Analysis of the challenges and benefits of creating blockchain protocols capable of true interoperability.
The recent release of a report from the World Economic Forum and Deloitte on blockchain interoperability revealed the true complications of inter-blockchain communication. Cross-chain has been one of the major discussion points in blockchain development circles over the last few years, particularly as many public blockchains look to increase their scalability and throughput.
Large web service providers such as IBM, Oracle, Azure Blockchain Services and SAP are vocal about their commitment to solving the issue, hoping to unite relevant clients with unique blockchain requirements. Recently, they demonstrated the ability to work together, with a high-profile use-case involving a shared COVID-19 data and analytics platform. By compiling trusted data from a wide network of verified sources, the tech firms are hoping to identify disease hot spots and reporting inconsistencies.
Despite all this, true inter-blockchain communication is easier said than done. Regulatory, governance and privacy concerns will cause most enterprises to shirk open initiatives, as there must be clear rules defining how participant data is acquired, shared and stored. A consensus must be reached on an onboarding process for new participants and partners in order to avoid conflict later in the cooperation. Expenses and revenues need to be shared throughout the network, despite varying levels of participation from each organization.
Even once these governance prerequisites have been met, the technical side is equally challenging. A lack of infrastructure and data standardization is a major obstacle to seamless communication, making it difficult for companies in different regions and sectors to work together.
This is why many early analysts were looking at protocols to try and identify the dominant technology. If one platform could garner enough market share, it could push entire industries in that direction, and a level of standardization could be achieved. However, with the wide variety of needs around privacy, throughput, velocity and consensus methodology, this type of thinking is now proving to be unrealistic.
For permissioned chains, this is less of an issue, as the majority of protocols are centered around Hyperledger Fabric, R3 Corda and Quorum (Ethereum-based). Standardization on these platforms is already being looked at through interoperability initiatives such as the Blockchain Integration Framework and Fabric Interoperability Workgroup.
Realizing the true value in collaboration
The value that inter-blockchain communication could unlock for these permissioned chains is significant. The World Economic Forum’s report points out that although blockchain platforms are being built to target industry ecosystems, global supply chains generally span multiple industry ecosystems, including shipping carriers, freight forwarders, manufacturing, retail, trade finance, banking and corporate administration.
The idea of linking all these sectors to one framework is simply infeasible, due to the potential scale as well as the industry-specific requirements. Instead of discouraging blockchain use in these cross-industry situations, companies should be encouraged to focus on specific areas and explore new technologies and platforms to link between frameworks, forming a network of trusted data ecosystems.
As one of the leading blockchain protocols in enterprise settings, Hyperledger realizes the importance of this. David Huseby, Hyperledger’s security maven, was very clear about the importance of interoperability when speaking with Cointelegraph Consulting:
“Cross chain interoperability is key to truly decentralizing the flow of information and even commerce. Take the idea of a consortium for tracking products and their provenance. Now add a node on that network that is cryptographically linked to a supply chain blockchain monitoring details like purchase and sales transactions, shipping details and delivery. As linked networks, a product’s journey can be traced and verified in both chains simultaneously.”
Driven by needs and expectations
Besides the obvious value of linking different ecosystems, failure to do so may become an impediment to enterprise usage. Looking at current trends, multi-framework strategies have already become the norm in other web service formats.
The cloud-service model that enterprises are accustomed to is a prime example. With clouds, many businesses are trending toward a multi-cloud strategy to specialize systems, lower costs, reduce service disruption risk and avoid vendor lock-in. This provides a clear mandate for progress: Blockchain silos caused by a failure to develop and implement inter-blockchain communication won’t just delay adoption, they will deter it. Cross-chain interoperability shouldn’t be seen as a luxury, it should be a core feature. Huseby believes that the time to act is now:
“Hyperledger, and the whole of the Linux Foundation, is dedicated to creating common, open source foundations that connect software systems. We think it’s vital for blockchain to have interoperability across platforms and have Hyperledger projects and labs that are taking different paths to creating the necessary common protocols. These include Hyperledger Quilt, Hyperledger Besu and BIF (Blockchain Integration Framework).”
Third-party solutions like The Unbounded Network from Hacera also exist and form the backbone of the aforementioned COVID-19 analytics platform. The Unbounded Network serves as an abstraction layer, using APIs and smart contracts to extract data from a number of trusted sources like Johns Hopkins University and the World Health Organization.
What makes this solution stand out is that Hacera doesn’t need to work directly with each partner, as they are existing data sources on the Oracle and IBM permissioned ledgers. The actors may simply combine data together in a solution that is both efficient and doesn’t require additional development.
On the public blockchain side, multi-chain solutions like Cosmos and Polkadot seek to solve this problem as well. Unfortunately, many permissionless chains are still approaching the cross-chain challenge from a self-centered philosophy.
The point of cross-chain should be to improve and add to the existing technologies, not just to replicate use cases in the hopes of siphoning off users from established digital currencies or DeFi solutions. Having a built-in dependence on their individual cryptocurrencies and payment structures doesn’t help, as it complicates integrations with additional digital assets and fees along the way. Thus, the industry is left with dozens of like-for-like infrastructure ecosystems, with competing use cases and very few instances of collaboration aimed at bringing mutual benefit.
Finding common ground
The lesson here is that cross-chain collaboration isn’t just an additional feature worth exploring, but a critical functionality for an enterprise environment. Large corporations like IBM understand this, and are trying to drive it forward, even if that means sitting down with competitors and figuring out how to make their blockchains fit together. If blockchain projects truly want to eliminate data silos, they must find ways to work together.
Cointelegraph Consulting has identified the following steps that must be taken in order to build decentralized protocols that can span industry ecosystems:
- Approach interoperability with the mindset of creating synergies across chains, instead of merely trying to take user base from each other
- Think beyond a startup mentality and have the long-term vision to anticipate an industry driven by interoperability while still in the early stages of product development
- Reduce reliance on token utility being derived as a form of payment
- Look to build API gateways with other platforms
- Explore joint collaboration on government-led projects to bring more developers and partners into a solution
- Create technology consortiums to explore more cross-chain solutions so that decentralized experiences can become more seamless