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October 14, 2022

Why Blockchain Interoperability Matters – and How to Achieve It Securely

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Sergey Gorbunov
Co-founder of Axelar

Blockchain interoperability must be a priority for all Web3 developers. Giving users a secure and simple way to transact across multiple blockchains is important for the growth and scalability of Web3 applications and protocols

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Growth in Web3 cannot come without an improvement in both developer and user experience. As more blockchains launch, the complexity for both developers and users increases. Developers are required to learn new languages and work in new environments. Users need to manage multiple wallets and use risky bridges to interact with their assets across different chains. 

In order to reduce this complexity, blockchain interoperability must be a priority for all Web3 developers. Giving users a secure and simple way to transact across multiple blockchains is important for the growth and scalability of Web3 applications and protocols. 

This can feel like an overwhelming task at times. As a developer, you face many different paths to interoperability. Making sure you choose the right approach that fits your project takes time you don't have. Making the wrong decision can lead to wasted time and technical debt. 

To help you make an informed decision, let's start by looking at why interoperability matters and then review some of the known approaches to blockchain interoperability and their use cases. 

Why blockchain interoperability matters

Blockchain interoperability compares to globalization because of its ability to open up the flow of assets that are currently locked in certain chains. Like countries, blockchains specialize and perform better than others in certain areas. For some applications, the place where a chain sits on the spectrum of providing scalability and security in a decentralized environment is very important. 

Opening the flow between specialized blockchains does more than create opportunities for existing applications to grow. It creates opportunities for new applications and use cases to emerge. Examples of this abound throughout economic history, from the new categories of businesses that have emerged with globalization, to the rise of new internet business categories following the advent of overlay networks, which increased interoperability on the web. 

Legacy approaches to interoperability

Instead of locking yourself into working on just one chain and its available contracts, cross-chain solutions open up the Web3 world for applications and their users. Many developers have recognized this, and as a result there are two well-worn paths to interoperability: multiple deployments and cross-chain bridges. Here, we'll look at where each of these approaches falls short. 

Multiple deployments – the hard way 

Deploying multiple smart contracts to different blockchain networks that connect to your application is one strategy for interoperability. For example, you can build one application that has smart contracts on both Ethereum and Solana. This allows users to choose their preferred chain to use your application which is one goal of blockchain interoperability. 

Users seem to be getting what they want in this approach, but from a developer's perspective, this "multicode" strategy doesn't come without costs. Maintaining entire copies of your application can cause issues with managing a universal application state, designing similar user experiences, and tracking updates across the different chains. 

Even for projects that overcome these challenges, network effects beyond the developers' control can interfere with user experience. Often, multicode projects end up with one or more blockchain's users as second-class citizens, with less liquidity, for example, than the leading chain. This reflects poorly on the dApp to those users, and to the world.  

Depending on your application, these disadvantages can be blockers. The multicode approach achieves interoperability by making an application accessible across multiple chains, but fails to provide any way for the application to communicate across multiple chains. Ultimately, managing code across multiple blockchains that have different architecture and functionalities is not scalable even for the most experienced developers. 

Cross-chain bridges – the risky way 

Cross-chain bridges succeed where the multicode strategy fails, by bringing cross-chain communication directly to your application. Cross-chain bridges work by transferring tokens across chains for users. A user sends an amount to a specific address on the source blockchain, which is controlled by a bridging service. The service receives the tokens and then verifies the transaction. After verification, a transaction gets completed in the same amount on the target blockchain.

This is how popular cross-chain bridges like the Binance Chain Bridge and Anyswap work. DeFi applications like staking and yield farming are popular use cases for cross-chain bridges. Users can track and transfer to different chains that will enable them to earn more funds. 

Cross-chain bridges are far from perfect. A quick Google search on "cross-chain bridges"  will provide results about the many reportedhacks of popularcross-bridges. There are several reasons that cross-chain bridges are more vulnerable to attacks than other blockchain interoperability approaches: 

- Centralization - Most bridges are controlled by a central service and functions are executed either by a federation or a group that operates a multisignature wallet. This creates a fixed point of failure in the process and a fixed set of targets for attackers to exploit to drain funds. 

- Liquidity - For cross-chain bridges to work, the service must have available funds on both the source and destination chains. These bridges can hold a large amount of funds, which makes them attractive targets for attackers. 

- Complexity - Cross-chain bridges deal with complex requests and also must adapt to how different blockchains function. In this way, each time a cross-chain bridge adds a new chain to support, the complexity handled by the bridge also increases. Where there is an increase in complexity, there is an increase in the opportunities and areas where attackers can target. 

Interoperability solutions – the smart way 

Interoperability solutions are networks that enable your applications to move any asset, and perform contract calls or messages to/from any chain supported by the network. These networks act as an interoperability layer to enable cross-chain communications for your application. 

Each of these solutions comes with different levels of decentralization and security. Axelar is the first to fully support the same level of decentralization as the blockchains it connects – by being a blockchain, itself. As a proof-of-stake network powered by the Tendermint Consensus Architecture, each node on the Axelar network runs the software of multiple connected chains. These nodes monitor state, validate transactions and run permissionless protocols that route transactions from one connected chain to another. This uniform architecture provides a scalable and secure solution for cross-chain transactions and delivers blockchain interoperability with minimal added security assumptions.

As a blockchain, Axelar is also capable of executing functions that other cross-chain services cannot duplicate. For example, Axelar network can generate one-time deposit addresses, which decentralized projects can use to create user onramps that rival centralized exchanges for simplicity and ease-of-use. Axelar network also programmatically handles routing to all connected chains. This means that, when a new chain connects, it immediately gets the benefit of connection to the entire network, and compounding network effects are instantaneous. 

As a developer, you can call contracts on any of the supported chains in the Axelar network by using the Axelar SDK and APIs. This enables you to call Ethereum's Compound Smart Contract from Solana as easy as a contract on the native chain, for example. Now you can focus on delivering the best user experience on the chain that fits your project the best and let the Axelar provide your secure connectivity layer to other blockchains. 

Wrapping up 

Decisions about your application should come with a clear list of priorities. It is important to consider how secure a solution is, evaluate the features it delivers, determine whether it's scalable, and examine its approach to decentralization. We have discussed here how some legacy blockchain interoperability approaches handle these priorities and outlined the ways in which Axelar's approach differs. You now have the knowledge to choose your path toward interoperability with confidence. 

Ready to get started building cross-chain applications? Check out our video walkthrough that shows you how to build, test, and deploy to the Axlear network.

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