Abstract

Cross-chain interoperability refers to the ability of applications to communicate and interact across different blockchain networks. This enables the transfer of data and value between different systems, enhancing connectivity and seamless integration.

What is Interoperability in Blockchain?

Interoperability in the context of blockchain refers to the ability of one blockchain to freely exchange data with other blockchains. Cross-chain interoperability means that smart contracts on different platforms can communicate with each other without the need to physically transfer tokens across chains.

For example, assets, services, and transactions are all recorded as documents on the blockchain. Any activity conducted on one blockchain can be reflected on another blockchain through appropriate interoperability solutions. This means that regardless of which blockchain the assets and services are on, they can be operated through applications.

Why is Interoperability Important?

Today's blockchains are in a similar position to the early internet: there are many isolated ecosystems that cannot exchange information with each other.

Due to the lack of interoperability and connectivity, blockchain technology cannot be more widely adopted because data and value cannot be seamlessly transferred across networks.

From a developer's perspective, each deployment constitutes an isolated entity, resulting in backend contracts that are not connected to each other and unaware of each other's existence. For example, a decentralized exchange (DEX) DApp may need to be deployed separately on Ethereum, BNB Chain, and Polygon networks. Each version of the DApp is isolated from the others.

For users, adopting a multi-deployment approach can create many difficulties. Users cannot seamlessly transfer tokens from one blockchain to another. The transfer process typically involves the destruction of assets on the source blockchain and their re-minting on the target blockchain using a third-party bridge. This process is time-consuming and confusing, leading to data silos and a poor user experience. Holding assets on multiple blockchains also carries high security risks, making them vulnerable to hacking and potential loss of funds.

Cross-Chain Interoperability Solutions

Developers have built various solutions, and cross-chain connectivity is gradually improving, making it easier to connect and transfer data and value across networks. This also opens up new possibilities for developing more user-friendly and interconnected blockchains.

There are different ways to enhance cross-chain interoperability. Here, we list some examples of solutions.

Chainlink

Chainlink is developing the Cross-Chain Interoperability Protocol (CCIP), an open-source standard that supports cross-chain communication, including messaging and token transfers. CCIP aims to use a standardized interface to achieve universal connectivity across hundreds of blockchain networks, potentially reducing the complexity of building cross-chain applications and services.

Wormhole

The Wormhole protocol is a universal interoperability protocol that enables the transfer of tokens and messages across different blockchain networks. Network guardians monitor and verify messages on the source chain, facilitating their transfer to the target chain. Developers using Wormhole can build cross-chain decentralized applications called XDApps.

LayerZero

LayerZero is an omnichain interoperability protocol for lightweight messaging between blockchains, providing secure, reliable, and trustless message delivery.

LayerZero's Ultra Light Node (ULN) is a smart contract that provides block headers of other bridged chains for efficiency. ULN is only triggered on demand, and smart contracts communicate with oracles and relays through LayerZero endpoints. This design enables lightweight and efficient cross-chain communication.

Hyperlane

Hyperlane is a Delegated Proof-of-Stake (DPoS) chain protocol that verifies and secures cross-chain communication through configurable consensus methods. In Hyperlane's network, each validator is responsible for verifying every chain connected by Hyperlane, ensuring secure and accurate cross-chain communication.

Inter-Blockchain Communication (IBC)

The Inter-Blockchain Communication (IBC) protocol is the standard protocol for blockchain interaction in the Cosmos network, designed to achieve interoperability between different blockchains. IBC defines a minimal set of functions specified in the Interchain Standards (ICS), which determine how blockchains communicate and exchange data with each other.

One example is Osmosis, a decentralized exchange (DEX) that allows users to swap tokens across chains. Osmosis leverages the IBC protocol to enable seamless cross-chain token swaps, with token holders directly benefiting from the interoperability provided by IBC.

Avalanche Warp Messaging (AWM)

Avalanche Warp Messaging (AWM) is designed to be more flexible, allowing developers to create their own messaging specifications to support communication. The AWM specification itself requires a byte array, an index for BLS multi-signature participation, and a BLS multi-signature. AWM makes it easier for developers to build powerful DApps on the Avalanche network.

BTC Relay

BTC Relay is an on-chain relay deployed in a live environment that allows Bitcoin block headers to be submitted to Ethereum. This verifies the validity of Bitcoin transactions submitted to the Ethereum blockchain, creating a trustless bridge between the two networks.

Cross-Consensus Messaging Format (XCM)

The Cross-Consensus Messaging Format (XCM) enables different consensus systems to communicate with each other on Polkadot. After the successful merger of XCM V3, developers can build applications that support features such as bridging, cross-chain locking, swapping, NFTs, conditions, and context tracking.

For example, the Moonbeam XCM SDK primarily supports XCM token transfers, allowing developers to interact with the Polkadot network using XCM.

Axelar

Axelar provides solutions for cross-chain communication through a universal messaging protocol, enabling developers to build decentralized applications that operate across multiple blockchain networks. Axelar also offers secure interchain communication for users bridging tokens through Delegated Proof-of-Stake (DPoS).

For example, Axelar's bridging app Satellite connects Ethereum-based BUSD to Cosmos, enabling interoperability between the two ecosystems.

Benefits and Limitations of Interoperability

The benefits of blockchain interoperability are obvious. Users can conduct seamless transactions across different blockchain networks without the need for centralized intermediaries. It also reduces fragmentation, improves interoperability across the broader blockchain ecosystem, expands business boundaries, and opens up new business models.

However, these solutions also have certain limitations. Different blockchains may have different security solutions, consensus algorithms, and programming languages, increasing technical complexity. These solutions may also make blockchains more vulnerable to attacks and create new governance challenges between different blockchain networks.

Conclusion

Cross-chain interoperability solutions may significantly improve the efficiency and functionality of blockchain networks by enabling communication, data, and value transfer across different networks.

The future development of cross-chain interoperability is expected to foster further innovation and new possibilities for blockchain applications across different blockchain networks. This will create a more connected and user-friendly blockchain ecosystem.

However, to achieve widespread adoption, different cross-blockchain interoperability solutions need to become more stable and secure. Which solution will provide the most efficient, stable, and secure tools remains to be seen.