Blockchain Interoperability – Understanding Cross-Chain Technology

• Ayushi Abrol
• March 01, 2022

In this blog, we will take you through an in-depth analysis of cross-chain technology as a concept and what it means for blockchain interoperability. Apart from this, we will also take a look at various aspects that relate to cross-chain technology and what it holds for the future!

 

As we know, blockchain works on a decentralized ecosystem that depends on a distributed ledger system. However, one downside that the current blockchain system suffers from is that it is not a cumulative platform. Different blockchain networks operate in isolation which does not allow them to communicate with each other. 

 

However, with the rise in emerging platforms, cross-chain technology is one such innovation that can address these issues and bring the required solutions.

 

Before we proceed with the discussion, let us first understand the conceptual meaning of cross-chain as technology and several other dimensions that relate to it.

 

What is cross-chain technology?

 

As far as the need for enhancing interoperability between blockchains is concerned, cross-chain technology is one of the most effective solutions to facilitate the same. It is an emerging technology that facilitates the transfer of value and data between two or more blockchains networks. 

 

The rapid increase in applications of some of the most common networks including Bitcoin Ethereum and Solana has led to the emergence of several key issues. While these networks enable a user to trade their tokens on the blockchain, there are several underlying economical and technical limitations while scaling up. As a result of these constraints, the users are usually not able to get the full benefits of technology because these chains operate separately. However, the introduction of cross-chain technology solves these problems by facilitating blockchain interoperability and enabling users to communicate and share data. 

 

The cross-chain protocol facilitates interoperability between different blockchain networks and enables the exchange of data between several networks. Through cross-chain protocol, users can communicate without the involvement of intermediaries. Consequently, blockchains that share similar networks can transfer value and data between each other.

 

Following are several main features of the cross-chain technology –

 

• Cross-chain technology works on the principle of atomicity. 
• It enables proper consistency between several interconnected blockchains. 
• It enables the distribution of networks across various platforms.

 

Why is cross-chain technology so important?

 

Now that we have learned about the functional meaning of cross-chain technology, let us now understand why it is so important. The importance of cross-chain technology lies in the fact that it enables the user to share data and trade tokens without necessarily using any intermediary. This infrastructure facilitates blockchain interoperability, allows two or multiple blockchains to elevate their efficiencies, trade-off decentralization, and security. 

 

It is also essential as it improves chain efficiency, reduces segmentation, and allows the users to communicate across multiple blockchains more freely. Therefore, cross-chain technology holds immense potential in enabling blockchain interoperability that can solve many issues and remove multiple constraints on blockchain and other networks. 

 

How does cross-chain technology work?

 

Since no defined approach can be equally applied for all networks, it differs from network to network. Every network uses a different system on blockchain interoperability to enable transactions without applying third-party integrations. Here are some of the most common and widely known approaches to isolated transactions across various chains –

 

Atomic Swaps

 

These are exchange facilitators that enable two different parties to trade their tokens on multiple blockchains. This type of mechanism does not involve the requirement for a centralized third party to facilitate the trades. Instead, it allows the user to directly trade their tokens on a peer-to-peer basis. This mechanism either finalizes the entire processor or does not initiate it in the first place. For instance, two parties can decide to keep a 1-hour restriction for the atomic swap. In this case, the original owners will receive their deposited tokens once the duration of 1 hour gets over even though not all the conditions are met. Although it may not be easy for a new user, a professional blockchain developer would find it easy to go with.

Relays

 

Relays enable blockchain networks to keep a check on the transactions and events taking place on other chains. They work on a chain-to-chain basis without the involvement of distributed nodes facilitating a single contract to act as a central client of other nodes on multiple chains. In this way, it can verify the entire history of transactions and specific central headers on demand. However, the relay approach requires a lot of expenditure to operate and take care of the security of operation. 

 

Apart from these two methods, there are various other approaches that cross-chain technology follows to function. Merged consensus is one of the approaches that enable two-way blockchain interoperability between several networks. On the other hand, a specific group of verified parties also come together to check the events of the chains. 

 

What are the benefits of cross-chain technology?

 

While cross-chain mechanism significantly helps in bringing blockchain interoperability, there are several underlying benefits of it.

 

Here are some significant benefits that cross-chain technology offers –

 

Connecting two independent blockchain networks –

One of the best advantages of cross-chain technology is that it enables effective communication and a strong connection between two different blockchain networks. Since it is usually used to initiate asset transfer and token swaps, there is no scope for blockchain incompatibility. In addition to this, it also allows the user to transfer information such as assets, transaction receipts, and virtual contracts. 

 

Better scalability –

Cross-chain technology facilitates better scalability than current mechanisms on blockchain due to their limited interoperability. Because this technology helps the users to interact with different blockchain networks, it is now possible to leverage the speed concerning multiple blockchains that ultimately enhance scalability. 

 

Enhanced flow of data and transfer of tokens –

As per the current mechanism, a user needs to send instructions from the source chain. Once the validator receives these instructions, the relayers convey the instructions to the destination chain. However, with cross-chain technology, the transaction is verified right after its completion and arrives at the destination change only once the verification is completed. In this way, it streamlines the entire process and makes the exchange and transfer of data seamless. 

 

If you also wish to trade in cryptocurrencies on the blockchain, it can take up any blockchain classes online to learn the basics.

 

Discouraging monopolization by large entities –

Cross-chain technology also helps in creating stability in the market by discouraging monopolization by large corporations. For instance, Bitcoin and Ethereum are the leading names in the world of cryptocurrencies that occupy more than 70% of the total market share. As a result of this dominance, there is no space left for new players in the market that can experiment with their strategies and make a spot in the existing competition. 

 

Cross-chain technology can help in such scenarios as it builds an ecosystem where the transaction processes will concentrate on all networks equally. The focus will not be only on a few major blockchain networks but on other networks as well. Hence, cross-chain technology can create a fair scenario by facilitating a balanced approach to state how crypto players participate in the marketplace.

 

How does cross-chain technology help achieve blockchain interoperability?

 

Although cross-chain technology is immensely helpful in combating the existing challenges on blockchain networks, how does it exactly help in achieving blockchain interoperability as a whole?

 

As we know, the success of blockchain technology largely depends on the networks that can be integrated into it. Interaction is also another indispensable factor that decides the usability of blockchain networks. Due to this reason, it is essential to put a system in place that can enable communication between different blockchains and facilitate the smooth sharing of data. This is where the role of cross-chain technologies comes into place. 

 

It attempts to solve the challenges involved by enhancing communication and interoperability between blockchain networks. There are several emerging cross-chain projects working on the same idea and acting as a platform enabling communication between different blocks in networks without involving an intermediary or third party. Various other platforms provide blockchain certification that any user can access upon completing the assigned course. 

 

As a concept that brings solutions to all these constraints and restrictions currently existing on the blockchain, interoperability has a long way to go in getting rid of intermediaries and third parties that are similar to centralized systems. As of now, there is no single wallet system in place that can enable a user to store and transfer the tokens and share data across various blockchains. Such a constraint becomes a huge issue in the long run as it hinders the user from initiating the transfer of data and trading tokens with proper security. 

 

Because it enables the user to get the benefits of a decentralized network and communicate with one another without any constant, cross-chain technology plays a key role in bringing these solutions together. Hence, cross-chain technology is the ultimate solution to achieving interoperability in blockchain and achieving even more transparency and efficiency in blockchain networks. 

 

Future of cross-chain technology

 

As an emerging mechanism, cross-chain technology has a long way to go in facilitating blockchain interoperability. On the other hand, it is also important for blockchain to spread its application to several industries. But due to the prevailing challenges and constraints, it may not be an easy way to go. Blockchain must bring interoperability on its platform and adoption in various segments that do not currently exist on its platform. In addition to this, the need for interoperability through crossing technology is not just limited to the safe transaction of tokens but also requires the safe and secure transfer of confidential data. 

 

Cross-chain technologies are still in the evolving phase but they can play a huge role in accelerating blockchain interoperability. It has huge potential in emerging as a viable mechanism to encourage better interoperability solutions in the future. Moreover, it is also essential for various corporate entities and retail investors that actively participate on blockchain platforms to trade in tokens. 

 

Since these businesses do not just deal in products and services but the transactions also involve sharing of confidential data and value. As a result, it is essential to put a system in place that can enable more transparency and secure systems for transactions on the blockchain without involving any intermediary. Also, if you wonder how to learn blockchain, you can refer to various sources that provide related information. Cross-chain technology is not just the need of today but also a hope for a better future!

 

Challenges to this new tech

 

However, there are still several challenges that cross-chain technology may fail to address. For instance, the existing mechanism does not preserve the history of non-fungible tokens as they are a part of transactions taking place on blockchains only between different platforms. Finalizing transactions and addressing the current challenges of blockchain technology is another concern that may not receive any resolution. 

 

In addition to this, several classes of industries may doubt the benefits that cross-chain technology offers concerning congestion and online attacks. It may lead to replication of benefits that blockchain currently offers that include low cost, resistance to censorship, and high security. Concerning these challenges, cross-chain technology will need to take these use cases under consideration and facilitate a more efficient system for resource sharing and data transfer. Also, if you are a business owner interested in learning about these technologies, make sure to refer to the best blockchain training for your training.

 

Final Takeaway

 

Blockchain interoperability and crossing technologies are two indispensable aspects of blockchain technology as a whole. Upon integrating the two concepts, we can discover the widening scope of cryptocurrency and its world but also promote the concept of blockchain adoption. The main reason why the importance of cross-chain technology is stressed so much is that it has great potential to deal with the current challenges. From the scalability issues to the dire need for transparency on blockchain networks, cross-chain technology can bring in several solutions to address the underlying challenges in the blockchain ecosystem. Hence, it would not be wrong to say that cross-chain technology is a budding future revolution!