Better Blockchain Interoperability will Attract Users, Developers, Traders

By | April 4, 2022

Interoperability: We must solve the lack of interoperability among blockchains, says Brandon Truong, Head of Product at ZetaChain.

The rapid growth of blockchain technology has led to a highly complex multi-chain ecosystem. With trade-offs around security, decentralization, scalability, cost, etc., it’s difficult to imagine that just one of these single blockchains would meet all of our society’s needs. As long as multiple chains exist, the demand for value flow between them will persist.

The issue of today’s blockchains is that they’re designed to be closed environments. Such fragmentation creates immense barriers for users to fluidly adopt and experience the benefits of other chains. If we want to see mass adoption of innovative web3 technologies and open the global financial system, then we must solve the lack of interoperability among blockchains.

A number of proposals and projects emphasize the ability to inter-operate, however, the majority of interoperability systems only apply to specific blockchains. Moreover, they contain standardized protocols that other blockchains must adopt through complicated, restricted, and/or less secure bridges.

Interoperability: Cross-blockchain Strategies

Several cross-chain strategies are used to increase levels of interoperability (side-chains, relays, notary schemes, hash time-lock contracts, and blockchains of blockchains), but the underlying fragmentation issue persists. Blockchains are inherently closed systems, which makes it difficult to bring reliable external information to the chain without a trusted third party (oracle) such as a centralized exchange. To date, no decentralized, permissionless, and public service facilitates atomic transactions that involve multiple blockchains.

Let’s examine these main cross-chain strategies. First, side-chains/relays solutions implement bridges that primarily enable portable assets from one chain to another. Rather than rely on a trusted intermediary, chain B implements a thin client of chain A using smart contracts to trustlessly verify events that occurred on chain A. Examples of relays include the BTCRelay on Ethereum and the Rainbow bridge of Ethereum on the NEAR blockchain.

Second, notary schemes are mechanisms where a trusted entity (or set of) is tasked with notarizing claims such as event X has happened on blockchain A. While obvious examples are centralized exchanges, notary schemes can be decentralized such as the Interledger project and THORChain.

Third, hash time-lock contracts (HTLC) are constructs of smart contracts that can facilitate atomic swaps across chains trustlessly without additional trust beyond the participating two blockchains. Examples of HTLC include XClaim BTC/Ethereum or BTC/Polkadot bridge, and the Lightning Network on Bitcoin.

Fourth, blockchains of blockchains (BoB) are frameworks that provide data, network, consensus, incentive, and contract layers for constructing application-specific blockchains that inter-operate with each other. Note that BoB does not solve current interoperability problems directly. For example, to connect to legacy chains, some sort of bridge or other mechanism described above must be employed. Important examples of BoB are Polkadot and Cosmos.

Each of these broad strategies has its strengths and weaknesses in technical complexity, trust assumptions, level of interoperability, and use cases. Our discussion here is brief and incomplete, but still, we can roughly categorize the characteristics of these strategies; see Table 1 for a comparison.

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Cross-chain Communication

A basic building block of any cross-blockchain interoperability is the ability to communicate and prove to chain B that a certain transaction happened on chain A.

Cross-blockchain Asset Transfer

Interoperability of blockchains

Cross-blockchain Smart Contract

  • Quant Network: Functionality-wise, the Quant network and its Overledger is the closest to ZetaChain. The Quant network is a centralized service that provides access to the connected public or private blockchains. It supports general programmability triggered by events on those blockchains (transaction to/from a given address, smart contract interaction, events, state changes, etc.), via popular languages and frameworks such as Javascript, Java, Python, etc. ZetaChain aims to achieve similar general programmability, but with an incentivized public blockchain, with far reduced trust assumptions, more transparency, complete verifiability and auditability.
  • ICP/Chain-Key: The Internet Computer Protocol (ICP) has proposals to enable interoperability to the Bitcoin network via its Chain-Key technology, which is similar to the distributed threshold signature scheme. With Chain Key, ICP in principle can custody funds on the Bitcoin network. It’s unclear how ICP observes the Bitcoin network, and how their smart contract platform interacts with external blockchains
  • HyperService: HyperService proposes a cross-chain smart contract platform that is chain agnostic. It consists of two components: a high level language HSL to describe a cross-chain dApp, and an execution layer that ensures financially atomic transactions.

Blockchain of Blockchains (BoB)

  • Polkadot, Cosmos: The most prominent BoBs are Polkadot and Cosmos. Polkadot, for example, provides a relay chain which handles all consensus, and Parachains which can be different blockchains with different state-transition functions. The Parachains are tightly integrated and can inter-operate seamlessly via the relay-chain. The Cosmos ecosystem, on the other hand, does not share consensus, so the interoperability between Cosmos chains is less tight. Every Cosmos chain is sovereign with their own choice of consensus (typically Tendermint-based fast finality). The Cosmos ecosystem relies on the IBC protocol (see Cross-chain Communication section), and special blockchains called Hubs to facilitate cross-chain asset transfers, and even cross-chain smart contracts. To enjoy interoperability in Cosmos or Polkadot, the blockchains typically need to be built on some common ground. Legacy blockchains, or new blockchains with their own consensus, cannot be part of BoBs.

Decentralized, Public/Permissionless, Omnichain Interoperability

Current cross-blockchain interoperability approaches previously described include the ability to communicate, transfer assets, and even run more sophisticated programming logic cross-chain. Beyond message delivery and cross-chain transactions, however, the market lacks a public blockchain on top of which general, decentralized omnichain smart contracts can be easily built. The ability for these smart contracts to hold and manipulate assets on external chains directly is what we refer to as omnichain interoperability.

Interoperability of blockchains

The Takeaway

In this piece, we analyzed the landscape of cross-chain interoperability and discuss the downsides of existing approaches such as bridging. Different from emerging projects, ZetaChain proposes a blockchain with generic omnichain smart contract support that connects both smart contract blockchains such as Ethereum, Ethereum L2 rollups, Solana, Terra, and Algorand, and even non-smart contract blockchains such as Bitcoin and Dogecoin. Through a series of technological breakthroughs in decentralized, distributed computing, cryptography and protocol communication, ZetaChain establishes itself as the first blockchain that natively connects to all blockchains and layers.

About The Author:

brandon chuong

Brandon Truong is head of Product at ZetaChain. ZetaChain is the foundational layer to a truly multichain future; the blockchain’s novel approach creates a fluid crypto-ecosystem that will enable more users, developers, and traders than ever to onboard, use, and take advantage of the benefits of crypto. ZetaChain’s blockchain enables multichain functionality without using bridges or wrapped tokens and enables the easy deployment of omnichain-dApps, or odApps, that can manage and connect data and value across all smart contract platforms as well as non-smart contract platforms like Bitcoin and Dogecoin.

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