Interoperability
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Interoperability
Interoperability is a fascinating topic. It is a concept applicable to different systems worldwide, from communication systems, hardware and technology to groups of people.
We use interoperable systems every day; it is also often a background function, so many people do not even realise they are interacting with them. Nevertheless, they have allowed many of our current systems to work seamlessly, including our internet and mobile devices. This article will approach interoperability from a technology perspective and understand how it has shaped the world we live in today.
What Is Interoperability?
The Cambridge Dictionary defines interoperability as:
"the degree to which two products, programs, etc. can be used together, or the quality of being able to be used together."
The Oxford Learner's Dictionary defines it as:
"the ability of computer systems or software to exchange and make use of information."
Broadly speaking, interoperability is the ability of two or more components or systems to exchange and use information.
There are two primary types of interoperability: syntactic and semantic.
Syntactic interoperability - this is the ability of two or more systems to communicate and exchange data. It allows different types of software to work together, even if they use another programming language or user interface. They usually use common data formats and communication protocols to achieve this.
Semantic interoperability - this is when data exchanged between two systems is understood by one another in a meaningful way. If the data is understood meaningfully and accurately, it allows the systems to produce useful results as defined by the users of the systems. This generally involves both sides referring to a common information exchange reference model.
Some examples of interoperability include:
A web browser reading and displaying a web page as intended
Plugging a mouse into your computer and it works straight away
A music file playing on a portable music player
Sharing data and resources between systems through a local area network (LAN) or a wide area network (WAN)
USB-C cables being able to charge Samsung and Apple devices
Interoperability between systems as we know them today has provided us, as users, significant benefits over our experience with technology, massively reducing complexity and increasing efficiency.
Interoperability In The Context Of Blockchain
Interoperability is one of the biggest problems being worked on in crypto currently. With the advent of smart contract platforms, it didn't take long for developers to realise that for these networks to reach a point where a global audience could use them, they would have to be interoperable.
For many years most blockchains have existed in silos that have made it difficult to move assets and information between them. This is because each has its unique design and consensus, making it impossible to achieve any form of verification if a transaction occurs outside its network.
In fact, the ability to achieve true interoperability between blockchains is so complex that they have dubbed it the Interoperability Trilemma. This tradeoff means that each interoperability solution can only choose two of the three following properties:
Trustless - this means having the same level, if not more security, than the base chain.
Extensible - the ability to support any blockchain
Data Agnostic - the ability to transfer and handle any type of arbitrary data supported by the chains
There has generally always been some level of compromise when designing interoperability solutions. Nonetheless, blockchain interoperability will allow different blockchains to communicate with one another actively. If they can successfully achieve this, blockchains can interact and share data, making it much easier to use various blockchain networks. If true blockchain interoperability is achieved, you will be able to:
Trustlessly transfer your assets between the various blockchain protocols that exist.
Smart contracts that exist on different chains will be able to interact and trigger specific actions when called by the other.
Blockchains that have been designed for specific purposes, such as scalability, will be easier and more reliable to use.
If successfully implemented, it would enable blockchain use cases that are currently close to impossible. It will also allow end users to leverage specific blockchains for the unique benefits they provide. However, creating a truly robust solution to the interoperability issue is exceptionally complex and challenging.
Our blockchains of today are often very different from one another. Different types of data, consensus mechanisms, network topologies and their unique characteristics as a byproduct of their intended applications have created a fragmented world in blockchain. If we are ever to see a genuine multi-chain world, there will need to be trustless ways of exchanging data and invoking specific actions on other chains.
We have seen several projects with unique approaches emerge as a result.
Approaches To Blockchain Interoperability
There are two general ways that people have approached blockchain interoperability: onchain and offchain.
Both of these approaches come with their unique tradeoffs, and there currently is no clear winner. Nonetheless, it is worth exploring both at a high level to get an understanding of them.
Onchain Interoperability
Onchain interoperability involves having a specialised blockchain sit in between the two blockchains that need to communicate. This middle blockchain is responsible for coordinating the state of each blockchain to which it is linked.
Two projects focused on this are Polkadot and Cosmos. While a deep dive into these two assets is beyond this article's scope and will be investigated over the coming weeks, we will touch on them from a high level and explain how they enable interoperability between different blockchains.
Polkadot
Polkadot describes itself as a "multi-chain network". It intends to act as a central relay chain or framework blockchains can opt-in to and use to communicate with other blockchains.
Polkadot essentially creates a sharded ecosystem where each blockchain, such as Ethereum and Bitcoin, operates on its own shard (called a parachain in the Polkadot ecosystem) and connects to the main relay chain that coordinates them, allowing them to communicate. The relay chain is the backbone of the Polkadot system and is responsible for achieving consensus and coordinating transactions on all the parachains; this is what helps the network achieve syntactic and semantic interoperability. Polkadot even has its own messaging format called cross-consensus message (XCM) that allows parachains to communicate with one another.
The blockchains that operate as a parachain can be public, permissionless networks, private consortium chains, or other Web3 technologies; in fact, they don't need to be designed as blockchains at all. This gives those who want to build on Polkadot a large amount of flexibility in their choices.
Cosmos
Cosmos is similar to Polkadot, describing itself as the "internet of blockchains".
Similar to the Polkadot, it will also have a central hub where each blockchain will connect to exchange data. This central hub will be responsible for helping the network achieve syntactic and semantic interoperability. In the case of Cosmos, it will be called the Inter-Blockchain Communication protocol (IBC). The IBC allows communication between blockchains if they have a compatible consensus (i.e. if they use Tendermint).
In the Cosmos ecosystem, blockchains communicate with each other through hubs and zones. Let's use Bitcoin and Ethereum as an example. If you wanted to connect the two chains and allow them to communicate, you would first connect each blockchain to its respective zone. Once this had been done, you could then connect both zones to the Cosmos hub, where they could now communicate, and you could transfer BTC and ETH between them.
Cosmos have also introduced an easy-to-use Software Development Kit (SDK) that allows developers to spin up a custom blockchain with a degree of flexibility.
Offchain Interoperability
Offchain interoperability is the second approach that can be used. As you probably guessed, this approach does not involve a specialised blockchain sitting in the middle of the two blockchains; however, there is still a protocol that provides a similar function. One project taking this approach is the oracle service provider Chainlink.
Chainlink
In one of its more recent updates, Chainlink has launched the Cross-Chain Interoperability Protocol (CCIP). This approach is very different to that of Polkadot and Cosmos. It does not rely on any central blockchain to coordinate those who want to use it to achieve interoperability with other chains.
Chainlink has already managed to create the most comprehensive network of node operators (or oracles) in the industry. They have effectively leveraged these to create its CCIP offering in combination with its off-chain computation protocol. Through the combination, they will be able to use their oracles to achieve off-chain consensus and validate cross-chain transactions, effectively creating interoperability. The CCIP, nevertheless, also provides a single-messaging interface or format that will allow syntactic and semantic interoperability.
These three projects, and a few others, are pioneering blockchain interoperability and paving the way for a multi-chain world where people can use a specific blockchain for the unique benefits they provide. We will dive into each in more depth over the coming weeks.
Conclusion
Interoperability is a topic that is worth understanding. It has significantly impacted the way our world works and has always been something important in moving us ahead. When applied to blockchain, interoperability will be no different; it will be a core premise on which the muli-chain world is built. Some people have realised this and started building projects that provide valuable, real-world solutions. We expect to see these projects come closer to solving the interoperability trilemma over time and creating a trustless world where math-based guarantees prevail.
Notable Articles and News Stories This Week:
For $5 A Month, Crypto Now Has Your Cell Plan Covered
Decentralised wireless provider Helium has struck a deal to mesh its burgeoning 5G network with T-Mobile’s cellular coverage.
The partnership is set to spawn what the companies have dubbed Helium Mobile, a subscription service starting at just $5 per month that runs Helium’s decentralised network alongside T-Mobile’s more established 5G grid.
The idea is to reward customers with Solana-native MOBILE tokens in exchange for sharing their data about Helium’s coverage quality. The initiative is set to launch in the first quarter of 2023.
Helium re-branded as a crypto company in 2019 to much fanfare, raising a $111 million venture round led by Andreessen Horowitz.
The cryptocurrency startup works by relying on users deploying crypto mining devices as nodes — which serve as wireless hotspots — in exchange for rewards denominated in Helium’s native HNT token. The company is hoping to carve itself a place in the top-heavy telecommunications industry by partnering with established companies such as T-Mobile.
Read more about the partnership here
Wintermute Whacked by $160M Hack Exploiting Known Vulnerability
Liquidity provider Wintermute, which provides liquidity across most CeFi and DeFi exchanges, has suffered a major setback in a second security-based incident this year.
CEO Evgeny Gaevoy disclosed in a Twitter thread on Tuesday that the platform encountered a $160 million breach in its decentralised finance (DeFi) operations. The firm’s CeFi operations and over-the-counter services weren’t affected, he said.
Gaevoy indicated Wintermute remains solvent, with $320 million in equity left after the hack. Users can expect the platform to face disruptions over the next few days until operations return to normal.
The CEO said the firm is “open to” treating the situation as a white hat, referring to hackers that just test vulnerabilities in a system, as compared to malicious hackers. It’s not known whether that is the hacker’s intent.
Read more about the hack here
Fed Raises Rates by 0.75% for Third Straight Month
The Federal Reserve doubled down on its newfound quantitative tightening strategy Wednesday, bumping interest rates by three-quarters of a percentage point for the third straight time.
The US regulator cited slowing consumer spending and production levels. The move marks the central bank’s fifth consecutive rate increase, a strategy it hopes will curb the highest inflation the country has seen in more than four decades.
Overall economic activity appears to have slowed a bit, Fed officials wrote in a statement released at the end of their two-day policy meeting, pointing to reduced spending and business production statistics.
The unemployment rate remains low, the central bank noted in its statement, but considering maximum employment, its inflation goals remain unchanged: a rate of 2% over the longer run.
In June, when the central bank opted to raise rates 75 basis points for the first time, Fed Chair Jerome Powell called the move “unusually large,” but if current conditions persist, higher increases could become the norm.
Read more about the hike here
Whilst we all have the option to look, to seek to understand, it’s often easier not to. Bitcoin, Ethereum and distributed ledger technology are complex systems that require significant due diligence. At Etherbridge, we aim to lower the barriers to understanding this fast-growing digital economy.
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This is not financial advice. All opinions expressed here are our own. We encourage investors to do their own research before making any investments.
