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The Quest for 'Interoperability' in Blockchain?


In 2009, Bitcoin went live. Hal Finney was among the first to run the Bitcoin code.

Fast forward 12 years later, and there are over 9,850 crypto projects.

Most launch from smart contracting platforms as tokens—like Chainlink and DeFi dApps, for example.

Others have their mainnets. Examples can be Ethereum, Litecoin, EOSIO, and others.

The baseline is that these projects and chains exist as isolated islands. That means tokens or coins in one platform cannot be transferred or exchanged for others without an intermediary. Often, this facilitator is a centralized cryptocurrency exchange. 

From these exchanges, users can easily swap different cryptocurrencies and tokens for other crypto or fiat. This isn't possible in decentralized exchanges where operations remain non-custodial, cut off from the fiat ecosystem. The problem with centralized exchanges is that they can be breached and funds stolen.

Blockchain interoperability is a state where users can exchange data or transfer value instantaneously between blockchains without using a third party. Interoperability introduces fungibility. With more of the latter, the liquidity of these tokens is increased in the open market, creating one active ecosystem. 

Efforts to make blockchains interoperable include atomic swaps that may use smart contracts. At the same time, new blockchains with interoperability features baked in are gaining traction. Some of these blockchains are Polkadot and Cosmos.

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