The blockchain ecosystem is growing, and numerous new blockchains are emerging, each claiming to offer unique merits. Yet, most of these blockchains are growing parallelly and rarely augment each other because the standard blockchain architecture doesn't support cross-chain connectivity, otherwise referred to as interoperability.

Blockchains, by design, operate in closed siloes. In contrast to the current Web2 ecosystem, blockchain-based applications and protocols often end-up serving closed communities. The underlying application or protocol is designed to operate in a standalone environment. As a result, many applications and protocols fail to achieve mainstream adoption despite their uniqueness and potential to solve existing problems.

To put this into perspective, consider a scenario where Gmail users can't send emails to Outlook users and vice versa. Or a situation where Android users could only make calls and send messages to other Android users but not iOS users.

Sounds unrealistic. Right?

Most existing centralized products and services have achieved peak adoption levels due to their seamless interoperability across devices and operating systems; this is arguably what blockchain technology is lacking. Despite several attempts, the blockchain ecosystem remains heavily fragmented, with each blockchain following its own set of consensus protocols, tokens and governance models, making it unnecessarily complicated for end-users.

What Is Blockchain Interoperability?

In the simplest terms, blockchain interoperability refers to the ability of blockchains to seamlessly communicate with one another. Interoperability enables accessing and sharing on-chain data, allowing trustless smart contracts, and transferring digital assets between individual chains, with the core goal of enhancing collaboration and supporting new use cases.

Blockchains must be able to share data and value among themselves to facilitate a diverse range of use cases. Existing blockchains like Ethereum, Bitcoin, Solana, and many others have ecosystems built on top of them, but the lack of interoperability prevents these ecosystems from interacting.

From highly customizable Web3 services and fully decentralized economies to cross-industry collaborations, interoperability can unlock new opportunities for blockchain technology in general.

That said, promising progress has been made in terms of blockchain interoperability. While most layer-1 blockchains lack built-in features that support interoperability, many solutions have emerged to make cross-chain communication and interaction between blockchains possible.

Cross-Chain Technology

Cross-chain technology facilitates interoperability between different blockchain networks, enabling them to exchange data and value without any intermediary. Consequently, decentralized applications and protocols built atop blockchains with similar code structures can seamlessly communicate with each other.

For instance, a cross-chain solution built for the Ethereum blockchain will work for applications and protocols deployed on Ethereum and other EVM-compatible blockchains, allowing the broader community to use them without switching networks and wallets continuously. Cross-chain solutions solve the interoperability dilemma to a significant extent through the following ways:

  1. Layer-2: Often referred to as L2, it comes with its own consensus mechanisms, security and validation parameters, governance and tokens. These L2s often serve specific use cases, which are generally distributed in a manner to improve the efficiency of the overall blockchain ecosystem.
  2. Oracles: In the context of blockchain interoperability, oracles serve the role of bridging the gap between on-chain and off-chain ecosystems. Blockchain developers use oracles to feed off-chain (real-world) data to their decentralized applications and protocols, thus unlocking a new spectrum of interoperability.
  3. Bridges: With this technology, tokens of one standalone chain can be locked and an identical asset can be minted on another network, to then be sent to the recipient. Essentially, bridges facilitate cross-chain value transfer.

Multi-Chain Technology

Multi-chain interoperability is considered an alternative in blockchain technology. Currently, cross-chain technology is the most used option to connect blockchain ecosystems. However, it is largely focused on solving the interoperability challenges of Ethereum and other EVM-compatible chains.

In its simplest form, multi-chain technology offers interoperability across different standalone blockchain ecosystems while maintaining shared security. Through this, chains can seamlessly communicate and transfer assets while considerably lowering potential security risks. However, multi-chain solutions can only offer true value when the project uses at least two chains that are part of the main network (layer-0 chain).

With multi-chain technology, "multiple" blockchains with distinctive features (speed, governance, decentralization, etc.) can coexist simultaneously. Each can add value to the underlying ecosystem in isolation from other chains but remain connected to each other and the core network. The multi-chain approach addresses the need for facilitating diverse use cases, enabling developers to choose the best available blockchain ecosystem to deploy their applications and protocols based on individual needs.

Omni-Chain Technology

Whereas cross-chain and multi-chain solutions address interoperability challenges, omni-chain technology aims to build an ecosystem where every blockchain and the projects built on them can seamlessly communicate with each other. In doing so, omni-chain solutions can complement cross-chain and multi-chain solutions' success.

By extension, they can lay the foundation for an interconnected blockchain ecosystem of applications and protocols. With omni-chain technology, developers can experiment with new use cases like introducing multi-functional NFTs that work across chains, multi-chain swaps and transfers and much more.

Advancing Greater Connectivity

Achieving end-to-end blockchain interoperability is rapidly becoming a reality. The pace at which the technology is evolving has unlocked new use cases, especially those that set new standards for interoperability. The rise of liquidity aggregators, automated market makers (AMMs), real-world asset (RWA) tokenization and other promising initiatives highlight that blockchain developers have realized the power of interoperability and are now more than focused on solving the interoperability dilemma once and for all.

The emergence of cross-chain technology laid the foundation for an interoperable blockchain ecosystem. Emerging multi-chain and omni-chain solutions alongside the ongoing developments across cross-chain solutions will continue removing the interoperability barriers, gradually bringing the broader ecosystem together for the greater good.

(Jacob Kowalewski is the Chief Strategy Officer of t3rn.)

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