The Five Ingredients Of Blockchain Interoperability

This year, 2020 is going to see a huge change in the blockchain scene. As you may very well know, ‘interoperability’ is an important facet for this growth. We need systems and programs which are deployed on the various blockchain stacks and protocols to talk to one another. Here’s the run down of where we are in terms of blockchain interoperability.

Here is the good news. Teams in the major enterprise blockchain communities have been diligently plugging away at this for years, ready for the time when live applications would need it. And that time is now.

At one level, the blockchain interoperability problem is simple to state:

“I want to ensure that the solution I deploy can work well with solutions other people deploy, even if we’ve made very different technology choices”.

Consider a typical supply chain. You may have an ERP system to manage supply chain operations and other day to day activities; maybe a treasury management platform to manage working capital; your bank may provide a portal to finance your trade activities; that may even be on a blockchain.

But… your logistics providers are also rolling out a global ‘track and trace’ solution using a totally different technology or simply moving to digital documents along the supply chain. Each of these solutions may drive efficiency in one part of the supply chain but, if we are to avoid the problems of the past – the very problems enterprise blockchain exists to solve – we can never allow ourselves to be constrained by self-imposed boundaries or technology choices of our vendors and partners.

To realise the full promise of enterprise blockchain and eliminate the formation of new digital islands, interoperability is critical.

In what follows, I share what I’ve learned about this problem and how I’ve come to believe that the vision of interoperable enterprise blockchains rests on five key technical ingredients.

Only then can we reach the desired end-state of industry-wide transformation.

The 5 Ingredients

If you break the problem down into its constituent ingredients, it becomes clear how to proceed. And I think those ingredients are:

  • We need integration with existing systems
  • We need to be able to initiate transactions on other networks and ‘rails’
  • We need to be able to transact interchain with solutions on other technologies
  • We need to be able to transact intrachain with solutions on different deployments of the same technology.
  • And we need to reduce buyer’s remorse by making it easy to interchange one underlying platform for another.

Here’s what all this means:-

Imagine you’re an aircraft manufacturing firm. You have thousands of suppliers, hundreds of banking partners and logistics providers in dozens of countries. You’re dependent on the timely delivery of millions of parts every year. At each step of the physical and financial supply chain there are blockchain applications that can deliver efficiency gains in paper processes in procurement and order management; working capital improvements, by speeding up payables and receivables processing; and risk reduction with track and trace capabilities in the logistics supply chain.

Integrate

A blockchain network could provide you with real-time supply chain financing. You may want to access these immediate financing options directly through your ERP system, which will need to integrate seamlessly with these new networks.

Initiate

And when it’s time to make a payment, why re-invent the wheel when existing payment rails do the job? You need to be able to initiate payments and settlement across existing payments networks like SWIFT, as well as potentially using emerging clearing and settlement assets and networks.

Interchain

Elsewhere, your logistics providers may be using other networks to increase visibility in the shipping lifecycle. Wouldn’t it be great if data from your financing network and shipping data from these logistics networks could be shared interchain?

Intrachain

You may also want to use a blockchain application to manage letters of credit. It turns out there may be additional benefits you get when integrating two or more blockchain apps that use the same underlying technology – so you need to actively consider intrachain scenarios too, if your underlying platform was designed to facilitate them.

Interchange

And, finally, it might be that your application provider or your own blockchain initiative demands that you deploy a different platform? Can we interchange one for another?

It turns out that some of these are harder to achieve than others but your platform provider had better have a good answer for all of them!

What’s your take on blockchain interoperability? Do you think we will see a significant progress this year on this? Share your views below.

Amarjit S.
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