Interoperability must be a priority for building Web3 in 2022

This article was contributed by Sergey Gorbunov, cofounder of Axelar.

Right now, the vast majority of us are reading articles, communicating with friends, working with colleagues, and purchasing goods using applications built on Web2 infrastructure. Essentially, what this means is that the technology underpinning our society and economy — the current version of the Internet — is centralized: controlled and owned by centrally operated systems. This comes with several limitations, including vulnerabilities to hacking and corruption, a lack of data protection, and a monopoly ownership of data, connections, and other internet services by Big Tech.

In 2021, the mainstream tech industry began to acknowledge the vast potential of Web3. A decentralized online ecosystem, Web3 will undo the current architecture of the internet and replace it with infrastructure based on blockchain technology. This means decentralized ownership, protection from bad actors, peer-to-peer exchange of data and assets without intermediaries, and information with guaranteed verifiable sources. Web3 will fundamentally change the way that we run our societies, businesses, and financial systems for the better.

The first-movers designing the foundations of Web3 are already at work: Ethereum, Terra, Avalanche, Polkadot, Cosmos, and many others. Each of these is a unique blockchain protocol, due to sit at the very bottom layer of Web3 and support the next generation of the digital world. A prominent vision for Web3 is that the technology stack will be open source — meaning that the code will be available for anyone and everyone to read, build upon, and improve, creating better end-user experiences in turn.

On each of these blockchain networks, there are already live decentralized applications (dapps) allowing us to communicate, trade assets, share stories, and transfer data, helping us to begin the shift to Web3. But despite the progress, these blockchain networks are unfortunately siloed from one another. They operate like independent cities — all centers of economic activity and business opportunities — but without the highway infrastructure to connect them and make them part of one powerful, diverse but unified nation. There is an urgent need for a seamless, universal, and decentralized method of sharing information and assets between blockchain ecosystems. Without achieving this, liquidity of digital assets will remain low because of poor off-ramping avenues. This is among several problems in the blockchain space caused by a lack of interoperability and cross chain communication. Ultimately, if these issues are left unaddressed, the world will never migrate from Web2 to Web3.

Rising above challenges

Acknowledging the problems caused by the siloed nature of the industry, individual blockchain protocols are dedicating an excessive amount of time to building their own once-off bridges to allow users to share assets and data from one protocol to another. So many decentralized finance (DeFi) dapps run on Ethereum that bridges have been built one-by-one between it and Terra, Avalanche, Binance Smart Chain, and many more, over the course of years and years. These bridges take a colossal amount of time, money, and resources to build, are a challenge to maintain, and still don’t give a clear path to sending anything but specific assets directly between two smaller chains in the ecosystem.

In addition to being time-consuming to build, once-off bridges are often highly centralized, acting as intermediaries between protocols. Built, owned, and operated by a single entity, these bridges become bottlenecks between different ecosystems. The controlling entity decides which tokens to support and which new networks to connect. This single, centralized point of failure leaves them open to security threats and/or corruption, and ultimately presents the same risks as leaving assets or personal data with any other centralized intermediary in traditional industries.

Another impact of the siloed nature of the blockchain space is that developers are forced to choose between blockchain protocols, and end up building dapps that can be used on only one network, but not the others. This cuts the potential user base of any solution down significantly and prevents dapps from reaching mass adoption. Developers then have to spend resources deploying their apps across multiple networks which for many means to fragment their liquidity across their network-specific applications.

Toward an interoperable Web3 future

From these struggles and drains on time and money, we know that a more universal solution for interoperability is the only way forward. Our industry, perhaps the most innovative in the world today and packed with the most talented minds, must prioritize the principles of universality, decentralization, security, and accessibility when it comes to interoperability. Only by doing this can we solve the problems plaguing our projects and users today.

To enact such robust connectivity and develop open protocols which create standardized pathways, industry collaboration is essential. The idea that protocols compete against each other is outdated. While protocols should continue to evolve individually for specific use cases, they cannot hope to fully scale without interconnection. Comparing these protocols once again to unique cities, they operate independently of one another, but to thrive must allow for communication, commerce, trade, and travel to and from neighboring locations.

Today, we may not always realize it, but much of the conversations we have about blockchain are entirely focused on infrastructure and interoperability. Achieving interoperability in its truest form should enable end-users and developers to operate seamlessly and build efficiently across multiple blockchain platforms without even being aware of it. We don’t think about the underlying protocols at work when we send an email or a text message or even when we host a video call. This is what we must strive for to realize the Web3 we all envision.

Interoperability is now a focal point for many protocols, which are coming to the realization that cross-chain communication will protect their stake in the future of blockchain, rather than diminish their advantage. Embracing cross-chain communication means empowering developers to build on a network that best suits their needs knowing that their applications will be accessible to users across other blockchain platforms. This allows blockchain networks to continue to improve the applications they provide and their own infrastructure, instead of investing countless hours and vast sums of money into building individual bridges.

In 2021, we witnessed the planting of a seed in the minds of retail consumers, large enterprises, traditional financial institutions, national governments, and regulators, all coming to the realization that blockchain and digital assets will be a significant aspect of the future of our society. We saw mainstream traction for NFTs; Big Tech exploration of the metaverse; bank proofs-of-concept around stablecoins and Central Bank Digital Currencies (CBDCs); and new regulatory hearings about the impact of crypto on various economic sectors.

Now, 2022 presents us with a unique opportunity to capitalize on what we’ve already achieved and make our underlying technology increasingly scalable and efficient. We must keep the big picture front and center of everything we do, asking ourselves not only what is best for an individual blockchain protocol, but how we can grow and expand our entire industry in a decentralized and secure manner. Interoperability is at the epicenter of Web3 and must be the priority objective of the year ahead.

Sergey Gorbunov is cofounder of Axelar.