Blockchain interoperability will accelerate institutional success.

Source: Cointelegraph Original Text: "Blockchain Interoperability Will Accelerate Institutional Success"

Author of the viewpoint: Wanchain CEO Temujin Louie

In recent years, we have witnessed a significant shift in traditional finance (TradFi) — established institutions have begun to adopt decentralized technology and explore strategies that incorporate the unique advantages of blockchain technology.

Traditional finance and adoption

Traditional financial giants like Goldman Sachs and BlackRock continue to show interest in leveraging blockchain technology for large-scale asset trading. U.S. payment companies such as Mastercard and Visa are adopting crypto solutions globally, signaling to global participants that the time to seriously consider blockchain technology has come. In today's rapidly changing digital environment, institutions that do not actively adopt decentralized technologies may face the risk of falling behind.

Despite the increasing number of institutions involved in decentralized technologies, poor interoperability remains a barrier to the widespread adoption of blockchain.

Walled Garden Dilemma

Due to the trustless nature of blockchain, it cannot communicate with other blockchains without external intervention. This leaves businesses with two options: either limit themselves to a single blockchain or rely on blockchain interoperability solutions to leverage the advantages of multiple chains.

After more than ten years of case studies and experiments, it has been clearly demonstrated that the scale and scope of global business are too large and complex for a single blockchain to support efficiently. Instead, the business logic of global institutions must routinely span multiple blockchains and seamlessly switch between private and public networks.

As a result, the only option for institutions to achieve their ambitions is to rely on blockchain interoperability solutions.

The Necessity of Expanding Interoperability

There are only a handful of reliable blockchain interoperability protocols that exist. Through advanced cryptography techniques such as multi-party computation and zero-knowledge proofs, these protocols address the challenges inherent in blockchain technology by securely and seamlessly transferring data between different blockchain networks.

Blockchain interoperability solutions enable institutions to develop cross-chain smart contracts, allowing interactions across multiple blockchains, thereby achieving greater liquidity. Institutional participants can deploy business logic across multiple networks while meeting stringent security and compliance requirements.

For example, blockchain interoperability allows traditional banks to proactively monitor and respond to market fluctuations, transaction histories, and compliance protocols. When bank customers need to conduct cross-chain transactions, interoperability protocols can be established to ensure cross-chain transaction verification, thereby meeting regulatory requirements in a simple and timely manner.

Between 2021 and 2024, several global healthcare organizations, including Change Healthcare under UnitedHealth Group, became victims of cyberattacks due to a lack of secure data management systems. Therefore, it is essential to integrate interoperability protocols into enterprise IT systems in industries where data sharing is critical, such as healthcare, finance, and supply chain. With the ability to connect different public and private blockchain networks, blockchain interoperability protocols can drive institutional adoption and success.

Challenges faced by institutions

While there are many factors that have contributed to the lack of widespread adoption of cross-chain interoperability to date, the negative impact of the lack of a transparent regulatory environment cannot be ignored. While several recent regulations and initiatives by government agencies, such as the Global Financial Innovation Network and the U.S. Digital Asset Executive Order, are designed to improve the current interoperability infrastructure, the journey to build security compliance solutions is just beginning.

The blockchain industry itself cannot escape blame. Although today's blockchain interoperability protocols are well-developed, interoperability itself remains in a fragmented and incompatible state. Competing projects continue to build temporary solutions, making it difficult for regulatory agencies to review their feasibility and security one by one.

The Road to the Future

Collaboration between regulators, industry leaders, and developers is key to accelerating institutional adoption of blockchain interoperability. While challenges persist and interoperability protocols continue to evolve, institutions need to take action to establish leadership in a world where decentralized platforms define endless possibilities for long-term scalability, security, and operational efficiency. By providing the simplest, most secure, and most efficient way to transfer data and assets, blockchain technology has reached a tipping point in mass adoption.

Author of the viewpoint: Wanchain CEO Temujin Louie

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This article is for general informational purposes only and does not constitute and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.