Blockchain’s Interoperability Problem Is Rooted in how It Is Structured

Key Takeaways

• Blockchain interoperability faces challenges due to the redundancy and scaling issues inherent in synchronizing multiple networks.
• Centralized cross-chain bridges, responsible for billions in losses, highlight the need for more secure, decentralized solutions.
• Two main approaches to interoperability exist federated validator networks for controlled collaboration and network-level consensus for seamless, scalable integration.

The problem of blockchain interoperability stems from the very nature of blockchain technology. In practice, blockchain synchronizes data between all network participants, replicating the same data across many different servers.

This, however, is redundant almost by definition, leading to scaling issues as it’s hard to synchronize a network with many participants.

It’s more feasible to have multiple networks interacting with each other through cross-chain bridges rather than one network to rule them all.

Blockchain and Centralized Failure

At the present moment, technology hasn’t advanced far enough to create one network that can meet all scalability requirements. That is why interoperability between different networks becomes crucial.

One key challenge is the reliance on centralized cross-chain bridges, which have introduced significant security vulnerabilities.

These centralized solutions have been responsible for $2.83 billion in losses  as of Q2 2024, mainly due to hacks and exploits targeting their inherent weak points.

Such failures highlight the urgent need for decentralized alternatives that can eliminate these vulnerabilities while still supporting scalable blockchain ecosystems.

Two Approaches to Interoperability

If we could have trustless interoperability between different networks, they would effectively become one network. However, due to technical limitations, this can’t be achieved  right now.

Nonetheless, there are two scenarios for approaching interoperability.

This involves either trying to make interoperability as decentralized and trustless as possible or creating one network where interoperability is ingrained in the low-level architecture.

The first approach is represented by various federated validator networks, where a permissioned (explicitly approved) validator community provides interoperability between different blockchain networks.

A key aspect of blockchain technology is the use of consensus algorithms,  which allow distributed nodes in the network to agree on the state of the blockchain.

In this way, validators have to reach a consensus on the state of the networks they are connected to.

This process is somewhat similar to traditional blockchain consensus, with the important distinction of not being open to external participants without explicit approval.

Interoperability at the Consensus Level

In the second approach, you can try to make interoperability work at the consensus level of the entire network.

Interaction between distinctly separated parts of the network occurs at the base-layer level, with transactions between different sub-networks are essentially similar to base-layer transactions.

With enough validators, this approach may actually provide infinite scalability, limited only by the number of potential validators.

It should be noted that the emergence of new ecosystem networks can attract more validators into the ecosystem, making it scale essentially linearly.

While both approaches are valid, federated validator networks are more established, which is why major blockchain networks rely on them.

The trustless interoperability approach, however, is more decentralized, and networks based on it will undoubtedly continue to advance.