The keys to blockchain interoperability (and why it matters)

five blockchain keys

Without the ability of different computer systems, applications, and devices to access and share information, data would be digitally siloed and networking itself would be impossible. Any IT professional knows this – that it is interoperability that allows the internet, enterprise networks and the digital economy to function.

So too will interoperability between disparate blockchains be critical as enterprises ramp up deployments. After years in the development and pilot phases, blockchain began emerging from the shadows in 2019, with financial institutions launching commercial implementations to improve the speed of trade processing and increase data privacy for customers. Other industries, such as healthcare, insurance, retail, energy, real estate, logistics and media and entertainment, are testing blockchain with an eye toward near-term deployment.

The keen interest in blockchain across multiple sectors is driven by the perceived benefits the technology offers to enterprises. Created to support bitcoin and other cybercurrencies, blockchain allows participants in a distributed network to share a string of connected and sequential transactions that can’t be modified and need no single trusted or coordinating authority. These characteristics mean blockchains are decentralized, transparent and tamper-proof. They also are automated, which can result in lower operational and transactional costs.

But blockchain isn’t a monolithic technology. Various blockchain protocols, or flavors, have emerged independently or as offshoots, including Ethereum, Hyperledger Fabric, Quorum, Ripple, and Corda. Each has its own features and focus. Ethereum, for example, is a public blockchain, while Ripple is a payments blockchain and the other three (Hyperledger Fabric, Quorum, and Corda) were developed as enterprise blockchains. And while Quorum and Corda were built to support the financial services industry, and Ripple to support banks and financial institutions, Ethereum is targeted toward B2C business and Hyperledger Fabric toward the B2B market.

Not surprisingly, attaining interoperability between blockchain protocols with different purposes, features and programming languages can be a challenge. But for enterprises to get the most out of their blockchain investments, interoperability is imperative.

Forbes contributor Richard Gendel Brown argues that “the vision of interoperable enterprise blockchains rests on five key technical ingredients.” Those are:

  • Integration with existing systems
  • The ability to initiate transactions on other networks
  • The ability to conduct transactions with other chains
  • The ability to transact between deployments on the same chain by integrating apps
  • Reducing “buyer’s remorse” by making it easy to switch one underlying platform for another

Biser Dimitrov, co-founder of BlockEx, an enterprise blockchain development company, says he expects more progress toward interoperability between blockchain protocols this year. “In 2019 we saw the multi-cloud blockchain deployments,” he writes, “so don’t be surprised to see successful cross-blockchains pilots in 2020.”

Brown says “teams in the major enterprise blockchain communities have been diligently plugging away” at interoperability for years. Industry cooperatives also are forming to advance blockchain interoperability.

One such effort is the Blockchain Interoperability Alliance, formed in 2017 by blockchain network and technology vendors Aion, ICON, and Wanchain to “focus on developing a common set of standards for blockchain interoperability.” And the Enterprise Ethereum Alliance, a standards group supporting the development of private versions of Ethereum technology, in January launched a testing ground for blockchain interoperability.

Blockchain isn’t a magic bullet, but its potential for improving business processes, providing transactional transparency and security, and reducing operational costs is clear. That potential won’t be realized, however, until blockchains are interoperable.

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