Interoperability in crypto refers to the ability of different blockchains and networks to interact with each other seamlessly. Basically, it’s what allows a user to transfer assets from one platform, such as Ethereum, to another, such as Binance Smart Chain, without using complicated solutions or intermediaries.
Why is interoperability important in the crypto space?
Simplifying the user experience
Currently, many users are deterred by the complexity of navigating between different blockchain networks. With interoperability, technical barriers are removed and users can buy, sell and actively trade more easily.
Reducing transaction costs
Conversion fees and fees for moving an asset between networks can become costly. Interoperability helps streamline the process, significantly reducing these costs.
Create a unified ecosystem
Different blockchains operate as separate islands. Interoperability turns them into an interconnected system, laying the foundation for a more accessible digital economy.
Increasing security and trust
Without the need to rely on intermediaries or third-party solutions, the risks of error or fraud are greatly reduced.
How does interoperability work?
The main methods that enable interoperability include:
1. Linking protocols between blockchains
Familiar examples, such as Polkadot and Cosmos, connect different blockchain networks, creating an internet of blockchains. Through these solutions, assets and data are transferred without the need for complex conversions.
2. Cross-chain smart contracts
These contracts provide automatic interactions between different blockchain networks. For example, a contract on Ethereum can automatically initiate an action on the Binance Smart Chain.
3. Wrapped tokens
“Wrapped” tokens, such as WBTC (Wrapped Bitcoin), allow users to use an asset from one network to another without losing its original value.
How does it benefit users?
Greater accessibility for users:
With interoperability, you don’t have to understand the technology behind blockchain. This makes transactions intuitive and simplified.
Increased flexibility:
You can use your assets across multiple networks and applications, with a wider range of crypto services at your disposal.
Maintain control over your funds:
By eliminating intermediaries, users have full control over their assets, contributing to secure experiences.
Practical examples of interoperability
Polkadot:
Polkadot is a leader in the interoperability space, enabling different blockchains to communicate with each other efficiently. Through its paracentralized network, it helps connect custom blockchains with other crypto ecosystems.
Cosmos:
Billed as the “Internet of Blockchains”, Cosmos makes cross-network transfers faster and more accessible, reducing technological barriers.
Binance Bridge:
Binance Bridge is a solution helps users easily transfer assets between different blockchain protocols, demonstrating the usefulness of interoperability in everyday transactions.
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