Today, the great majority of us are reading articles, interacting with friends, working with colleagues, and buying items using apps built on Web2 infrastructure. Essentially, this implies that the technology that underpins our society and economy – the present form of the Internet — is centralized: it is controlled and owned by centrally administered systems. This has various drawbacks, including susceptibility to hacking and corruption, a lack of data security, and Big Tech’s dominant control of data, connections, and other internet services.
In 2021, the mainstream technology sector recognized Web3’s enormous potential. Web3, a decentralized online ecosystem, will deconstruct the present internet architecture and replace it with blockchain-based infrastructure. This entails decentralized ownership, protection from malicious actors, peer-to-peer exchange of data and assets without middlemen, and information from guaranteed verified sources. Web3 will radically alter the way we manage our society, corporations, and financial institutions for the better.
Ethereum, Terra, Avalanche, Polkadot, Cosmos, and many more projects have already begun to lay the groundwork for Web3. Each of them is a distinct blockchain technology that will reside at the very bottom layer of Web3 and enable the next generation of the digital world. One notable aim for Web3 is that the technology stack will be open source. The code will be accessible for everyone and everyone to study, build upon, and enhance, resulting in an improved user experience.
On these blockchain networks, there are now decentralized operational applications (dApps) that enable us to interact, exchange assets, share stories, and transfer data, assisting us in starting the transition to Web3. Despite their growth, these blockchain networks are frustratingly isolated from one another. They function as distinct cities — all centers of economic activity and commercial possibilities — but lack the transportation infrastructure linking them and making them part of one strong, varied, but cohesive country. There is an urgent need for a smooth, universal, and decentralized means of transferring information and assets across blockchain ecosystems. Without this, the liquidity of digital assets would stay low due to insufficient off-ramping routes. This is one of the issues in the blockchain sector created by a lack of interoperability and cross-chain communication. If these challenges are not solved, the world will never shift from Web2 to Web3.
Overcoming Obstacles
Recognizing the issues posed by the industry’s walled structure, different blockchain protocols are devoting an inordinate effort to developing their one-time bridges that enable users to exchange assets and data from one protocol to another. Most decentralized finance (DeFi) dApps run on Ethereum, that bridges have been constructed one by one between it and Avalanche, Terra, Binance Smart Chain, and many more over the years. These bridges require a massive amount of time, money, and energy to develop, are difficult to maintain, and still do not provide a clear method for transporting anything other than specialized assets directly between smaller chains in the ecosystem.
In addition to being time-consuming to develop, one-time bridges are often highly centralized, functioning as intermediates between protocols. These bridges create bottlenecks between distinct ecosystems because they are built, owned, and controlled by a single company. The governing entity determines which tokens to support and which new networks to link. This single, centralized failure exposes them to security issues and/or corruption and ultimately poses the same dangers as placing assets or personal data with any other centralized middleman in conventional sectors.
Another effect of the blockchain space’s walled structure is that developers are compelled to select between blockchain protocols, resulting in dApps that can only be utilized on one network but not the others. Developers must then invest resources distributing their apps over different networks, which for many means fragmenting their liquidity between their network-specific applications. This drastically reduces any solution’s potential user base and prevents dApps from attaining mainstream acceptance.
Towards an interoperable Web3 future
We know from these battles, time, and money drains that a more general solution for interoperability is the only way ahead. When it comes to interoperability, our sector, which is possibly the most inventive in the world today and filled with the most intellectual minds, must emphasize the ideals of universality, decentralization, security, and accessibility. Only by doing so will we be able to fix the issues that are now hurting our projects and consumers.
Industry cooperation is crucial for implementing such powerful connectivity and developing open protocols that offer standardized paths. The assumption that protocols compete with one another is out of date. While protocols should continue to improve separately for particular use cases, they cannot expect to scale without interconnectivity completely. When compared to individual cities, these protocols function independently of one another, but to prosper, they must allow for communication, commerce, trade, and transit to and from surrounding sites.
Today, we may not always recognize it, but most of the discourse surrounding blockchain is solely focused on infrastructure and compatibility. To achieve real interoperability, end-users and developers should be able to function smoothly and effectively across numerous blockchain systems without even being aware of it. We don’t consider the underlying protocols at work when we send an email, a text message, or even hold a video conversation. This is what we must aim toward to actualize the Web3 that we all imagine.
Interoperability is currently a focus issue for many protocols that realize that cross-chain communication will secure their interest in the future of blockchain rather than reduce it. Embracing cross-chain communication means allowing developers to create on a network that best meets their requirements, knowing that their apps would be available to users on other blockchain platforms. Instead of spending endless hours and large amounts of money on constructing individual bridges, blockchain networks may continue to enhance the services they serve and their own infrastructure.
We witnessed mainstream adoption of NFTs, Big Tech study of the metaverse, bank proofs-of-concept for stablecoins and Central Bank Digital Currencies (CBDCs), and fresh regulatory hearings on the effect of crypto on different economic sectors. In 2021, we saw the planting of a seed in the minds of retail customers, giant corporations, conventional financial institutions, national governments, and regulators. They all realized that blockchain and digital assets would be a crucial part of our society’s future.
Now, 2022 provides us with a once-in-a-lifetime chance to build on what we’ve already accomplished and make our underlying technology more scalable and efficient. Interoperability is at the heart of Web3 and must be the year’s top focus. We must maintain the larger picture at the forefront of everything we do, asking what is best for a specific blockchain protocol and how we can develop and extend our whole sector in a decentralized and safe way.