Cross-Chain Interoperability: Major Issues & How to Tackle Them

There are now numerous blockchains besides Bitcoin. Popular examples include Ethereum, Polkadot, Solana, and Binance Chain. And although blockchain was designed to be decentralized, ironically, most function as isolated silos, and are quite centralized. Each has its own unique structure, token, and consensus mechanism, and “communication” between different ecosystems has to be created on a case-by-case logic. This makes interoperability one of the biggest challenges in blockchain.

Different consensus mechanisms

One of the most fundamental aspects of any blockchain is its consensus mechanism — the algorithm that ensures agreement among distributed nodes in the network about the state of the blockchain. Different blockchains employ different consensus mechanisms to achieve security, decentralization, and performance based on their design goals. Nowadays, there is an immensity of consensus mechanisms, This makes interoperability between blockchains very difficult, creating several challenges, namely:

Diversity of trust models
Each consensus mechanism relies on different assumptions about how trust is established within the network. Different models make it difficult to create a shared framework for cross-chain interactions because what is considered “secure” on one chain might not meet the same standards on another. For example, Bitcoin’s Proof of Work (PoW) assumes that network security is maintained by the majority of miners behaving honestly due to economic incentives. In contrast, Proof of Stake (PoS) chains rely on validators staking assets and being penalized for dishonest behavior.

Finality differences
Block finality refers to the point at which a transaction or block can be considered irreversible. Differences in finality concepts complicate the design of interoperable solutions because each chain must reconcile whether an asset or data transfer is truly “final” and can be trusted. In PoW, finality is probabilistic, meaning a block becomes more secure the more blocks are built on top of it, but it can theoretically be reversed. In other consensus mechanisms, finality is often immediate — once a block is validated, it cannot be undone.

Security models mismatch
Thirdly, there’s security. Each consensus mechanism has its unique way of maintaining the network’s security. But why is this a factor? Different security logics create challenges when one blockchain must validate or interact with another chain’s state, as the security guarantees are not always comparable. PoWs depend on computational power, and PoSs rely on economic staking, for example. Byzantine Fault Tolerance mechanisms, on the other hand, focus on ensuring a certain number of honest nodes, typically in permissioned environments.

Performance and Latency
There are also major gaps when it comes to performance and the kind of resources each consensus mechanism uses. Proof of Work is slower and more resource-intensive compared to Proof of Stake or DPoS. High-performance blockchains process thousands of transactions per second, while others operate at a fraction of that speed. When blockchains with different speeds attempt to communicate, synchronizing transaction states and maintaining consistency becomes problematic.

Mobility limitations of data and tokens
Users can’t easily transfer tokens or assets from one blockchain to another. For instance, moving Bitcoin to Ethereum involves complex processes like using tokenized derivatives like wrapped BTC. Although there were a lot of technical advancements that now allow to exchange of different tokens more easily, some processes are still cumbersome.

DApps built on one network cannot seamlessly communicate or exchange data with dApps on another network. This restricts the potential of DeFi, NFTs, and other blockchain-based solutions.

User experience challenges
Currently, exchanging tokens and using dApps from different blockchains requires users to navigate multiple wallets, exchanges, and interfaces to interact with different networks. This fragmented user experience creates friction and inhibits non-technical users from adopting blockchain technologies.

Different programming languages

The fact that different blockchain ecosystems are written in different programming languages (Polkadot is written in Rust, Ethereum is written in Java, Python, and so on) is another technical issue that hinders interoperability. Programming languages are just like human idioms: they can’t be understood without a version of a translation.

Having blockchains written in different languages leads to incompatibility between smart contracts, essential tools in the DeFi world — a smart contract written in Solidity cannot directly interact with one written in Rust. DApps and smart contract ecosystems are generally confined to the blockchain on which they were developed, limiting their ability to integrate services or assets from other chains.

Cross-chain protocols, which aim to enable blockchains to communicate and share data, must account for the differences in programming languages and execution environments. This means that a solution enabling interaction between two blockchains must either translate or bridge the different languages involved, which can be technically complex and error-prone.

Solving the Lack of Interoperability

In a way, finding solutions for the interoperability issue has to do with having a vision and looking further. While Bitcoin was the first of its kind, it wasn’t created as a collaborative tool. It was aimed as a digital currency generator prioritizing security and transparency. The ones that followed were designed with different purposes in mind, namely bringing forth solutions and applications to real issues, in both the real and the digital worlds.

The first solutions to the interoperability problem included building cross-chain bridges and layers on top of the main networks that can be customized for different use cases. Smart contract platforms and layered solutions (L2s and L3s) were designed to enable dApps and DeFi to integrate economics and other aspects.

Cross-Chain Bridges
Cross-chain bridges are a very useful tool that has been developed in the last few years to help mitigate the lack of interaction between blockchain ecosystems. They facilitate the transfer of assets and data between blockchains, thereby enabling token exchange and the usage of data from an Ethereum-based blockchain to a Polkadot one. Known bridges include Multichain (connects over 70 Blockchains), Wormhole (Solana ↔ Ethereum, BNB Chain, Polygon, and others) and Synapse.

There are many types of cross-chain connections, including federated bridges (depend on a set of trusted validators to manage the transfer of assets between blockchains. Although fast and efficient method, it introduces a new degree of centralization), sidechains (like Polkadot’s), hash time-locked contracts (using smart contracts to enable an atomic swap and render it successful), and liquidity network bridges (they use liquidity providers to facilitate transfer between chains).

Although bridges help solve several interoperability issues, they also leave blockchain ecosystems more vulnerable, and the Ronin and the Wormhole hacks are good examples of that. In the first case, the centralized control over the bridge’s validation system allowed hackers to gather more than 600 million USD. A breach of security in Wormhole allowed attackers to mint tokens without proper validation.

Layered Solutions
Multi-layer blockchains offer several benefits: each top layer allows for more customization, scalability, and speed while still leveraging the original layer’s features such as security. While Ethereum was the first to come up with the layering concept to solve its high gas fees and scalability issues, Polkadot pioneered layering mostly for security reasons.

Layer 1 refers to the underlying blockchain itself, providing the fundamental structure for decentralization, security, and consensus mechanisms. Layer 2s are built on top to improve scalability by processing transactions off-chain, and then settling them back on the main blockchain. They reduce the load on Layer 1, allowing faster transactions and lower fees.

Then, there are the Layer 3s. It’s where the actual applications (dApps, interfaces, and wallets) are built. It’s designed for end-user interaction, leveraging the lower layers for security, consensus, and scalability. Layering solutions can help solve some of the core limitations of early blockchain systems, ensuring that blockchain can scale to support a broader range of applications and use cases.

Some support the logic of L0s, considering it the layer below L1, acting as a base for interoperability — from this perspective, Polkadot’s relay chain would be Layer 0 while each parachain project would be a Layer 1 blockchain in itself.

XCM: Polkadot’s approach to ecosystem compatibility and interoperability
Polkadot is the only ecosystem designed with a “security-first” approach while prioritizing interoperability between its components. It’s made of a relay chain to which several parachains (each containing a project) are connected. These parachains share the relay chain’s security features and can be optimized for specific use cases such as smart contracts, privacy, gaming, or DeFi. This layered structure ensures that Polkadot can scale, remain secure, and support diverse blockchain applications across its ecosystem.

Although they’re not connected to each other by default, there is a way to do so. If you want to know more about XCM and the way Polkadot parachains connect to each other, check out our article on the subject.

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