This article was written by the community. It was prepared by Derek Yu, CEO of PureStake, the team behind the Moonbeam platform for cross-chain interoperability between applications.

The views expressed in this article are those of the author/creator and do not necessarily reflect the views of Binance Academy.

Carefully! Lots of text.

Cross-chain compatibility enables communication and interaction between applications from different blockchains. It allows you to transfer data and assets between disparate systems, providing improved connectivity and easy integration.

What is interoperability in blockchain

Interoperability in the context of blockchain means the ability to freely exchange data between different blockchains. Cross-chain interoperability allows smart contracts on different blockchains to communicate with each other without the need to send actual tokens from one chain to another.

For example, assets, services and transactions are recorded on the blockchain in the form of documentation. If the right interoperability solution is found, all operations on one network can be represented on another network. As a result, applications work with any asset or service, regardless of what blockchain it is on.

Why compatibility is so important

Blockchains are now in the same position as the Internet at the beginning of its existence: many isolated ecosystems that are unable to exchange information.

The lack of interoperability and connectivity hinders wider adoption of blockchain technology as it prevents the free flow of data and funds between different networks.

From a developer's perspective, each deployment is an isolated and independent project. Therefore, contract codes are often not related to each other and have no information about each other. For example, if you deploy a decentralized exchange (DEX) DApp on the Ethereum, BNB Chain, and Polygon networks separately, this will result in multiple isolated versions of the DApp.

For users, different versions of the same application often cause inconvenience, as they do not allow easy transfer of tokens from one blockchain to another. Typically, this problem is solved by destroying the assets on the original blockchain and re-creating them on another blockchain using a third-party bridge. But this process is often lengthy and complex, and results in fragmented islands of data. However, storing assets on multiple blockchains can be risky as they can be hacked and your funds can be withdrawn.

Solutions for cross-chain compatibility

Cross-chain interoperability is improving as developers create solutions to connect and transfer data and funds between different networks. Over time, blockchain applications can become more user-friendly and connected.

Cross-chain compatibility can be achieved in different ways. Below we provide examples of products that work on this task.

Chainlink is developing the Cross-Chain Interoperability Protocol (CCIP), an open-source standard for enabling cross-chain communications, including messaging and token transfer. The goal of CCIP is to provide a universal connection between hundreds of blockchains using a standardized interface. In the future, this solution could make it easier to create cross-chain applications and products.

Wormhole

Wormhole is a common interoperability protocol that enables the exchange of tokens and messages between different networks. It allows you to track messages on the original chain for verification and transfer of funds to other chains. Developers using Wormhole can create cross-chain decentralized applications called xDapps.

LayerZero

LayerZero is an omnichain protocol for lightweight and reliable message transfer between blockchains based on a system with trust level settings.

Ultralight LayerZero Nodes (ULN) are smart contracts that provide block headers from other connected chains to improve efficiency. The ULN only fires on demand, and the smart contract communicates with the oracle and relay through the LayerZero endpoint. This system ensures easy and efficient cross-chain communication.

Hyperlane

Hyperlane is a Proof of Stake (PoS) chain protocol that verifies and secures cross-chain communication using custom consensus methods. Hyperlane validators are responsible for validating every chain connected to Hyperlane, ensuring reliable and accurate cross-chain communication.

Inter-Blockchain Communication

Inter-Blockchain Communication (IBC) is a standard protocol for communicating blockchains on the Cosmos network, ensuring interoperability between different blockchains. IBC defines the minimum set of functions specified in the Interchain Standards (ICS) that define the way blockchains interact and exchange data.

One example is Osmosis, a decentralized exchange that allows users to swap tokens between different blockchains. Osmosis uses the IBC protocol to freely swap tokens from different chains, allowing holders to directly benefit from IBC interoperability.

Avalanche Warp Messaging

Avalanche Warp Messaging (AWM) is a flexible solution that allows developers to create custom messaging options for communications. The AWM structure itself requires a byte array, the index of the user who generated the BLS multisignature, and the BLS multisignature. AWM's goal is to make it easier to develop powerful DApps on the Avalanche network.

BTC Relay

BTC Relay is a chain relay for deploying applications in real-world environments. It allows Bitcoin block headers to be transferred to Ethereum. In this way, BTC Relay creates a bridge between the two networks based on a trustless system to verify the inclusion of Bitcoin transactions in the Ethereum blockchain.

Cross-Consensus Message Format

Cross-Consensus Message Format (XCM) enables communication between consensus systems on Polkadot. By merging with XCM version 3, developers can build apps to leverage bridges, cross-chain blocking, exchanges, NFTs, conditionals, contextual tracking, and more.

For example, the Moonbeam XCM SDK mainly supports the transfer of XCM tokens, allowing developers to interact with the Polkadot network using XCM.

Shoulders

Axelar offers a cross-chain communication solution using the General Message Passing protocol, which allows developers to create decentralized applications that run across multiple blockchain networks. Axelar also provides secure cross-chain compatibility through Delegated Proof of Stake (dPoS) consensus for users transferring tokens across the bridge.

For example, Axelar's bridge app called Satellite connects Ethereum-based BUSD to Cosmos, enabling interoperability between these ecosystems.

Compatibility Benefits and Limitations

The benefits of cross-chain compatibility are obvious. Thanks to it, users can seamlessly make transactions between different blockchains, without resorting to the services of centralized intermediaries. It also reduces fragmentation, improves interoperability within the broader blockchain ecosystem, and opens up new opportunities and business models.

However, these solutions have some limitations. Different blockchains may have different security solutions, consensus algorithms, and programming languages, which increases technical complexity. In addition, these solutions can increase the likelihood of attacks and create new challenges for managing various networks.

In conclusion

Cross-chain interoperability solutions can significantly improve the efficiency and functionality of blockchains by enabling communication, data and funds transfer between different networks.

With the development of cross-chain interoperability between blockchains, it is expected that more innovation will emerge and more opportunities will open up for applications. All of this can lead to a more connected and user-friendly ecosystem.

However, widespread use of cross-chain interoperability solutions will only be possible if they are stable and secure. It is unclear which solution will provide the most efficient, stable and reliable tools.

  • What are bridges between blockchains?

  • What is Level 0 Blockchain?

  • What is Level 1 Blockchain

Risk Warning and Disclaimer: The following materials are provided “as is” without warranty of any kind for general reference and educational purposes only. This information should not be considered financial advice, legal advice, or a recommendation to purchase any specific product or service. You should seek your own advice from appropriate professional advisers. Since this article was written by a third party author, please note that the opinions expressed are those of the third party author and do not necessarily reflect the views of Binance Academy. For more detailed information please follow the link. The value of digital assets can be volatile. The value of the funds invested may go up and down. You may not get your invested funds back. You are solely responsible for your investment decisions. Binance Academy is not responsible for your possible losses. This information does not constitute financial, legal or professional advice. To learn more, please read our Terms of Use and Risk Disclosure.