A key driver of liquidity and value in the blockchain technology space is the development of interchain operability. With so many powerful blockchains being developed and deployed for different use cases, the potential for a bridging system that efficiently connects blockchains together is massive. We will provide a quick overview of what technologies exist now, and what tech to look out for in the longer term.
Current Technology — Low Level 1:1 Atomic Chain Swaps
At this point, most of the deployed interchain technology revolve around low level implementations of atomic chain swaps, with basic interchain linkages between only two networks.
An example is the Dogethereum bridge (not to be confused with Dogethereum, a layer 2 Doge blockchain based on Ethereum) — that is, the interchain connection developed between the Dogecoin network and Ethereum.
The Dogethereum bridge operates via the use of a layer-2 solution built over both the Ethereum network and the Dogecoin network. Designated Dogecoin addresses act as agents for transfers for Dogecoins to the Ethereum network, whilst an Ethereum ERC-20 token smart contract provides the basis for Doge on the Ethereum network itself. For each Dogecoin transferred to an agents address, a collateralised Doge token is created on the Ethereum network, essentially making Dogecoin a fully function Ethereum token — usable in smart contracts, transfers and dApps. Currently, the usability of the Dogecoin bridge is limited, as there are no front end services that provide transfers between the two networks. Users are required to run both an Ethereum and Doge node to utilise the current version of the bridge, with only command line tools available for operating between blockchains, so it’s a really technical exercise to use it but it works.
Another similar solution is the BTC Relay system, connecting the Ethereum and Bitcoin networks. BTC Relay uses an off-chain Bitcoin blockchain explorer in conjunction with a Ethereum smart contract to keep a copy of the bitcoin blockchain accessible and usable in Ethereum smart contracts. In simple terms, typically it is impossible to track Bitcoin transactions from inside an Ethereum smart contract, as they are contained on discrete blockchain networks. By keeping Bitcoin blocks stored on the Ethereum network, Bitcoin transactions can be tracked and used by Ethereum contracts directly. It is important to note here, however, that BTC relay does not provide a method to bridge Ethereum information to Bitcoin — and as such is a relatively limited solution. Sadly the BTC Relay has been left neglected, as the relayed copy of the blockchain has fallen significantly behind the mainnet Bitcoin blockchain. See our video on the BTC Relay below:
The major issue with most of the currently live cross-chain solutions is their reliance on insecure off-chain operations to ensure bridging between blockchains. Using the examples above, the Dogethereum bridge relies on trusting off-chain agents relaying Doge and DogeEthereum tokens correctly (although there is a small element of staking here). The BTC Relay example relies on ‘relayers’ to keep the blockchain up to date with the relevant blocks and transactions. The lack of major security incidents with these solutions is not necessarily a result of them being secure, but rather resulting from a lack of adoption because of their immaturity.
Near Term/Future Technology — Early Implementations of Cosmos, Polkadot and HyperLedger Quilt
Right now there are three clear leaders in the development of Interchain operability; Cosmos, Polkadot and HyperLedger Quilt. Each have their own approach to developing cross-chain solutions, as we will discuss below.
The Cosmos Protocol — A ‘Blockchain of Blockchains’
Cosmos is a project aiming to provide cross-blockchain connectivity via their own purpose built blockchain. The Cosmos model is based on Cosmos Hubs which connect individual Cosmos Zones. Probably the simplest way to summarise this system is to think of the Zones as individual blockchains, and the Hubs as the mechanism by which the Zones communicate.
Individual Zone’s are designed to have different governance systems, monetary policy and token models. The operation of those individual blockchain’s and their mining algorithms is completely independent of those of the rest of the Cosmos network, but to communicate with the Cosmos Hubs — and thus the other Zones — these Zone’s must have the ability to utilise the Cosmos Interblockchain Connectivity system (IBC).
Hubs, on the other hand, operate as the mediator between the zones within Cosmos, essentially providing the basis for IBC. Hubs are hosted on a blockchain layer above the separate Zone blockchains, where the native currency is the Cosmos Atom. Atom’s form the basis for Cosmos’s Proof of Stake consensus algorithm, with block validators chosen at a probability directly proportional to their Atom holdings (see our PoW vs PoS article).
The major issue for Cosmos right now is that their implementation relies on the adoption of their individual Zone blockchains. Because these Zone chains require a mechanism to communicate with the central Cosmos Hubs, software forks are required on any major preexisting chain in order to facilitate this. They do have a mechanism for forking pre-existing chains as they are to be immediately compatible with the Cosmos chain, called ‘hard spooning’. These basically replicate the complete state of a blockchain at a certain point (addresses, balances and contracts inclusive), but add the ability to communicate within the Cosmos Zones and Hubs system. Again, however, this requires adoption within these spooned versions of Cosmos chains. An example of one of these is the Cosmos version of Ethereum — Ethermint — which suffers from a lack of adoption.
Polkadot — Parachains and Relaychains
Polkadot was the subject of a massive US $130M raise in October 2017, providing a similar cross-blockchain connectivity service to Cosmos via the use of their Parachain and Relay system. Their model is best described by the diagram below:
The Polkadot ecosystem is based around 3 major facets. Firstly, the Relay Chain, which serves as the base blockchain layer for facilitating cross-chain operations. Secondly, the Parachains, which are individual blockchains all with separate governance, economics and consensus mechanisms, while still native to the Polkadot network. Thirdly, the Bridgechains, which provide the basis for communications between the wider Polkadot network and separate blockchains.
Much like Cosmos, Polkadot’s central technology stack is based around the creation of new discrete blockchains on their Relay Chain. Again this means a network success case requires significant adoption of individual Parachain’s on the network. It is not dissimilar in this respect, although its proposed solution to a lack of popular native networks is different to the ‘spooning’ solution offered by Cosmos.
Rather than fork existing chains directly onto the Polkadot network like Cosmos does, the network instead has proposed extensive development of interchain bridges. The major issue here is that not mature enough to claim to be a secure and decentralised solution to cross-chain communication. This is not an insignificant problem, as this is the major bottleneck for basically all cross-chain connectivity projects.
Currency wise Polkadot runs on the titular DOT currency, using a similar Proof of Stake algorithm to Cosmos in order to reach consensus whilst still parsing the expected large data load of an interchain network. Its large currency holdings and support from pedigreed developers from Parity should see it develop healthily into the future.
Hyperledger Quilt — The Business Solution
Labelled as the solution for business blockchains, Hyperledger’s Quilt is an extended java implementation of the open-source interledger protocol. Its design is more centred around developing a standard for business and new distributed ledgers to follow, such that connecting those ledgers is not a difficult process. Much like Polkadot and Cosmos, its major goal is to encourage specialisation of blockchains on a use case basis, such that the most efficient blockchain for a particular application is the one that gets used.
From a technical perspective, the major portion of the Quilt system is its enforcement of basic standards and requirements for individual blockchains to allow IBC. A number of blockchains have joined the Quilt system in order to facilitate some degree of cross-chain connectivity, with Wanchain and Rippleboth joining the Hyperledger consortium and having genuine interest in the Quilt part of the company.
The interesting question with the Quilt system is whether it can see pre-existing blockchains implement software forks to match up with its requirements. Clearly there is some optimism around its implementation system with the previously mentioned interested blockchains, but justifying genuine alterations of a blockchain just for IBC is difficult given the level of potential security vulnerabilities that could possibly be introduced.
Clearly interchain operability is hard to achieve. To be most effective it requires developers from the core blockchains to make changes to their own protocols, as a result it is quite possible (we think likely) that the major breakthrough would come if the Bitcoin or Ethereum devs turned their mind to this and modified their code for interoperability.
The issue with that of course is that they might consider that a dilution of their asset into interoperable assets so this lessens the economic incentive to do it.
True interoperability is most likely years away since the core codes still need a lot of work for a variety of other reasons, notably scalability before they open themselves up to more load and security vulnerabilities from interoperability. One for the far horizon.