The Importance Of Blockchain Interoperability

VegaX Holdings
4 min readSep 12, 2021
Blocks to signify Blockchain.
The Importance Of Blockchain Interoperability — VegaX Holdings

Over the course of its relatively short existence, blockchain technology has developed into one of the most useful technologies since the invention of the internet. As more companies have been founded to work on furthering innovation in the blockchain space, the technology itself has progressed further beyond its original purpose as an avenue for Bitcoin transactions.

The technology is still in its early stages, and due to its relatively short lifespan, there are challenges that blockchain technology still faces. Blockchain interoperability is considered by most to be the next hurdle that the technology must overcome on the path to mass adoption.

Since the blockchain space has been expanding, more and more blockchains exist, but there is no standard that exists that can allow the blockchains to interact with each other.

What is Blockchain Interoperability?

Simply put, blockchain interoperability is the ability of two blockchains to transmit information to each other. Why is this important? Well, because different blockchain projects are focused on providing different services to users. So, what if someone wants to trade cryptocurrencies on one blockchain, but they want to use the lending and borrowing mechanisms on a different blockchain?

Unfortunately, because you cannot transmit information between different blockchains, the user must log in to each blockchain they wish to use separately. So, by implementing interoperability, users could not only save valuable time, but avoid the hassle of having to login to many different blockchains individually.

Why Is Blockchain Interoperability Important For Mass Adoption?

First, most people prefer things to be convenient. The lack of interoperability means that blockchain technology is not very convenient to use in its current state. There are so many different blockchains that it can be difficult to choose between them, but if different blockchains could connect to one another and share information, the whole process of using them could be much more convenient.

Second, providing a way for blockchains to share information with each other could strengthen the technology as a whole and allow users of different blockchains to share information and communicate with each other better. Over time, this would greatly benefit the blockchain space.

Third, technologies often need to develop more before they are able to convince a wider audience to use them. Here are some comparison scenarios to put the potential impact of blockchain interoperability on mass adoption in perspective.

Imagine if you couldn’t send an email from a gmail account to an outlook account? All businesses and individuals would have to be on the same email service to communicate and email certainly wouldn’t have become as widely used for social and business communication as it is today. Many people would have likely decided not to use email, especially if they were not able to communicate with everyone they needed to be connected with.

Or, imagine if you couldn’t send a text from an android phone to an iphone or vice versa. Today, texting is a daily occurrence for most people and the primary form of communication for many people, especially younger generations, but certainly texting wouldn’t have taken off the way it did if people could only text half of their contacts because the other half used a different type of phone. Mass adoption of new technologies is in many ways determined by their communication capabilities.

The Problems That Need To Be Solved For Blockchain Interoperability To Function Correctly

Interoperability is a term that means that different types of computer systems can exchange information, and this process has already been solved. However, in order for blockchain interoperability to work, an additional step is required involving transferring real-world assets and making sure there is consistency between different systems. This problem is more difficult to solve, although teams have been working on solutions for some time.

There is also a problem associated with currency and asset transfers from one blockchain to another, and this problem can be further divided into sub-categories: cross-chain transfers, cross-chain swaps, and cross-chain transactions with more than two parties. The challenges involved in solving this problem are:

  • Proving to a blockchain that someone holds an asset on another blockchain. Since the blockchains are separate, they must be convinced efficiently that the other blockchain contains assets, considering that one blockchain can’t “see” the other blockchain.
  • Identifying what the guarantees will be for a cross-chain protocol.
  • Designing efficient cross-chain protocols.

The difficulty comes with forming a bridge between different blockchains through a standard that blockchains can use to communicate with one another. First, the rules that make up the standard must be determined.

Blockchains like Cosmos and Polkadot are the closest developments towards a system of blockchain interoperability and have made some promising breakthroughs regarding solutions to the blockchain interoperability problems. However, more research and development is required in order to make true blockchain interoperability an easily implementable reality.

As always, please reach out to us with questions, comments, and suggestions!

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