Why do we need Interoperability? And what are the most recent use cases?
Over the past few months we have started to witness a rise of many different Blockchains, each one with their own elements, like Ontology, NEO, Ethereum, ICON and many more. While most of them are trying to become the number one Blockchain with most dapps and usage, there is no denying that we need a way to have all these Blockchains communicate with each other, the perfect analogy would be having a lot of islands with no bridges between them.
However, these chains do need bridges to share data, in a digital world where data is everything it is unrealistic to not pursue solutions for these chains. This is how interoperability with cross-chain and atomic swaps comes in.
Let’s start with interoperability, there isn’t a consensus on a general solution because every project that is pursuing interoperability and tries to implement it, will modify it so that it looks like it’s a unique discovery.
This technology is still very new and many projects are still researching and developing, for example NEO is starting this quarter the initial tests for NeoX – “ A protocol that allows NEO to interact with other Blockchains for the use of exchanging assets and value”, this is a very difficult process because the transactions made between Blockchains must be successful in both sides, if one fails and the other succeeds, then it creates serious issues.
Atomic Swaps is the middle solution, transactions made directly from one user to another, also called by peer-to-peer. With Atomic Swaps users always hold their own private keys, meaning they have control over their assets, it’s a decentralized way of exchanging value without having to trust in other parties involved. A very good example of cross-chain atomic swap technology is the exchange between Litecoin and Decred. One of the major issues with cross-chain atomic swaps is price discovery and order matching.
Switcheo exchange is the most recent decentralized exchange to aim to use atomic swaps between SWTH (Switcheo token) and Ethereum. They recently launched 3 pairs of the Ethereum Blockchain on the exchange and the experience of interacting with both chains (NEO and Ethereum) its groundbreaking. There are also other exchanges trying to accomplish this technology like Komodo, Blocknet, NEX exchange, and others but none of these are perfectly designed like Switcheo, although Blocknet is pursuing amazing features like X Router and X Bridge but its not user friendly enough for mass adoption, this features allows the user to not being obligated to download the full blockchain, for interest parties you can check their API for both features in https://api.blocknet.co/.
On the projects level, we have a race towards the implementation of this technology from Cosmos to Polkadot, to Aion, Lamden, Metronome, ICON, NEO, Wanchain, Ark, Quant Network, these are some of the most dedicated projects to achieve these features.
The final solution to achieve is Cross-Chain Smart Contracts, in a short version, this will allow inter-blockchain transfers of value without performing a swap or a trade. The problem with interoperability is to ensure that both transactions are confirmed or failed in both blockchains that are crossing with each other, this is the barrier for the continuation of decentralized systems.
About the author: Afonso Casanova is very passionate about new tech. He is an entrepreneur with a background in finance. Afonso is not a financial adviser and this article does not consist of investment advice, this is only Afonso's opinion.