Interoperability

What Is Interoperability?

Blockchain interoperability, or cross-chain interoperability, is the ability to see and share information across multiple blockchains. One of the clear benefits of blockchain interoperability is being able to trade assets across various blockchains without the need for a centralized, custodial exchange.

Interoperability is important to a blockchain’s development as it enables users to transact across different platforms. While there are blockchain interoperability solutions available, more need to be created to connect separate blockchains, such as Bitcoin and Ethereum.

Wrapped tokens, also known as proxy tokens, are one popular solution, with Wrapped Bitcoin (WBTC) being the most popular one. However, wrapped tokens require a trusted custodian to hold user funds or create a secure mint/burn protocol to ensure the consistent supply of crypto assets.

Komodo is one example of a project working on a native blockchain interoperability solution through AtomicDEX, a decentralized exchange that is compatible with 99% of crypto assets. AtomicDEX achieves blockchain interoperability through atomic swaps, which are secure trades of digital assets made from one user to another via non-custodial wallets, thus creating decentralized bridges between different blockchains and protocols. AtomicDEX supports native cross-chain trading, meaning that no wrapped tokens are required. Cosmos is another example of a blockchain project focused on interoperability via its inter-blockchain communication (IBC) protocol.