What is blockchain interoperability?

More than ten years since the launch of Bitcoin, new layer-1 chains continue launching with their unique ways of addressing the Blockchain trilemma. It has become increasingly clear that the future doesn’t belong to just one ecosystem but that we’ll live in a Multichain future, where each chain has a different focus and fills a separate niche.

Interestingly, we live in a time when various Layer-1 protocols have announced a shift toward app-chain models, introducing more chains into the ecosystem.

This then raises the question of how all these chains can communicate, or put otherwise, the question of blockchain interoperability.

What is blockchain interoperability?

In very simple terms, blockchain interoperability describes the ability of different native blockchains to interact with each other. Each team makes different design choices regarding consensus, smart contract languages, and other things in a world of multiple chains. This leads to difficulties in interacting between chains.

If you think of blockchains similar to countries, you could consider interoperability the question of speaking a shared language. Assuming English is the only language you speak when faced with someone who knows nothing but Japanese, you’ll have trouble communicating even without considering your cultural background. That’s the state of blockchain interoperability when chains aren’t interoperable.

Each blockchain could communicate and share data with other chains with true interoperability. In an ideal scenario, users would have complete freedom over moving their assets between chains, and it would be as easy as switching a tab in a browser.

Why does interoperability matter?

As mentioned above, the main reason it matters is the existence of multiple ecosystems, each with a raison-d’etre. While there’s no way of knowing if the currently dominant ecosystems will remain so in the future, interoperability is crucial in any multichain world.

Fragmentation and incompatible chains create an experience full of friction for users and hinder the idea of the Open Web, where users can take their data and assets wherever they want. Whenever two parties interact on the same chain, things are easy. As soon as it’s different chains, things get more complicated. Moving your funds from NEAR to Astar using a bridge, for instance, is quite complex, involving various steps going via EVM. Additionally, fragmented ecosystems also reduce composability.

While Astar has developed a solution to empower dApp builders through dApp staking, other developers building outside can’t tap into that functionality as long as interoperability isn’t given.

It’s also worth mentioning that current solutions like bridges (more on them below) tend to add complexity and smart contract risks. Unsurprisingly, the top 5 DeFi hacks all involved bridge protocols. With better ways for chains to interact, bridges might become a thing of the past or change their form significantly.

Interoperability matters as a fundamental building block for a decentralized web that powers seamless, interconnected experiences. While the paradigm in web2 has been competition, web3 networks benefit from interconnectedness, thanks to network effects.

Benefits of Blockchain Interoperability

Interoperability between chains offers an array of benefits, including:

• Customizable web3 services: With composability across chains, builders will be able to create services that weren’t possible in legacy systems. Interoperable smart contracts could find use in industries such as health care and law by enabling parties to share information while seamlessly switching between public and private environments. Combining strengths of different chains will empower new use cases, and some are already playing out, such as combining the storage protocol arweave with an NFT on a native blockchain and then rendering the data via a decentralized Front-end hosted on a third chain. (Did you know Astar Portal also exists as a decentralized Front-end on ICP?)
• Decentralization: Truly interoperable ecosystems could create decentralized hubs that facilitate communication between hundreds or thousands of chains.
• Cross-industry collaboration: Interoperability enables teams to collaborate instead of competing by reducing silos and playing into each other's
• strengths.
• Unrestricted flow of data and assets: with interoperable systems, value, and information aren’t restricted to one ecosystem anymore but can move seamlessly.
• Scalability: as of now, services are limited by the underlying infrastructure. Not anymore when they can grow across multiple chains.

Even though interoperability is in its infancy, a few disadvantages have become clear already.

Disadvantages of Blockchain Interoperability

While interoperability offers an array of attractive benefits, it’s crucial to be aware of some challenges developers and users will face, such as:

• Differing levels of trust and security: when signing up for one service on a highly secure chain, users expect that level of security across all they do. However, with interoperable chains, assets are potentially transferred from secure to less safe environments opening them up to manipulation.
• Throughput differences: Some apps require high throughput and near-instant validation. Building across chains with different scalability can lead to problems negatively impacting the user experience or even causing congestion.
• Systemic risk: if all chains are hyper-interconnected, the failure of one could pose a risk for all others.

How is interoperability achieved?

Already builders have created ecosystems that focus on interoperability, allowing chains that use their tech to communicate seamlessly.

Polkadot

Polkadot is an ecosystem of chains all connected through a relay chain that provides security and decentralization. All code is built using the Substrate framework, which allows builders to compose complex dApps from existing pieces of code. Polkadot breaks down the silo between chains with XCM, a messaging standard for chains to communicate and securely transfer assets and rich data.

Cosmos

Cosmos is another multi-chain ecosystem. Unlike Polkadot, chains aren’t connected via a layer-0 blockchain but communicate through the Cosmo hub. The hub monitors the state of each zone and reports back. Comos allows apps to customize chains for their needs while benefitting from the ability to communicate with other Cosmos chains. A good way to track connections in Cosmos is Map of Zones.

When chains in Cosmos or Polkadot want to communicate with other chains outside of their respective ecosystems, they’ll have to tap into different interoperability solutions.

Bridges

Cross-chain bridges are a primary way to move value from one ecosystem to another. This value transfer can be achieved through the following:

• Burn and mint where tokens on the first chain are burned, and new ones are minted on the destination chain
• Lock and mint, where tokens are locked in a smart contract and wrapped tokens are issued on the destination chain
• Liquidity Pools: some bridges facilitate asset transfer through pools of assets from origin and destination chains.

Bridges tend to rely on multi-sig set-ups and, with significant value locked, have become a favorite target for hackers. The Multichain fallout most recently illustrated the lack of decentralization in bridges.

Atomic Swaps

Atomic swaps are a type of token swap across chains without intermediaries that involves using smart contracts and locking assets for a short time. These swaps don’t require using bridges and are called atomic because the trade either happens and both receive each others’ funds or both simply keep their funds. While the concept was first introduced in 2013, it wasn’t until 2017 that the first atomic swap took place, with Charlie Lee swapping from Litecoin to Bitcoin, and they remain niche to this day.

Oracles

It’s not just a value that moves between chains but also information. Oracles like Chainlink bridges the gap between the real world and blockchain, but also between normally incompatible blockchain ecosystems. This way, builders have access to information on what’s happening in other ecosystems and can integrate that data into their apps.

Multichain smart contracts

Sometimes, dApps only want to trigger the execution of a function on a different blockchain. Multichain smart contracts enable that by connecting chains allowing developers to call a contract on another chain. With the launch of Multichain Smart Contracts at Astar, we’re already enabling Substrate contracts to trigger functions in Ethereum contracts.

Messaging Protocols

XCM is a standard that establishes how messages are sent across chains in Polkadot. The actual protocol for sending these messages is XCMP and remains under development. Eventually, it could be used to share information outside of the Polkadot ecosystem. Another web3 messaging protocol currently entering the market is XMTP, which recently was integrated by Coinbase wallet to facilitate social interactions with users of other dApps that have integrated the protocol, such as Lens Protocol.

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Interoperability is nascent but will be a driver for broader adoption by enhancing user experiences and supporting innovative business models.

At Astar, we’re building with interoperability in mind to provide devs with a toolkit that gives them access to all the connections we’ve forged and 2 powerful virtual machines to support their products.

Start building or try out what you can do on Astar today.