Prioritizing Interoperability in Web3 is Key
At the moment, the vast majority of us are purchasing goods, communicating with friends, working with peers and much more utilizing applications built on Web2 infrastructure. What does this mean? Essentially, that technology is the basis our society and economy — the current version of the Internet — is centralized: managed and owned by centrally operated corporations. This comes with several drawbacks, including vulnerabilities to security, misuse of user data, and largely monetizing of the back of others, generally taking the lions share of the transaction
Only in 2021 has the mainstream media caught on to the enormous upside Web3 has to offer. As a decentralized online ecosystem, Web3 will replace much of the current internet infrastructure and replace it with blockchain technology. This means decentralized ownership, protection from corporations and bad actors, peer-to-peer exchange of assets without intermediaries, information with verifiable sources and an endless amount of other possibilities. Web3 will fundamentally change the way we interact with the internet for the better.
The first-movers designing the foundations of Web 3.0 are already at work: Ethereum, Terra, Avalanche, Near, Polkadot and many others. Each of which is a unique blockchain protocol, which lies at the bottom layer of Web3 and supports the next generation of technology that will leverage its properties. A promising vision for Web3 is that the technology stack will be completely open source. This means the underlying code will be available for anyone and everyone to read, build upon and improve, creating an optimal end-user experience in turn.
On top of each of these blockchain networks, there are already many live decentralized applications (dapps) allowing us to communicate, trade assets, transfer data and more. But despite the significant progress, these blockchain networks are unfortunately siloed from one another. Basically operating as independent cities, all with their own centers of economic and social activity. Unfortunately, there is no highway infrastructure to connect these networks and therefore weakens the entire value proposition of Web3 for time being. There is an urgent need for an accessible, ubiquitous and decentralized method of sharing data and assets between blockchain networks. Without this, liquidity of digital assets will continue to remain low because of poor off-ramping avenues. This is one of several problems in the blockchain space caused by a lack of interoperability. Ultimately, if these issues are not resolved, the world will never shift from Web2 to Web3.
Consequences of a Fragmented Ecosystem
Acknowledging the problems created by the siloed nature of the industry is the first step to mainstream adoption. Currently, individual blockchain protocols are dedicating an excessive amount of time to building their own one-off bridges to allow users to transfer assets and data from one protocol to another. Numerous decentralized finance dapps run on the Ethereum network where bridges have been built one-by-one between itself and Terra, Fantom, Binance Smart Chain, Avalanche and many more, over the course of the past few years. These bridges take a substantial amount of time, effort and money to build. Not to mention are a challenge to maintain and still don’t provide a clear path to sending anything besides specific assets directly between two smaller chains within the ecosystem.
In addition to being time and capital intensive to build, once-off bridges are often highly centralized, acting as intermediaries between protocols. Built, owned, and operated by a singular entity, these bridges effectively become bottlenecks between different ecosystems. The controlling party decides which tokens to support and which networks to connect. This primary, centralized point of failure leaves them open to security risks and/or corruption, and ultimately yields the same risks as leaving assets or data with any other centralized intermediary in any of the traditional industries. Thus, defeating the fundamental purpose of Web3.
Another consequence of the siloed nature of the Web3 is that blockchain developers are forced to choose between different blockchain protocols, and end up building dapps that can only be used on one network. This immediately slashes the potential user base of any solution significantly and prevents dapps from ever reaching mass adoption. Developers then have to spend millions deploying their dapps across multiple networks which fragments their liquidity across their network-specific applications.
Toward an Interoperable Web3 future
From these struggles, we know that a more universal solution for interoperability is the only way forward. Our industry, by far the most innovative in the world today, is packed with the most talented minds. They must prioritize the principles of decentralization, security and transparency when it comes to interoperability. In doing so, we solve the problems plaguing our projects today and preventing mass adoption.
To enact such robust interoperability and develop open protocols which create standardized pathways, industry collaboration is imperative. The idea that protocols are destined to compete against each other is outdated. Instead, protocols should continue to innovate individually for specific use cases. Although these protocols operate independently; in order to thrive they must allow for communication and usability from other networks.
Today, many of the conversations we have regarding blockchain are entirely focused on interoperability and infrastructure. Achieving interoperability in totality should enable users and developers to operate seamlessly and build efficiently across multiple blockchain networks without even being aware of it. When using the web, we don’t think about the numerous underlying protocols at work when we send an email or receive a text message or anything else. This smooth level of interoperability is what we should strive for in Web3.
Interoperability is now a primary concern for many protocols, which are coming to the realization that cross-chain communication will protect and secure their stake in the future of blockchain, rather than diminish their advantage. Embracing cross-chain connection means empowering developers to build on a network that best suits their vision, knowing that their dapps will be accessible to users across all blockchain networks. This allows the blockchain ecosystem to refocus time and resources to their own infrastructure as opposed to investing endless resources building individual bridges.
Innovation in Web3 is moving at light speed. I cannot wait to see the companies built around solving this problem.
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