Blockchain Interoperability: Bridging the Gap of the Vast Blockchain Network
For anyone who is new & excited about Bitcoin and Blockchain Technology, you might look towards Bitcoin as the best network within the world but chances are you will be presented with 1000 different blockchain networks each with their unique purpose. The DeFI Space has grown rapidly from the early 2010s and in the land of blockchain networks out there, the question remains is how do we build an interconnected DeFI Space? How do we bridge the gap on all these networks? Let us explore the world of Blockchain Interoperability!
The Greatest Invention since Internet
For most of us the internet might be the greatest invention we have seen as it transforms every part of our life. Learning from the early 90s, the internet set a buzz within the industry so unprecedentedly, causing a market crash in the early 2000 as many companies fell off the picture. The “Dot Com bubble” as we know it today was caused by many companies trying to integrate the greatest invention into their company even though it might not be feasible to do so.
The “Internet” became a tool for popularity and as Blockchain Technology emerged to follow the path of greatest invention, history looks to repeat itself. The Blockchain Technology journey that started in the early 90s rose to popularity with its first successful adoption by Bitcoin and its whitepaper in 2008 laid out a framework for a digital payment system that could be quicker and secure compared to the traditional finance system.
Fast forward to the mid 2010s, Bitcoin is quickly gaining in momentum in terms of value and its adopters grew from the tech space to pretty much everyone who would like to seize the opportunity. As much as everyone praised Bitcoin’s revolutionary breakthrough, a lot of limitations for growth have also been realized, its speed for processing transactions that can be enhanced and its scalability issues with the increasing adoptions.
Then New solutions start to come along to solve the issues such as Forking or Branching the Bitcoin Network to elevate its processing speed with Litecoin and Bitcoin Cash which garner praise from the community. Or, creating an entirely new blockchain network with different features to the Original Bitcoin Network such as Ethereum and Binance Smart Chain which introduce the Smart Contract or Tokenization to the DeFI Space.
This then became the route that most projects took as it provided them with more freedom to introduce their own protocols to the original principle laid out by Bitcoin. Projects such as Cardano or Tron started to appear introducing the Proof of Stake system to the DeFI Space and became a cornerstone for many different innovations in the future. Currently there are more than 20,000 DeFI Projects out there with most piggybacking on other blockchain while some operate on its own network.
Over the years as the DeFI Space continues to grow, the topic of “Interoperability” starts to become a concern with the goals of an interconnected decentralized payment system that seems to drift further away. At its core, blockchain interoperability refers to the ability of all these different blockchain networks to communicate with one another, share information, and execute transactions in a trustless, efficient and secure manner.
The significance of Blockchain Interoperability can be viewed through several use cases, particularly in the realm of DeFI Space. DeFi platforms are largely built on major blockchain networks like Ethereum or Binance Smart Chain, but many other blockchains such as Tron are gaining traction due to their lower fees, faster transaction speeds, and enhanced scalability. Without interoperability, DeFi applications would be confined to a single blockchain, limiting their adoption and liquidity. However, by enabling cross-chain communication, DeFi platforms can expand their reach, allowing users from different blockchain ecosystems to interact and grow seamlessly.
Moreover, blockchain interoperability can contribute to greater decentralization across the ecosystem. Currently, a few dominant blockchain networks, such as Ethereum and Bitcoin, have significant control over the space. However, interoperability can empower smaller blockchains to participate in larger, more diverse ecosystems, fostering competition and innovation. As smaller blockchains collaborate with larger networks, they can leverage the strengths of multiple platforms, creating a more decentralized and resilient blockchain infrastructure.
Despite the progress being made, there are still several challenges to achieving seamless blockchain interoperability. One of the key hurdles is the lack of standardized communication protocols across different networks. Each blockchain has its own unique way of managing data, verifying transactions, and executing smart contracts, which can make it difficult to establish common ground. To overcome this, blockchain developers will need to collaborate and adopt universal protocols that support cross-chain communication in a secure and efficient manner.
Security is another major concern when it comes to blockchain interoperability. While solutions have been developed to facilitate cross-chain communication, they also may introduce new risks to the existing networks, such as potential exploits or attacks. Therefore, any interoperability solution must prioritize security, ensuring that assets and data are transferred safely between networks without compromising the integrity of the underlying blockchains.
Heading into the year of 2025, Blockchain Interoperability is not just a technical challenge but it slowly becomes a fundamental requirement for the growth and success of the Blockchain ecosystem. As the number of blockchains continues to rise, the convergence of these technologies will help unlock new possibilities for decentralized finance, digital assets, and much more, ultimately bridging the gap between the vast and varied blockchain networks.
Bridging the Gap
The future of Blockchain Interoperability continues to show a promising future and the term “Bridging the Gap” has become famous amongst the DeFI Community on its own. Bridges are the most prominent solution currently as it manages connections to different blockchains and facilitates the transfer of assets between them. One of the most well known of these solutions is the “Wrapped Token” mechanism which allows projects such as USDT to rise up the ranks as the most popular cryptocurrencies out there and operate on many different blockchain networks.
Another promising approach to blockchain interoperability is the use of standardized protocols. By adopting common standards for data formats, transaction types, and smart contract execution, blockchain networks can better understand and interact with each other. The Ethereum-compatible blockchain ecosystem, for example, uses the Ethereum Virtual Machine (EVM) to ensure that smart contracts on different blockchains are compatible and can be executed consistently. The adoption of such standards across the industry could significantly reduce the complexity and costs associated with cross-chain interactions.
The rise of Layer-2 solutions also contributes to the broader goal of interoperability. Layer-2 networks are built on top of existing blockchains and aim to improve scalability, transaction speed, and cost-efficiency. By facilitating interactions between Layer-2 solutions and their respective Layer-1 blockchains, interoperability can be enhanced. For instance, platforms like Optimism and Arbitrum, which are built on Ethereum, aim to create a more scalable infrastructure while still maintaining compatibility with the main network.
The race to “Utilize and Develop Blockchain Networks” has led to the pursuit to “Bridge the Gap” as soon as possible before more adoptions come by. Blockchain Interoperability is a continuous goal as new networks are developed everyday, each with their own unique set of protocols and new solutions such as Aggregrators or Oracles are proposed. What is clear for the community is the goal for an interconnected Blockchain System may not be a distant dream away and despite the challenges, we always need to hold on to the right project that resonates to all of us!
We at Nagaya Technologies realize that there is a huge potential behind Blockchain Technology and the DeFI Space. We realized that this potential needs to be paired with correct adoption and therefore created the World First Hybrid Digital Asset — Nagaya. Nagaya are proud to be amongst the pioneers in the RWAs space and hope to expand our capabilities as Blockchain Interoperability continues to grow. For more information regarding the latest updates on Nagaya and our whitepaper, you can visit us at https://www.nagaya.co
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