INTRODUCTION.

Blockchain interoperability is the ability of different blockchain networks to communicate and exchange data and value with each other. It is an important feature for the development and adoption of the decentralized web, as it enables cross-chain collaboration, innovation, and efficiency. However, achieving blockchain interoperability is not an easy task, as it involves technical, economic, and social challenges. Here, I will discuss some of the different types of blockchain interoperability solutions and their use cases, and provide some examples and solutions.

Types of blockchain interoperability solutions

There are various types of blockchain interoperability solutions currently available. The individual blockchains are moving towards a homogenous interoperability structure (Cosmos, Polkadot). The heterogeneous blockchain will still need to connect, and hence, solutions like Wanchain and Celer will be prevalent. According to a report by the European Union Blockchain Observatory and Forum, the types of blockchain interoperability solutions can be classified into three main categories:

- Public connectors: These are solutions that use a separate blockchain as a bridge to facilitate the exchange of data, assets, and messages between different blockchain networks without the need for intermediaries. Public connectors can be further divided into two subtypes:

- Side chains and chain relays: These are solutions that use a secondary blockchain that is connected to a primary blockchain, and acts as a proxy or a relay for cross-chain communication and transactions. Side chains and chain relays can use different consensus mechanisms and security models, such as federated, delegated, or merged mining. Some examples of side chains and chain relays are Liquid, Plasma, and Polkadot.

- Notary schemes: These are solutions that use a set of trusted or semi-trusted nodes that act as validators or witnesses for cross-chain communication and transactions. Notary schemes can use different methods and techniques, such as threshold signatures, multisignatures, or zero-knowledge proofs. Some examples of notary schemes are BTC Relay, Interledger, and Ren.

- Atomic swap protocols and cross-chain automated market makers: These are solutions that use cryptographic protocols and smart contracts to enable direct and trustless exchange of cryptocurrencies and tokens between different blockchain networks. Atomic swap protocols and cross-chain automated market makers can use different approaches and mechanisms, such as hash time-locked contracts, state channels, or liquidity pools. Some examples of atomic swap protocols and cross-chain automated market makers are Lightning Network, Raiden Network, and Uniswap.

- Application-specific blockchains: These are solutions that use a dedicated blockchain that is designed and optimized for a specific application or domain, and can interoperate with other blockchains that support the same application or domain. Application-specific blockchains can use different architectures and standards, such as sharding, layer 2, or interoperability frameworks. Some examples of application-specific blockchains are Ethereum, Hyperledger, and Corda.

Use cases of blockchain interoperability solutions

Blockchain interoperability solutions can enable various use cases and applications that can benefit from cross-chain communication and transactions. Some of the use cases and applications are:

- Decentralized finance (DeFi): DeFi is a movement that aims to create open, permissionless, and transparent financial services on the blockchain, such as lending, borrowing, trading, and investing. Blockchain interoperability solutions can enable DeFi users and providers to access and offer a wider range of financial products and services across different blockchains, and leverage the best features and functionalities of each blockchain. For example, users can borrow ETH on Ethereum, swap it for BTC on Bitcoin, and lend it on Compound, all in a seamless and trustless manner.

- Non-fungible tokens (NFTs): NFTs are unique and indivisible digital assets that represent ownership and provenance of various items and collectibles, such as art, music, games, and sports. Blockchain interoperability solutions can enable NFT users and creators to transfer and trade their NFTs across different blockchains, and access and offer a larger and more diverse market and audience for their NFTs. For example, users can create NFTs on Ethereum, transfer them to Binance Smart Chain, and sell them on OpenSea, all in a frictionless and secure way.

- Decentralized autonomous organizations (DAOs): DAOs are organizations that are governed by smart contracts and run by a community of stakeholders, without the need for a central authority or intermediary. Blockchain interoperability solutions can enable DAO users and members to participate and coordinate in the decision-making and operation of different DAOs across different blockchains, and leverage the collective intelligence and resources of each DAO. For example, users can join a DAO on Aragon, vote on a proposal on Snapshot, and execute an action on Moloch, all in a transparent and democratic way.