Blockchain Interoperability

Interoperability is a characteristic of a product or system, whose interfaces are completely understood, to work with other products or systems, at present or in the future, in either implementation or access, without any restrictions. - Wikipedia

Imagine if you couldn’t connect to the Internet, but only be able to participate in local intranets with the people in your neighborhood and be forced to only enjoy very limited content and only the pleasant online company of your neighbor uncle Bob among few others instead of the entire world.

Or if every bank was operating each their own private payment network, which doesn’t anyhow communicate with the others, so you could only pay to merchants who chose your bank private network among the others.

Or if you couldn’t use or move your photos anywhere but on the device used to capture them. Not to your computer or the internet or a flash drive, not even slideshow them on your TV.

Interoperability and Blockchain

For some reason, however, the majority of the blockchain ecosystem decided to ignore the importance of interoperability and focus on pushing features and slightly altered versions of known protocols for years.

Leading to the “standard” applied:

One coin, one scripting language, one virtual machine, one network.

We have payment coins, privacy coins, smart contract platforms, masternode networks, a considerable amount of utility tokens and dogecoin. But each is serving its purpose in its own network, and therefore limited in terms of use, functionality, performance, participants, and scaling, and perhaps adoption?

Somewhere along the way, we decided that all those use-cases illustrated on the graphic below would work out without anyhow communicating in a scalable manner.

(Blockchain Digital Transformation | Source: 101 Blockchains)

Reaching mainstream for innovative technology such as blockchain would require it to function better or equal to the centralized networks. While not completely ignoring their key properties and functionalities which allowed them to reach their current levels of success and adoption.

In the past few years, a series of centralized and decentralized solutions such as hash locks, notaries, relays were introduced, but only found appliance in semi-decentralized exchanges still very limited in use and functionality mainly due to the different languages blockchains speak.

While interoperability is a cornerstone of blockchain future it comes second to scalability. Thus, a good interoperability model/platform is not sufficient development for mainstream adoption.

A few pioneers are already developing platforms and infrastructures for blockchain interoperability with very likeable infrastructures yet scalability remains a fear.

Exploring the landscape

A few, yet very well prepared projects are working on a more sophisticated solution for blockchain interoperability. Who will be the one to standardize interoperability and create a scalable internet of digitalized assets.

Cosmos

Cosmos is a decentralized ecosystem of independent blockchains.
The project raised 17.6M $ in early 2017 by selling the native currency ATOM in a crowd sale.

Cosmos utilizes the IBC (Inter-Blockchain Communication) protocol where each blockchain runs its own consensus and validator sets.
It uses hub & zone infrastructure for interoperability, where zones represent independent blockchains who can send transactions to other zones by routing through a hub. In Cosmos, anyone can build a zone or a hub — it has no strict rules of membership and they can all connect and exchange data.

Users can exit a to another Zone via the Hub. They submit a receipt (IBC Packet) that the Zone finalized the exit transaction over the IBC channel between the Zone and The Hub. The job of the hub is to make sure that any authority is exclusively held by the zone that submitted a proof and the zone has the authority to make the change. In the case of a simple token transfer, the Hub checks that the Zone had the right to transfer a token because of the balance the Hub maintains for the Zone contains the token and that the Token hasn’t already been sent to another zone.

A really serious shot in terms of interoperability, yet scaling appears problematic. One of the Tendermint pBFT consensus shortcomings is communication complexity, every validator has to communicate to reach consensus for every single block. A serious downside of it is that it cannot scale. Exceeding 200 validators on the network will exponentially drop its performance.

Pros:
- No strict rules of membership
- Live
Cons:
- Scaling

Polkadot

Polkadot empowers blockchain networks to work together under the protection of shared security.

Polkadot raised over 145M+ late 2017 selling the native currency DOT during a crowdsale. If Cosmos resembles an open network of hubs and zones, Polkadot is a single “relay chain” relaying parachains.

In the Polkadot Network, all the parachains are children of a parent chain called the Relay Chain, which maintains the global state for the parachains where each parachain has to pay for pooled security no matter of its size or needs.

Each parachain is essentially independent and can utilize any type of consensus algorithm, fee model, and others.

Any user can transfer data between parachains by getting collators to produce a block with the exit and getting a receipt of finality from the relay chain and presenting it to the corresponding chain. The contract between the state machines is specified by the respective developers. Developers will have to develop standards that enable the safe chain to chain interaction but potentially any interaction is possible.

Substrate appears better packed with a variety of out of the box modules and consensus algorithms to choose from. A decent project with an experienced team and a heavy war chest. On the negative side, apparently Polkadot has a 100 units limit on the hosted parachains and those 200 seats are to be acquired through a kind of bidding system. Both very limiting and possibly very expensive compared to open membership protocols.

Pros:
- Rich stack
- Off the box modules and consensus algorithms
Cons:
- Limited to 100 parachains at current estimates
- Expensive membership
- Not live

AVA

AVA is building an internet of interoperable and highly customizable blockchains and assets. The project utilizes a novel metastable consensus protocol called Avalanche. Avalanche is robust and its properties include quick finality(1–2s) and low latency; high throughput; scalability with no drop on performance.

AVA raised 6M $ in February 2019 in a private funding round and is yet to disclose details on an eventual crowd sale.
AVA is the third notable project which targets to tackle interoperability.

AVA is a “Heterogeneous Network” with multiple scripting languages and virtual machines natively supported on the platform and available to use as plug-ins. Meaning you could theoretically deploy Ethereum with all its current features and even add ring signatures, private smart contracts, zk proofs, etc. and most importantly scale.

The Ethereum hosted on AVA would still be able to host tokens, but also allow them to scale and be used without clogging the network.

Pros:
- Plug-in Infrastructure
- Off the box scalability
- Multiple VM and scripting languages support

Cons:
- Not live yet

Solving the blockchain scalability and interoperability will be the breaking point of crossing the chasm and opening the innovative trustless technology to the world. Standardizing cross operation between highly customizable digital assets is of the magnitude similar to the transition from intranets to the internet.

And remember…

Truly yours,
ANFawks