Blockchain and Its Impact on Interoperability

Icy Canada Team
Icy Canada TeamOctober 7, 2022
Updated 2023/07/14 at 6:24 AM
Abstract Futuristic infographic with Visual data complexity , represent Big data concept, node base programming.
Abstract Futuristic infographic with Visual data complexity , represent Big data concept, node base programming. Source: Depositphotos

The 21st Century has seen blockchain to be one of the hotbeds of technological innovation. It has made its reign visible in industries across pharmaceutical, finance, gaming, manufacturing and what not! However, the history of this tech superpower dates back to the 1990s. 

Sneak Peek into the Timeline

It is important to go back to roots and understand the journey of a tool. Here’s a genesis of the evolution of blockchain from a mere thought to being accepted in major applications.

  • 1991- Stuart Haber and W. Scott Stornetta, in their research paper, described a computational technology that encrypted data with timestamps, making it immutable
  • 1992- Blockchain was defined as a chain of blocks, with each timestamped block containing a set of documents. The blocks were linked to the previous chain, using the proposed concept of Merkle Trees
  • 2004- The bedrock of cryptocurrency or digital cash was laid by Hal Finney. He introduced the Reusable Proof of Work, which received non-exchangeable tokens. The tokens were stored in a trusted server that allowed users globally to validate any transaction 
  • 2008- The enigmatic Satoshi Nakamoto conceptualized the decentralized blockchain, where blocks of data would be appended to the pre-existing chain. A peer-to-peer network of computers would timestamp and validate the transaction

Understanding Basics- What is Blockchain Technology

Through the milestones in the journey, blockchain evolved to be the distributed ledger technology as we see it today. 

  1. The database is stored in the form of blocks with timestamps
  2. The blocks are added to the chain and linked to previous blocks
  3. Each block cryptographically encrypts the data using hash codes, generated by a mathematical function that converts digital information to a sequence of numbers and letters.
  4. The block also has the hash of the previous block
  5. The blocks are timestamped which makes the chain irreversible and the data is immutable
  6. Each transaction needs to be authenticated by a majority of the nodes spread across a wide peer-to-peer network of computers
  7. This consensus leads to the decentralization of blockchain, which furnishes transparency 

With transparency and data privacy as its weapons, blockchain finds application in a wide array of industrial sectors, even in the best online casinos. From streamlining supply chains and financing the unbanked to efficient fund distribution to revolutionizing cash transfer with cryptocurrency, blockchain has sent rippling effects.

Communication- The Key to Success

Different blockchain projects are rolling out to handle specific transactions and data. The platforms are dedicated to serving special use cases

  • Stellar Blockchain works towards building a decentralized cross-border payments platform
  • Ethereum is one of the most famous blockchain platforms for smart contracts
  • VeChain is another platform aiming to strengthen supply chain operations 

Such blockchains work in isolated ecosystems. With the proliferation of different chains, communication among them becomes necessary. 

Interoperability is a feature that bridges fragmented chains and enables communication among different blockchains.

What is Interoperability?

In its simplest definition, interoperability refers to the communication technique between two blockchains. It facilitates the exchange and sharing of information across several blockchain networks.

For example, any transaction made in one blockchain network is documented. An interoperability solution can transfer this information from this chain to another. Currently, if an individual makes any transaction on Bitcoin, this information cannot be shared with the Ethereum chain. Interoperability will make this successful.

Several blockchains communicating with each other without the need for intermediaries is the guiding light for the development of fully decentralized platforms.

Crosschain Technology- Enabler of Interoperability

Crosschain enables blockchains get and send data to and from external systems. This helps in achieving interoperability. Such fully decentralised systems would fuel mass adoption of blockchain technology. Integrating cross chain technology boosts security and flexibility.

Apart from industrial solutions, sidechains, notary schemes, and oracles are some ways of incorporating interoperability.

  • Sidechain

Cross-chain links the main chain with the side chain, through which two active blockchains communicate.

  • Notary Scheme

A trusted third party called a notary facilitates the exchange of information between two blockchains.

  • Oracles

Decentralized oracles bridge the information gap between on-chain and off-chain.

Industrial Blockchain Interoperability Projects

Some industrial protocols that have pioneered the integration of interoperability include:

  • Polkadot- It enables the transfer of smart contracts across various blockchains. It is a multichain technology that works on pooled security methods.
  • Cosmos- Chains can communicate with each other by generating certificates in compliance with the Inter-Blockchain Communication protocol

Summing It Up

Blockchain interoperability wraps up a multitude of benefits like improving security, facilitating multi-token transactions, and so on. The adoption of blockchain in healthcare, finance, trading, and sectors where the value chain is of paramount importance will see their success rates going high with the further advent of interoperability.

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