Blockchain Interoperability Remains a Critical Missing Puzzle Piece
Blockchain technology has taken its time to reach a stage where it is actively being pursued and tested in a range of different industries. Major companies and businesses are looking to the nascent technology as the answer to various problems in their given ecosystem.
From healthcare to supply chain (two prime examples) blockchain is offering up numerous potential solutions for increasing the efficiency and operations of those critical, and valuable, industries.
However, blockchain is still in its embryonic stages, and issues around its performance and capabilities have hamstrung its progression into mainstream usage. Scaling remains a central concern of those in the blockchain community, with different solutions being brought forward and tested.
These include sharding, Plasma and the Lightning Network, as well as Ethereum changing its entire consensus algorithm.
One aspect of blockchain limitation that is not being addressed as fervently is interoperability. Interoperability calls for blockchains being built and customised for individual companies (rather than sectors) to be able to operate and interact fully with others in the industry.
A lot of issues in the supply chain currently stem from different systems and parties within the chain interacting along the route a product takes. There is a lot of difficulty moving goods, with trust, from the start of the chain to the end - in a world without blockchain interoperability, the problem persists in a different guise.
Interoperability Should Be the Standard
Currently, blockchains operate only within themselves. Put simply, the decentralised ledger and tokens attributed to one blockchain cannot work or link in any way to another blockchain. If a transaction is recorded on the Bitcoin blockchain it will not, and can not, have any bearing or effect on the Ethereum chain, for example.
However, interoperability and cross-chain technology would make it possible to share information across chains. This would allow users of one chain to access information on another chains, and keep a ledger of transactions across different chains. It sounds simple enough and is comparable to different computer operating systems utilising the internet. In the blockchain space, though, we are still far from it being a reality.
The fact that the chains operate in isolation is part of the reason people cannot yet enjoy the full benefits of distributed ledger technology. The inability of different blockchains to communicate with one another may be slowing adoption in the mainstream sectors, as well as the technology not living up to its billing.
The Missing Piece?
While many seek out interoperability as the missing piece of the puzzle, it would be unfair to say that without interoperability that blockchain cannot progress any further.
Spencer Dixon, a software developer with a focus on blockchain, machine learning, and data, explains how interoperability can unlock the next stage in the technology's advancement.
"I don't think it's fair to say the future of blockchain is solely reliant on interoperability, there are plenty of viable applications of blockchain today, as Bitcoin has proven over the past decade," Dixon told BDJ.
"Interoperability will allow blockchain to break into areas where it currently cannot, bringing further maturity and opportunity into the space.
“This makes it difficult to build the kinds of solutions that would make use of both Bitcoin and Ethereum together”
"At present, every transaction on a blockchain is confined to that particular blockchain. Bitcoin knows nothing about what Ethereum is doing and so on. This makes it difficult to build the kinds of solutions that would make use of both Bitcoin and Ethereum together. Interoperability allows us to bridge this gap."
Dixon goes on to use the supply chain as an example of one area that can benefit from an increase in interoperability on blockchains:
"Imagine we were building a blockchain to track the shipping of some widgets. Perhaps we decide to track the location of our widgets with some sensors, reporting their location periodically to a blockchain, as well as handle the chain of custody, and take payment in Bitcoin. Each type of transaction needs to happen differently with inherently different properties."
It is a simple example how the use of different blockchains can be helpful because of their different niches, but how it can become a nightmare trying to operate with a bevy of chains on one supply chain.
Toward Blockchain Integration
In a university paper from Finland titled ‘Digital Supply Chain Transformation toward Blockchain Integration’, Kari Korpela, Jukka Hallikas and Tomi Dahlberg bring up the case for interoperability.
The introduction of the paper explains how the supply chain environment is a multi-party one that is reliant on the need to cooperate and work together to integrate this new technology.
"Digital supply chain (DSC) collaboration is a multi-stakeholder environment involving different needs and goals, in which big companies are seen as hub organizations that lead the integration work, along with their main suppliers. Even competing companies are collaborating to pursue the integration of the entire supply network," the paper reads.
"Value-added service providers play different roles, collaborating with common interests to establish interoperability of systems across organizations.
"DSC should offer companies competitive advantage: intermediates should offer fast integration; logistics partners should offer visibility of deliveries, using tracking and tracing features; information and communication technology (ICT) companies should develop cost-effective cloud solutions, and finance providers should offer working capital through the transaction banking services."
As the paper highlights, the many stakeholders involved in a blockchain need to be able to work together in a space where there is trust. Blockchain technology offers the transparency to ensure that trust. Without interoperability, the solutions become quite siloed.
From Walmart to Target, Maersk to Starbucks, a lot of companies are looking at creating their own blockchain solutions for the supply chain. If they each build their own custom blockchain solution without considering interoperability, they are only taking half the advantage.
Starbucks may want to track and trace its coffee beans for ethical reasons, and Maersk shipping may want blockchain to ensure transparency. If Starbucks coffee is shipped on Maersk and the two blockchains never interact, there is a loss for both those companies.
Learning to Interact
The blockchain space is still new. It is still solving problems at the same time as discovering new ones, as it slowly becomes more ingrained into the mainstream. Interoperability is a sticking point, but not one that will need reinventing of the wheel - as Dixon goes on to explain.
"In the web world, we can already lean on existing software and tools to do these things to save us from reinventing the wheel. They talk to each other really well. But in the blockchain world, if we want these services to work together, it's far more challenging," he says.
"With interoperability between blockchains, we would be able to lean on the specialisms of existing chains and leverage them to build complex solutions”
"With interoperability between blockchains, we would be able to lean on the specialisms of existing chains and leverage them to build complex solutions to some of the messier real-world problems.
"I hope that interoperability will provide two things to the blockchain world; firstly, the ability to solve the messy real-world problems that require multiple kinds of blockchain, asset swapping or different kinds of inner workings. And secondly, that it will allow developers to focus on treating blockchains as specialist services that can be leveraged by others."
The Year of Enterprise Usage
The last 18 months or so in the blockchain ecosystem has seen major organisations exploring the technology to make their operations more effective. This stage has been highly experimental and very much an individual testing ground.
Companies want to know if they can use blockchain internally to make their businesses better. Soon enough, though, they will want to see if they can take it a step further and use their blockchain externally.
With many different companies building blockchain solutions, there will come a time where these companies will want to interact on that level. Without considering interoperability, this won't be a possibility, and the next step in making the technology work will stutter to a halt.
It is not only blockchain that will need to be interoperable to succeed. The internet of things (IoT) will need similar levels of cohesion if it is to flourish as a world-shaping technology. In fact, the sheer diversity of IoT manufacturers and projects could be one of the primary obstacles in its growth. Just consider the sheer plethora of different fitness trackers or the various smartphone manufacturers - these all need to work together seamlessly to see a truly integrated IoT.
Without IoT developers working together to build interoperable tools, bulbs won’t work with light switches, sensors won’t work with different smartphones and devices will be incompatible different with networks. Organisations which develop standards have done a decent job thus far of standardising protocols and this must continue as the technology matures. At present, though, the level of interoperability is not sophisticated enough to bear any resemblance to the science fiction-like internet of things we have been promised. From autonomous cars being able to communicate with one another to your fridge connecting to your laptop, IoT interoperability will be key going forward.
Illustrations by Kseniya Forbender
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]
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