides fulfill their obligations before the trade can be completed. Although they can be executed without any intermediary, a decentralized exchange will help swappers find each other.

   Honorable Mention - Parachains: Parachains rely on a relay chain for security but are essentially their own protocol otherwise. They have rules and governance and are interoperable with other Parachains. They helps reduce costs to use services inside the ecosystem. Layer two solutions can also be built on top of them.