Inter-chain interoperability: transforming the decentralized ecosystem
The blockchain economy has been growing at a phenomenal rate for the past few years due to an expansion adoption curve, awareness and interest of institutional and retail investors. However, most of this $ 1.5 trillion economy is dominated by a handful of large platforms that exist mostly in isolation due to a lack of communication and interoperability between chains.
When platforms or companies exist in silos, it encourages monopolization where they grow larger and larger to capture the majority of market share. If you are not convinced, take a look at Google and Amazon! This monopolistic behavior kills innovation and makes it difficult for small players to establish their positions in the market.
If we look at the current state of the cryptocurrency ecosystem, Bitcoin and Ethereum dominate the market with a combined market share of over 62% at the time of writing. However, this monopoly effect does not end there, as the remaining 18% of the market is captured by eight different projects, meaning that only ten projects control 80% of the entire 1,500 cryptocurrency market. billions of dollars.
This monopolistic behavior in the blockchain space is not intentional since we are talking about a decentralized environment where no single entity rules the market with its power. This monopoly effect can be reduced by allowing true cross-chain interoperability solutions to connect these large silos. blockchain networks, and allow many innovations to take advantage of the functionality of these platforms instead of reinventing the wheel every time.
Promising inter-chain interoperability solutions
To help build an interconnected ecosystem, several blockchain platforms are now developing solutions to allow true interoperability between the different public chains. They all have a unique approach with a robust architecture that allows these siled chains to communicate with each other and transfer assets seamlessly.
Let’s discuss some of these platforms and how they enable interoperability between chains.
Spotted is a meta-protocol or layer 0 protocol where you can create and run your own custom blockchains. These blockchains are called “Parachains”, which can communicate transparently and perform an inter-chain asset transfer on all parachains launched on the Polkadot network.
Similar to the Ethereum network, where you can deploy and launch smart contracts, you can launch specially designed and niche-focused blockchains on the Polkadot network. To connect existing blockchain platforms like Ethererum and Bitcoin, Polkadot built cross-chain bridges so that every parhain in the Polkadot network could communicate with them and transfer value.
The underlying meta-layer that secures all parachains within the Polkadot ecosystem is called the “relay chain” which provides shared security for all parachains in the network. The relay chain also enables trustless cross-messaging between all parachains and bridged blockchain networks.
The relay chain that secures the entire Polkadot network has two consensus protocols, BABE (Blind Assignment for Blockchain Extension) and GRANDPA (GHOST-based Recursive Ancestor Deriving Prefix Agreement). BABE manages the block production mechanism, and GRANDPA is responsible for the provable and deterministic finality. The BABE and GRANDPA consensus protocols work independently to run and secure the network.
Wanchain is a blockchain interoperability platform that provides cross-chain infrastructure to connect all isolated public and private block chains, just as the WAN (Wide Area Network) connected the isolated LAN (Local Area Networks). This interconnected blockchain ecosystem will pave the way for many innovations in the $ 69.9 billion Defi economy, enabling Open Finance in its true essence through decentralized cross-chain applications.
Many of the interoperability solutions available today are either centralized or focused on public blockchain interoperability. Wanchain is fully decentralized and enables interoperability of public-to-public, public-to-private, and private-to-private blockchains.
Wanchain is secured by Galaxy Consensus, a proprietary Proof of Stake consensus algorithm where validator nodes are required to stake Wanchain’s native WAN tokens to validate transactions on the network. Additionally, all cross-chain bridges on the network are maintained by Wanchain’s Storeman Group, which are independent and unified decentralized collateral pools.
Wanchain built the world’s first decentralized direct bridge between BTC-ETH and built its cross-chain infrastructure since 2017. Today, Wanchain has built decentralized bridges to connect EOSIO, Binance Smart Chain, XRP Ledger, Bitcoin and Ethereum, with Polkadot and other channels in the works.
As part of its development roadmap, Wanchain plans to roll out an upcoming Ethereum Layer-2 solution called X-Rollup, and they are constantly working on adding support for cross-chain bridges for various public blockchains and private to promote adoption.
Cosmos is a decentralized network of independent and interoperable parallel blockchains. The Cosmos and Polkadot networks both have a similar design approach, where custom blockchains can be launched within the ecosystem and connect to external platforms via bridges. However, there are subtle differences between the two.
The Cosmos team released Tendermint in 2014, which is a practical Byzantine fault-tolerant state machine (PBFT) and peer-to-peer network gossip protocol. Tendermint takes care of all the consensus and networking for each independent parallel blockchain on the Cosmos network.
At the top of Tendermint is the Application Blockchain Interface (ABCI) which allows blockchains to launch their custom applications statefully. The ABCI protocol is also responsible for updating the state of the blockchain. Only Tendermint has access to the functions that can change the state of the block chains, which is a secure design approach.
To enable inter-chain communication, Cosmos has built the Inter Blockchain Communication (IBC) protocol which allows all blockchains in the Cosmos network to interact with each other through a central hub called the Cosmos Hub. Cosmos calls it the Zone and Hub model, where each blockchain is a zone that communicates with the others through a central Hub.
To allow interoperability with external networks like Bitcoin and Ethereum, Cosmos Network has special types of bridges called Peg Zones. These Peg Zones are managed by a set of validators who approve cross-chain transactions by locking and unlocking indexed assets. Unlike the bridges used at Polkadot, the design of the Peg zones in Cosmos Network is quite complicated and mostly theoretical at this point.
Polygon was previously called Matic Network, which was a simple Ethereum Layer-2 scaling solution. The team renamed and relaunched the platform under a new name, Polygon. This revamped platform aims to create what they call “the internet of Ethereum blockchains” – a multi-chain ecosystem and network of blockchains compatible with Ethereum.
Polygon has a developer-centric approach, where it allows developers to easily launch their Ethereum-enabled blockchains by leveraging different modules for consensus, governance, virtual machine implementations, and runtime environments.
There are two types of strings you can create on Polygon; autonomous chains and secure chains. Autonomous blockchains are self-sovereign and built on their own consensus and security, while secure chains inherit the security of Matic’s Proof of Stake (PoS) sidechain.
However, all autonomous and secure channels launched on Polygon Today derive their security from the Matic PoS side chain, and they will be separated in a later upgrade. Polygon also supports Matic Plasma, a Layer 2 scaling solution, and the team plans to bring more Layer 2 scaling solutions such as zk Rollups, Optimistic Rollups, and Validum Chain. . Polygon is focused solely on the Ethereum ecosystem, and we have yet to see its pull.
Fusion is yet another cross-chain interoperability platform focused on financial innovations. Fusion has built Decentralized Control Rights Management (DCRM), a decentralized custodian model for performing cross-chain and cross-system transactions.
DCRM is the distributed storage of private keys divided into shards and stored on a network of nodes. In a traditional custodian model where a user initiates a cross-chain transaction, the user’s funds are locked and the keys to unlock these funds are stored on a centralized server or on custodians.
In DCRM, however, the private key is divided into shards, and each fragment is encrypted and then distributed over the network. DCRM ensures the safety and protection of user funds. In addition to this, Fusion is also compatible with Ethereum and supports smart contracts that can take advantage of the security and interoperability offered by the platform.
Fusion uses a variant of the Proof of Stake consensus mechanism called Ticketed Proof of Stake (TPoS) to secure the network. This custom TPoS algorithm allows Fusion to achieve 15 seconds block time and supports 2500 to 3000 TPS, suitable for complex and large scale applications.
Cross-chain interoperability is the next big thing in today’s fragmented world decentralized ecosystem we see it today, as it will reduce the monopoly effect and allow innovators to leverage the strengths of existing platforms to build applications for financial inclusion.
About the Author
Haroon Baig is a Microsoft alumnus, coding geek turned freelance researcher and writer at Decentralized Lab. He works with companies of all sizes in the blockchain space to establish, expand and improve their online footprint through his writing. He got involved in the crypto space in 2012 and was fascinated by the underlying technology. Since then, it educates people about this space through its content.