Accenture has added to its growing family of blockchain projects by investing in a startup called IPFS. The company is a decentralized file system that aims to improve the speed and security of the P2P network by decentralizing it. IPFS is decentralized because all of its resources are stored on computers that are not controlled by the company, so it is not subject to censorship.
In this post, we’ll look at the problem of interoperability in the blockchain space, and show that it is largely solved. All the complicated stuff behind the scenes has been hidden from the public for the past few years, and we’ve got the solution. Trustless bridges may be the key to blockchain interoperability.
The “trustless” aspect of blockchain transfers is something that many blockchains are working to achieve. With the help of a trusted third party, we can finally establish trust between different blockchains without the need of a central authority. Unfortunately, this is a problem that has plagued the blockchain world since its inception. The problem is that a trusted third party can be costly in terms of money and time, and not all blockchains are amenable to the idea of a trusted third party.. Read more about blockchain interoperability projects and let us know what you think.
Lovers of cryptocurrency and blockchain are proud to be part of a community that is working towards the future of financial systems. However, the community is fragmented by nature, with multiple blockchains operating independently of each other. The dream of mass adoption of blockchain and decentralized finance meets a major obstacle: lack of interoperability.
Meanwhile, decentralized applications (DApps) – the fruits of decentralization – continue to exist. DApp developers are struggling to do transactions between different blockchain networks, and the reason is that they are stuck in the Ethereum ecosystem. Although Ethereum has a better infrastructure, it is losing ground.
Related: Professional traders need one global crypto, not hundreds of lakes
Ethereum’s quest to dominate the single-network blockchain
According to the DApp Market Report, about 59% of all DApps run on the Ethereum blockchain. Despite the growth of decentralized finance on Ethereum, many developers and users are dissatisfied with the network.
Rising transaction costs are a real scourge for developers and users. The Ethereum network is also prone to congestion. Even six years after its launch, Ethereum’s transaction speed is about 15 transactions per second (TPS). The combination of the above factors frustrates the efforts of the project proponents and jeopardizes the feasibility of their projects.
Related: Where does the future lie for DeFi : Ethereum or Bitcoin? The experts’ response
Moreover, the long-awaited update to Ethereum 2.0 did not solve the scalability problem. The full implementation of Eth2 may take years. Given related efforts such as proof-of-stake migrations and security upgrades, actions to improve scalability don’t seem to be on the priority list.
Part of Eth2’s vision is to make applications faster and cheaper. But as reality moves further and further away from this vision, the crypto finance community is looking for alternatives.
These alternatives are based on cooperation, not competition. One of the potential growth factors for decentralised funding is increasing interoperability.
Interoperability and finding solutions for interoperability
Interoperability is proposed as a solution to apply decentralized finance outside of the Ethereum blockchain, and thus boost the idea of decentralization. With seamless connectivity between different blockchain networks, interoperability is the future.
Thanks to interoperability, the traditional mindset that I use blockchain B because it is better than blockchain A is undergoing a paradigm shift. We are moving towards a culture where A and B blockchains work together and are used together for a purpose.
For more context, consider the following: Without the compatibility of the vast majority of deFi protocols, the largest blockchain network and cryptocurrency Bitcoin (BTC) would be missing. However, blockchain bridges have allowed their BTC assets to be transferred to the Ethereum network in the form of packaged tokens, such as. B. Wrapped Bitcoin (WBTC), which tokenized about 1% of its bitcoin holdings on Ethereum. These ERC-20 compatible tokens enable faster bitcoin transactions and allow users to use bitcoins in DeFi protocols like Aave to borrow and borrow assets – or perform other DeFi activities.
Blockchain compatibility allows users to conduct transactions with ERC-20 tokens on Binance’s smartchain, avoiding Ethereum’s jump fees and allowing transactions to be completed almost instantly. The emergence of compatible solutions should serve as a showcase for the DeFi’s many products and applications.
Many developers, especially in high volume areas such as games, are now looking to solve their problems with dual-layer solutions. However, many of these solutions are slow to implement, while developers are reluctant to consider options such as plasma state channel technology. Aggregation is a new workaround that aggregates transactions to increase throughput.
Related: Two-tier scaling solutions address business challenges with public blockchain
However, it is a fact that many of Ethereum’s layer 2 protocols leave DApps limited to the Ethereum ecosystem. Without interoperability, developers and users cannot use other platforms.
Second, how do you achieve seamless interoperability while bypassing the difficulties of existing Layer 2 infrastructure?
Unreliable bridges The holy grail of blockchain interoperability?
As the name suggests, blockchain bridges are built to connect blockchains and facilitate communication. This technology solves the problem of interaction between two different protocols. By using untrusted bridges, users can leverage both blockchains.
Generally, these bridges are managed based on burns and folds. Therefore, the tokens do not leave their respective blockchain during the transaction. The token is burned or locked on its blockchain and its equivalent is mined or created on another blockchain. This method ensures a constant supply of tokens and reduces volatility.
There are two types of blockchain bridges: federated and non-federated. The first is a private and rather centralized project that requires certain criteria to be met before a bridge can be used. On the other hand, unreliable bridges work in a decentralized environment: Like Bitcoin and Ether (ETH) miners, unreliable bridge validators have an incentive to maintain bridges. In this case, trust bridges work with mathematical truths and are free from human error or corruption.
In addition to the innate transparency, bridges of trust have many advantages. They guarantee the interoperability of tokens between different networks. Ethereum can use this ability to offload its transactions to another blockchain. Moreover, untrusted bridges relieve the blockchain when transaction volumes are high and provide users – especially DApp developers – with a seamless transaction experience.
Untrusted bridges and open finance
Using trustless bridges is an effective way for blockchain technology to grow in harmony. It also encourages developers to create WiFi applications that advance the prospects of an open financial system. Bridges without Trust ushers in a new era of interoperability that will ultimately unlock new value for all market participants.
Trust bridges enable cooperation between theFi platforms and central banks. A peer-to-peer banking system that leverages the convenience of traditional banking systems is a hope born of bridges of trust.
This article contains no investment advice or recommendations. Any investment or business transaction involves risk, and readers should do their own research before making a decision.
The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent those of Cointelegraph.
Stephen Tse is the founder and CEO of Harmony.one. Previously, he worked as a researcher at Microsoft Research, as a senior infrastructure engineer at Google, and as a chief search engineer at Apple.Decentralized blockchain computing is the promising technology behind cryptocurrencies like Bitcoin and Ethereum, as it allows for a whole new range of applications. But today, it’s still too unwieldy to be deployed at scale, due to the notorious “blockchain bloat” problem.. Read more about blockchain bridge and let us know what you think.
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