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Web 3.0 is still at its nascent stages. When we talk about the web, then mostly we are talking about Web 2.0. Interoperability is rife in Web 2.0. By interoperability we mean that different computer systems can interact with each other to share and use data and value. But in Web 3.0, interoperability is still evolving to reach the level, generally experienced in a Web 2.0. We are in the era that might witness a paradigm shift in interoperability in Web 3.0 from cross chain to omnichain interoperability.
This guide unfolds the meaning of the new revolution in blockchain interoperability, i.e. omnichain interoperability. But we will start with revisiting the concepts of interoperability, interoperability in blockchain, the current solutions for interoperability in blockchain, their challenges and finally the new concept of omnichain interoperability.
What is Interoperability?
Interoperability refers to the ease with which disparate computerized systems like applications, databases, etc. can share data and value among themselves, even though these systems are built by different manufacturers. While computer systems in Web 2.0 are rife with interoperability, interoperability is not that mature in Web 3.0.
In Web 2.0 we are able to get access to content or data from different servers and sources at one place. For example, you can open your Chrome browser and consume data from computerized systems managed by disparate servers. For instance, Facebook, Google, Amazon and so on. It is that seamless that you do not even think twice before sending email (data) from Gmail to Yahoo or Microsoft outlook.
Interoperability in Web 3.0 or Blockchain
Interoperability in Web 3.0 is not as evolved as it is in Web 2.0 (discussed above). There are hundreds of blockchain platforms in the Web 3.0 like Bitcoin, Ethereum, Solana, Cardano, Avalanche, Bitgert, TechPayChain and more. Each of these blockchain platforms live in siloes and you cannot easily transfer data or tokens from one chain to the other.
Interoperability in Blockchain refers to the ease with which disparate blockchain platforms can share data and value among themselves.
The incumbent cross chain capabilities like bridges, sidechain and oracles, manage to address this issue of interoperability in blockchains, but not fully. Omnichain interoperability solutions are the future which will enable a seamless user experience in using disparate blockchain platforms, sharing data and tokens.
Incumbent Cross Chain Solutions which solve half the problem
Currently in Web 3.0, interoperability is limited to blockchain platforms which are similar in nature. For instance, cross chain compatibility or interoperability can be made possible between Ethereum and Ethereum compatible blockchain platforms like Polygon, Binance Smart Chain, Avalanche, etc. However, cross chain compatibility is not possible between Bitcoin and Ethereum.
Currently, we are employing the below listed mechanisms for interoperability in the blockchain space.
- Sidechains: These are also known as layer 2 platforms. They have their own token, consensus mechanisms and security parameters. These are parachains and aim to transfer Smart Contracts’ data between blockchain platforms. They take some of the processing away from the main blockchain platforms and hence decongests it, increasing its speed. Example: Polkadot, Cosmos.
Cosmos for example, has developed an Inter Blockchain Communication Protocol (IBCP) which supports blockchain platforms to communicate data and value among themselves. Similarly, Polkadot has the Inter Chain Messaging Protocol (ICMP).
- Oracles: Oracles connect blockchain platforms with off chain applications for data from outside world. For example, an Oracle may help a blockchain platform to get the data of the political hierarchy of USA or any other country as required. Example: Chainlink, API3.
- Bridges and swaps: Bridges in blockchain are somewhat similar to the physical bridges we see in our daily lives to connect two otherwise separate locations. Bridges facilitate the sharing of data and value between two different blockchain platforms. Example: Cross-Chain bridge, Multichain.
Omnichain Interoperability in Blockchain
Most incumbent multichain or cross chain capabilities are focused on Ethereum and Ethereum compatible chains. This fact overrides the fact that the Web 3.0 is expanding with NFTs, Metaverses and Dapps (majorly DeFi) being built on other non-EVM compatible chains. Its imperative to think of an Omnichain solution which could make all these disparate chains (EVM or non EVM compatible) interoperable.
Omnichain interoperability is all about going beyond the current cross chain solutions targeting EVM compatible chain only. It aims at developing multi chain solution which encompasses both EVM and non EVM chains to build multi-chain decentralized exchanges (DEXs), multi-chain lending, yield farming, and multi-chain NFTs.
Omnichain Interoperability-Current Scenario
Creating an Omnichain solution is one of the prime challenges in the blockchain space. The rise of the blockchain ecosystem with applications for gaming, finance, NFTs, Metaverses, has risen the demand for a Omnichain system which can accommodate all these thousands of applications on disparate blockchains into one interoperable Omnichain.
LayerZero is one such company working towards Omnichain interoperability in Web 3.0. LayerZero Labs, a team based in Canada, developed the LayerZero interoperability protocol, aimed to natively support cross-blockchain communication. The team raised a significant round in early 2022. Leading venture capital firms led the impressive $100M round at an over $1 Billion valuation.
LayerZero Labs will deploy a Smart Contract on all the blockchain platforms that it supports. This Smart Contract, will be the mediator for all inter-blockchain communications.
Until now the Layer Zero solution supports blockchains like Ethereum, Arbitrum, Avalanche, BSC, Fantom, Optimism, and Polygon, compatible with the Ethereum Virtual Machine (EVM). The Layer Zero team also plans to include non-EVM chains such as Cosmos Hub, Cronos, and others in the future.