Blockchains Need to Evolve and Create Standards for Interoperable Asset Transfers
2021 has been a major year for blockchain development and growth, with new use cases and applications emerging at a furious pace. Competition within the sector has heated up as well, but for blockchain to truly evolve and meet its full potential, businesses will need to work together on interoperable standards.
Cross-blockchain asset transfers have been taking place for several years already, mainly focusing on swaps between a chain's native assets and tokens. This eventually evolved to chains being able to handle several decentralized exchanges. Typically, native assets transferred from older and more established blockchains (like Bitcoin and Ethereum) to newer ones takes place through bridges. The processes for these types of exchanges are not uniform, however, and can result in slippage, loss of value and complicated navigation for end users.
In addition to bridges, some blockchains have created inter-blockchain protocols. These are not uniform, however, and are geared toward creating alternate versions of the same blockchain as spawned by end users. This approach isn't sustainable, as most businesses are unlikely to spin off their own chains.
Creating a set of standards for interoperable asset transfers will only benefit blockchain development, just as standards and protocols have helped other areas of technology. Standardization will help end users by ensuring consistent functionality across different blockchains, while also making applications easier to use.
Blockchains are growing at a rapid pace and show no sign of slowing down. As they cement their position in the world of finance and beyond, an asset and payment ecosystem is developing to include a variety of blockchains, blockchain assets, digital and cryptocurrency tokens, stablecoins and central bank digital currencies (CBDCs).
This ecosystem will benefit greatly from interoperable blockchain standards governing asset transfers. A set of industry standards could be the key to ensuring blockchain lives up to its true potential as a powerful platform with the ability to have a major impact on global financial activity and beyond.
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Edited by Luke Bellos
