How to achieve blockchain interoperability

For years, blockchain interoperability has been a buzzword and top priority within the cryptocurrency and web3 industry. Despite numerous platforms, protocols, and projects dedicated to solving the lack of communication between blockchains, broad interoperability within the expanding ecosystem remains out of reach.

Despite the ups and downs in cryptocurrency prices we’ve seen lately, the foundation of the digital asset sector, which includes blockchain, is much more mature, stable, and focused on solving real-world problems. We have also seen the adoption of blockchain technology in numerous industries, including supply chain management, where it has improved efficiency by eliminating the need for multiple intermediaries through its transparent and traceable features.

We cannot slow down the progress of blockchain over the last two years, both within web3 and with its expansion to other industries such as real estate and healthcare. Despite advances in areas such as decentralized finance, decentralized physical infrastructure networksand real-world tokenized assets, how can we expect widespread adoption if assets cannot be transferred seamlessly between major blockchain networks like Solana (SUN) and Ethereum (ETH)?

Whether it’s cross-chain bridges like Wormhole, layer 2 solutions like Arbitrum, interoperability-oriented blockchains like Polkadot (SPOT), or interoperability protocols such as Chainlink (LINK), each of these solutions tends to solve only one aspect of the problem.

Security vulnerabilities associated with cross-chain bridges and sidechains have been well documented, as they rely on complex smart contracts and often employ centralized custodians to hold funds during transfers. This creates a single point of failure that hackers can and have exploited. All we have to do is examine the 2022 Ronin Bridge hack, where a The hacker absconded with about 625 million dollars into crypto via a hacked private key, to understand the risk they pose.

Blockchains like Polkadot or Cosmos have implemented innovative and sophisticated mechanisms to try to solve the interoperability puzzle. However, Polkadot’s interoperability is limited to its ecosystem and is not scalable. Cosmos offers a little more flexibility, but suffers from security weaknesses and has not fulfilled its mission of being the “Blockchain Internet.”

The main problem with blockchain’s current limited interoperability is that it fragments the space into disparate ecosystems, essentially turning the industry into a growing number of isolated islands of liquidity. Polkadot parachains can communicate with each other, but being able to transfer assets and data between blockchain networks like Ethereum or Binance would be immensely more beneficial to the entire web3 space.

Solving this would enable seamless asset transfers by making them faster, cheaper, and more secure, and would even improve the utility of stablecoins, altcoins, and tokens on multiple chains. Furthermore, interoperability would greatly enhance the role of DeFi protocols by enabling the creation of unified liquidity pools, which would create deeper and more stable markets and reduce slippages in larger trades.

Breaking down these liquidity barriers not only equates to a smoother flow of funds and higher token values. It can also translate into less reliance on centralized exchanges, which essentially serve as risk bridges, better scalability, a more user-friendly experience, and greater potential for innovation across the web3.

While interoperability seems less and less of a priority as other web3 developments and trends grab the headlines, there is still a lot of R&D going on behind the scenes. Several projects are developing their own solutions, but there is no single framework that has emerged as a universal standard.

Kima, for example, represents one of the most promising interoperability protocols that is currently developing a solution to unify the entire blockchain ecosystem. As a peer-to-peer, asset-agnostic money transfer and payment protocol, Kima has developed a flexible decentralized solution to move assets between blockchains without using smart contracts. Powered by its decentralized settlement layer, universal payment lane, and liquidity cloud, Kima has undergone three years of intense research and development as it prepares for its upcoming token and mainnet launch.

Kima has secured pre-launch support for major blockchains and is developing partnerships with a wide range of web3 and TradFi players because its protocol is also designed to link digital assets with fiat systems such as bank accounts and credit cards. By facilitating seamless transfers between fiat and crypto, Kima positions itself as a crucial piece of infrastructure at the intersection of DeFi and finance.

Fostering true blockchain interoperability is certainly a challenge, but progress is being made. It requires extensive collaborations between competing networks and a commitment to a universal standard. Standardizing communication protocols, facilitating the highest degree of security, and maximizing decentralization are a good starting point. Continued investment in research coupled with a thriving community of dedicated developers provides enough optimism that genuine interoperability is possible.