ICON Project, the platform for interconnecting blockchain networks has provided a major fillip to blockchain interoperability. The move will increase the decentralization of its’ nodes, which will aid interconnecting disparate blockchain networks.
The blockchain technology, with its’ decentralization, immutable records, and security offers significant opportunities. Smart contracts and platforms running them have helped to create decentralized business models. However, the technology is new, therefore, there is work to be done before it realizes its’ potential.
You have already read about the scalability and transaction throughput challenges of Bitcoin and Ethereum. There are also several reports about their high energy usage, and the associated impact on the environment.
These aren’t the only challenges confronting the technology. The lack of blockchain interoperability also impedes the adoption of it. Prominent blockchain networks like Bitcoin, Ethereum, etc. use disparate technologies. You can’t transact using Bitcoin on the Ethereum blockchain network.
This represents an interesting paradox, to say the least! The blockchain technology laid its’ emphasis on decentralization. The idea was that the technology will do away with the need to have one central server, therefore, eliminate the role of middlemen.
The reality turned out different though! Crypto traders couldn’t interchange Bitcoin with Ethereum, therefore, centralized businesses emerged to offer crypto exchanges! Crypto traders had to use these centralized exchanges as banks to trade their digital currencies, however, these are not licensed banks!
The exchanges operated outside regulations, and traders have no legal recourse in case of irregularities. Hackers have repeatedly attacked these centralized crypto exchanges and made off with large sums.
The lack of blockchain interoperability affects more than cryptocurrencies. Enterprise blockchains like Hyperledger Fabric, R3 Corda, etc. also use different technology stacks. Smart contracts functionalities, consensus algorithm, and transaction processing tend to be different in them, thus ruling out interoperability.
There are blockchain projects working on improving the blockchain interoperability. Their approaches are generally of two kinds, namely, open protocols, and multi-chain frameworks.
Open protocols offer standardized channels for different blockchain networks to interact with each other. Multi-chain frameworks have a tiered governance structure where different blockchain networks join in. Multi-chain frameworks more often have their own crypto tokens.
ICON is a multi-chain framework with its’ cryptocurrency ICX. It connects multiple blockchain networks using its’ “ICON Nexus“, i.e., its’ blockchain platform using the “Loopchain” technology. “ICON Republic” is the overarching governance organization, which is like the federal government in a country with multiple states.
Blockchain networks regardless of the industry they serve can join this community of blockchains. A blockchain network is called a community in this context, and a ‘Community Representative’ (C-REP) connects to Nexus. The C-REP acts as a portal on this network, using which other blockchains can interact with the associated blockchain.
Smart contracts on Nexus will govern the relationship between C-REPs. ICONs’ recent announcement about this project is an important one! They have come up with an important step towards decentralization.
According to ICONs’ latest announcement, there will be 22 node-operators, also called “Public Representatives” (P-REPs). The individual blockchains, i.e., the communities on Nexus will elect their P-REPs. P-REPs will have the necessary authority to create blocks, verify transactions, and perform their consensus-related responsibilities.
ICON had a successful “Initial Coin Offering” (ICO) that ended in October 2017. While the decentralization move with elected P-REPs will act as a big boost to blockchain interoperability, a report states that ICON is also developing a “Decentralized Exchange” (DEX). Keep watching this space for more exciting news about this promising project.