Blockchain interoperability will accelerate institutional success

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

Traditional Finance and Adoption

Traditional financial giants such as Goldman Sachs and BlackRock continue to show interest in using blockchain technology for large-scale asset trading. The global adoption of crypto solutions by US payment companies such as Mastercard and Visa also sends a signal to global players that the time is ripe to seriously consider blockchain technology. In today's rapidly changing digital environment, institutions that are not actively adopting decentralized technologies may face the risk of being left behind.

Although the number of institutions involved in decentralized technologies continues to grow, poor interoperability remains a barrier to widespread blockchain adoption.

Walled Garden Dilemma

Due to the trustless nature, blockchains cannot communicate with other blockchains without external intervention. This leaves enterprises with two choices: either limit themselves to a single blockchain or rely on blockchain interoperability solutions to take advantage of multi-chain advantages.

After more than a decade of case studies and experiments, it has been clearly proven that the scale and scope of global business is too large and complex to be efficiently supported by a single blockchain. Instead, global institutions’ business logic must routinely span multiple blockchains and seamlessly switch between private and public networks.

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

The need for expanded interoperability

Currently, only a few reliable blockchain interoperability protocols exist. Through advanced cryptographic techniques such as multi-party computation and zero-knowledge proofs, these protocols can securely and seamlessly transfer data between different blockchain networks, effectively solving the challenges inherent in blockchain technology.

Blockchain interoperability solutions enable institutions to develop cross-chain smart contracts that interact between multiple blockchains to obtain greater liquidity. Institutional participants can deploy business logic to multiple networks while meeting strict security and compliance requirements.

For example, blockchain interoperability enables traditional banks to proactively monitor and respond to market volatility, transaction history, and compliance protocols. When bank customers want to conduct cross-chain transactions, interoperability protocols can be set up to ensure cross-chain transaction verification and meet regulatory requirements in a simple and timely manner.

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

Challenges to Institutional Adoption

While there are many factors that have prevented the widespread adoption of cross-chain interoperability to date, the negative impact of the lack of a transparent regulatory environment cannot be ignored. While recent regulations and initiatives from government agencies such as the Global Financial Innovation Network and the U.S. Digital Assets Executive Order aim to improve the current interoperability infrastructure, the journey to building secure and compliant solutions has just begun.

The blockchain industry itself is also to blame. Although today's blockchain interoperability protocols are fully functional, interoperability itself remains fragmented and incompatible. Competing projects continue to build ad hoc solutions, making it difficult for regulators to review their feasibility and security one by one.

The Road Ahead

Collaboration between regulators, industry leaders, and developers is key to accelerating institutional adoption of blockchain interoperability. While challenges remain and interoperability protocols continue to evolve, institutions must act to establish leadership in a world where decentralized platforms define endless possibilities for long-term scalability, security, and operational efficiency. Blockchain technology has reached a critical mass adoption point by making it as simple, secure, and efficient as possible to transfer data and assets.