Interoperability and Its Role in the adoption of Blockchain Technology

Blockchain technology (which enables the use of cryptocurrencies, NFTs, and more) is a distributed ledger technology that allows users to record and keep track of transactions within the network.

Blockchain technology enables users to track any held assets, create new assets, and spend blockchain-based tokens.

Blockchain's distributed nature means no one entity is required to manage the network's operations. Instead, the blockchain is secured by a network of nodes or miners who validate and process transactions.

While blockchains have many capabilities, being able to communicate with each other is not one of them.

Currently, most blockchains work individually, and connecting them will help improve the technology's usability.

In addition, interoperability can improve the adoption of blockchain technology by enabling a blockchain to exchange data with other blockchains.

As a result, digital assets on one blockchain may be transferred to another, making it easier to use decentralized applications across multiple chains.

Every blockchain is a separate entity, so naturally, they can't interact with each other. For example, let's look at Ethereum and Tron's cases.

Given that they are both different, they can only interact with each other with an interoperability solution. 

If blockchains could work together, it would be much easier to interact with each other and exchange information. This could make the blockchain industry a much more efficient and much more competitive one.

It would also help people using blockchain-based platforms because it would be easier for them to access many platforms.

Since every blockchain has its native dapps (i.e., lending protocols, DEXs, etc.), users will likely switch between different networks to use these platforms.

Blockchain interoperability aims to enable the seamless transfer of assets between these networks. Developers can achieve one of the ways interoperability by creating versions of the same asset on multiple networks.

Next, a bridging solution can connect both chains, locking and releasing assets when needed.

Since interoperability solutions work via smart contracts, the process stays decentralized.

Therefore, developers must facilitate the connectivity of blockchains to acquire information from one another while maintaining decentralization.

Therefore, having connected blockchain ecosystems is preferable to having them apart. 

How investment into interoperability solutions will help in the implementation of this technology

The next-generation fail-safe multichain protocol t3rn, raised $6.5m in a strategic funding round led by Polychain Capital, the world's premier digital asset investment fund.

This strategic round also counted among its investors Blockchange, Lemniscap, D1 Ventures, Huobi Ventures, Figment Capital, Bware Labs, MEXC, Open Process Ventures, NetZero Capital, and an array of industry-leading angel investors, many of which are prominent founders.

"The future of Web3 is multichain," said Maciej Baj, Founder and Chief Technology Officer of t3rn. "This means that transactions across multiple blockchains can and should be as easy and safe as those on a single chain. t3rn supports this new paradigm in cross-chain programming. This strategic funding round supports the development of our innovative approach to blockchain interoperability."

"Interoperability between layer-1 blockchains and the applications built on top of them will help improve efficiency and liquidity across the ecosystem by reducing fractured liquidity pools and increasing composability across different execution environments," said Ben Perszyk, Partner at Polychain Capital. "t3rn is building an expressive protocol for generalizable function calls across different chains – an ambitious undertaking that will unlock new behaviors for crypto builders and users."

"It's one thing to say we need interoperability across blockchains and another to actually build it," said Ken Seiff, Managing Partner of Blockchange Ventures. "t3rn is actually doing it. They are enabling the future where smart contracts can actually execute across chains instead of being bounded by one chain or being forced to work across risky bridges."

Roderik van der Graaf, Founder and Managing Partner at Lemniscap said: "Considering the contours of today's multi-blockchain environment, the need for smart contract interoperability has never been more pronounced. At Lemniscap, we're particularly excited about driving the development of multichain solutions and cross-chain interoperability."

"As frontrunners in the space, t3rn is greatly extending the accessibility to multiple decentralized applications, enabling developers to seamlessly create cross-chain applications."

t3rn enables fail-safe smart contract interoperability, no matter how many different blockchains are involved, with the simplicity of an SDK. And unlike bridges, t3rn enables multi-step transactions to be composed across different chains under a single call.

Since its inception, t3rn has been supporting the development of the Polkadot ecosystem and has been part of the Substrate Builders Program.

The protocol is also announcing the completion of its second grant from the Web3 Foundation to further develop XBI – an innovative XCM-based standard for smart contract communication.

Jacob Kowalewski, Chief Strategy Officer at t3rn, said: "We are incredibly proud to not only have the support of some of the foremost investors in the space but also to be continually delivering on ambitious grants for the Web3 Foundation."

"In a time when multichain solutions are hindered by hacks and exploits, we at t3rn are committed to building a game-changing solution in a measured manner, and we look forward to becoming a pivotal part of a secure multichain world."

Why Interoperability Is Essential

The potential for blockchain technology to succeed can be boosted by enabling various blockchain networks to interact and share information. 

However, this is difficult owing to the inability to exchange data between multiple blockchains.

For instance, users cannot transfer assets from the Ethereum blockchain to the Binance Smart Chain without using a cross-chain bridge.

Bridges and other interoperability solutions enable users to transfer assets across multiple blockchains. One popular example is the stablecoin Tether (USDT) on Ethereum, TRON, and other blockchain networks.

Bridges work by having the asset on both blockchains. So, for example, let's say a user wants to send USDT from the Ethereum blockchain to TRON.

The ERC-20 token will be locked into the bridge, and an equal amount of the TRC-20 token will be released.

It looks something like this:

A user sends 150 USDT (ERC-20) to the TRON bridge.150 USDT (ERC-20) is locked into the bridge150 USDT (TRC-20) is released by the bridge to be used on TRON

Bridges work via smart contracts that automatically execute once the required conditions are met. So, users can move assets between blockchains without needing a centralized intermediary.

Connectivity between blockchains will make it simple for anyone to interact with protocols and decentralized applications (dapps) since they won't have to buy each network's native token.

Instead, they can use one token or asset across multiple networks via bridges.

Sidechains, Atomic Swaps, and Cross-chain Transfers

One way users can achieve blockchain interoperability is by developing a sidechain. Sidechains are independent blockchains that work alongside the main chain and are usually connected via a bridge.

The purpose of a sidechain is to process transactions for the main blockchain, which reduces the strain on the main chain. 

For example, the Ethereum blockchain used to suffer from congestion when too many transactions needed processing. When the network is congested, transaction times are slower, and fees are more expensive. 

The main blockchain can benefit greatly from having its transactions moved onto sidechains. This allows the main chain to deal with fewer transactions, preventing network congestion.

Interoperability also includes transferring tokens from one blockchain to another via token swaps.

Through atomic swaps, sometimes referred to as cross-chain swaps, it is possible to transfer tokens from one blockchain for tokens of a different blockchain without the involvement of a centralized authority.

The functionality of cross-chain swaps is dependent on smart contracts that can manage many types of tokens.

A transaction involving the exchange of tokens will be carried out automatically by smart contracts upon fulfilling certain conditions.

Users cannot implement atomic swaps on some blockchains without first establishing cross-chain bridges. Using these bridges makes it possible for users to transfer assets across separate blockchains.

Conclusion

Interoperability can help to increase the adoption of blockchain technology by simplifying the user experience for those who want to engage with protocols across multiple networks.

In addition, interoperability could give rise to more niche blockchains since users won't be locked into a single network when transacting.