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Picture the scene: you’re about to deposit your savings at a new bank. But as you’re filling out the forms, you come across a news story about a $624 million theft caused by a devastating exploit to the bank’s computer system.
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You start to look at other banks to find a safer alternative, but things aren’t that easy. You see, you have no way to properly differentiate or evaluate each bank’s back systems, and thefts are commonplace—in fact, a staggering $2.9 billion was stolen from banks due to similar back system issues between 2021 and 2023 alone.
You’d be forgiven for being a little hesitant about your next move!
It’s hard to believe, but the above is true. Except it isn’t banks that have suffered these high-profile, embarrassing breaches… it is cross-chain bridges.
We’ve seen breaches caused by just about everything you can think of—from unforeseen outcomes due to over-complicated design to unexpected backdoors to outright fraud. The one common thread between all of these incidents is that they are devastating to the people who rely on cross-chain solutions and damaging to the reputation of blockchain as a whole.
However, when you look past the headlines, a powerful truth comes into focus: cross-chain infrastructure is core infrastructure. So long as you continue to believe that blockchain has the potential to change the world for the better—and that mainstream adoption remains the goal—cross-chain solutions are here to stay. So, let’s have a frank and honest look at the current state of blockchain interoperability.
Core infrastructure first, product second
For the uninitiated, blockchain interoperability is the key to remedying the fragmented and siloed nature of blockchains. You see, blockchains, as trustless systems, are incapable of communicating with other blockchains without some kind of intervention. This is where cross-chain solutions come in. Cross-chain solutions enable data on one blockchain to flow seamlessly to another. For users of dApps and defi protocols, interacting with cross-chain solutions is a near-necessity, given that many of the most exciting and consequential projects are now being built away from the likes of the Ethereum L1 blockchain.
Today, the state of blockchain interoperability is one of fractured incompatibility. Numerous competing interoperability projects each vie for dominance, creating bespoke cross-chain products of varying security and repute that ultimately do nothing more than gerrymander the blockchain landscape. This incompatibility between different cross-chain solutions remains one of the great ironies of blockchain. Worse still, this incompatibility hinders the ability of users, enterprises, and regulators to assess the security of each alternative, which jeopardizes the widespread adoption of blockchain technology as a whole.
The solution to this is a shared framework for interoperability.
Blockchain interoperability can not be the responsibility of a single project. It needs to be an industry-wide effort. Instead of adopting an “everyone for themselves” mentality, we need to get together and decide, once and for all, how we want to transmit, receive, and verify data from another blockchain.
While some may object, adopting a shared framework for interoperability does not need to threaten the business models of existing interoperability projects. Rather, it would simply form the foundation for a maximally secure layer of core infrastructure upon which projects can build unique products that make different tradeoffs tailored for different use cases. This is the differentiation that matters.
Going back to the initial scenario, the world of traditional finance has seen tens of thousands of banks carve out thriving businesses with loyal customer bases while relying on secure, shared infrastructure. Similarly, web2 businesses around the world all rely on the Internet protocol suite: a shared framework that enables end-to-end data communication between distinct network devices on the Internet. A shared framework for interoperability—one that clearly outlines architectural guidelines and interface definitions is the clear path forward. Blockchain interoperability must be core infrastructure first, product second.
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Author: Temujin Louie
Temujin Louie is a communications specialist with more than ten years of experience driving the adoption of transformative digital technologies. His introduction to blockchain began in 2012 during his graduate studies at the London School of Economics and Political Science, where he studied Bitcoin’s impact on incumbent power structures. Temujin is a subject matter expert in blockchain interoperability. He has the rare talent of simplifying intricate technological concepts into engaging narratives. He has served as the essential bridge between the tech world and the broader public, offering his unique insights and strategic acumen to both tech startups and global multinational enterprises. Temujin joined Wanchain in March 2021 and serves as Wanchain’s CEO.