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For years, blockchain interoperability has been a buzzword and a top priority within the cryptocurrency and Web3 industries. Despite the large number of platforms, protocols, and projects dedicated to solving the lack of inter-blockchain communication, widespread interoperability within the growing ecosystem remains out of reach.
Despite the recent ups and downs in cryptocurrency prices, the foundations of the digital asset sector, including blockchain, are much more mature, stable, and focused on solving real-world problems. Blockchain technology is also being adopted in many industries, including supply chain management, where its transparent and traceable nature eliminates the need for multiple intermediaries and increases efficiency.
The progress blockchain has made in the last year or two, both within Web3 and expanding into other industries such as real estate and healthcare, cannot be undermined. Despite advances in areas such as decentralized finance, decentralized physical infrastructure networks, and tokenized real-world assets, it is still difficult to share assets across major blockchain networks such as Solana (SOL) and Ethereum (ETH). If there is no smooth transfer, how can we expect mainstream adoption?
Whether it’s a cross-chain bridge like Wormhole, a layer 2 solution like Arbitrum, an interoperability-oriented blockchain like Polkadot (DOT), or an interoperability protocol like Chainlink (LINK). Each of these solutions tends to solve only one aspect of the problem.
Security vulnerabilities associated with cross-chain bridges and sidechains are common because they rely on complex smart contracts and often employ a central administrator to hold funds while they are transferred. Well documented. This creates a single point of failure that hackers can exploit. All we have to do is investigate the Ronin Bridge hack that occurred in 2022. In this hack, hackers used hacked private keys to get away with about $625 million in cryptocurrency, and we understand the risks it poses.
Blockchains such as Polkadot and Cosmos have implemented innovative and sophisticated mechanisms to solve the interoperability puzzle. However, Polkadot’s interoperability is limited to its ecosystem and is not scalable. Cosmos is a bit more flexible, but it has security weaknesses and doesn’t live up to its mission of being the “Internet of Blockchains.”
The main problem with today’s limited blockchain interoperability is that blockchain interoperability fragments the space into disparate ecosystems, essentially increasing the number of islands of liquidity that isolated the industry. That’s what I’m doing. Polkadot’s parachains can communicate with each other, but being able to transfer assets and data between blockchain networks like Ethereum and Binance would be extremely beneficial to the Web3 space as a whole.
Solving this will enable faster, cheaper, more secure and seamless asset transfers, as well as the utility of stablecoins, altcoins and tokens across multiple chains. Additionally, interoperability allows for the creation of unified liquidity pools, greatly strengthening the role of DeFi protocols, creating deeper and more stable markets, and reducing slippage on large trades. .
Breaking down these liquidity barriers will not only allow for smoother flow of funds and increase the value of tokens. This will also lead to reduced dependence on centralized exchanges, which essentially act as risk bridges, increased scalability, a more user-friendly experience, and increased potential for innovation across Web3.
Although interoperability seems to be an increasingly lower priority as other Web3 developments and trends dominate the headlines, there is still a lot of research and development going on behind the scenes. Different projects have developed their own solutions, but no single framework has emerged as a universal standard.
For example, Kima is one of the most promising interoperability protocols currently developing solutions that integrate the entire blockchain ecosystem. As an asset-agnostic peer-to-peer transfer and payment protocol, Kima has developed a flexible decentralized solution to move assets between blockchains without using smart contracts. Leveraging a decentralized payments layer, universal payment rail, and liquidity cloud, Kima has undergone three years of intensive R&D in preparation for its upcoming mainnet and token launch.
Kima has secured pre-release support for all major blockchains, and its protocols are built to link digital assets with fiat systems such as bank accounts and credit cards, making it compatible with a wide range of Web3 and TradFi players. We are building partnerships. By facilitating smooth transfers between fiat and cryptocurrencies, Kima is establishing itself as a critical infrastructure at the intersection of both DeFi and finance.
Fostering true blockchain interoperability is certainly a challenge, but progress is being made. It requires extensive cooperation between competing networks and a commitment to universal standards. Standardizing communication protocols, promoting the highest degree of security, and maximizing decentralization is a good starting point. Continued investment in research and a thriving community of dedicated developers gives us optimism that true interoperability is achievable.
