Blockchain technology is becoming increasingly important in wider society as it provides solutions to many problems such as financial inclusivity and data security. To make this a reality, industry commentators say a single, interoperable communications standard is necessary, much like TCP/IP is to the internet. Until this is achieved, blockchain networks are isolated machines with no way to transfer data and value across different networks. Companies, such as Chainlink Labs, are actively working to develop solutions to this issue.

Interoperability is vital for services like tokenizing real-world assets, as this ensures the liquidity of the asset is not limited to just a single ecosystem. To do this, proper risk management systems, such as KYC credentials, must be put in place to add authenticity to tokenized RWAs. Three commonly used blockchain interoperability solutions are cross-chain bridges, independent layer 2 sidechains and oracles.

Cross-chain bridges have experienced some issues, such as the extensive hack seen on Ronin Bridge in March 2022; this was due to a combination of choices in security setups and consensus mechanisms, which were considered centralized and thus more vulnerable to attack. To avoid these events from occurring it is important that interoperability is incorporated within the platform, not reliant on third-party bridges.

Several protocols aiming to bridge this gap between blockchains are on the market today, and are being developed to constantly increase their efficiency – such as the Cross-Chain Interoperability Protocol from Chainlink, the IBC from Cosmos, Overledger from Quant Network, and Polkadot. It is claimed by some that ZK-rollups are“the endgame” of blockchain scaling, with Polygon Miden founder suggesting they are the answer. As technology progresses and protocol development using interoperability solutions continues, it is hoped that eventually blockchains will communicate as seamlessly as the web does.



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