Important Properties of Interoperability
In 2019, the race to solve the blockchain interoperability problem has gathered steam. We discussed in our previous newsletter what interoperability is and why it’s important. This month, we share how the different approaches to interoperability should be measured, and how this helps practitioners apply the best solution to the problems they are facing.
There are three fundamental properties that determine the efficacy of an interoperability solution; decentralization, inclusivity and efficiency.
- Decentralization — Does the solution require a centralizing component in order to work well?
- Inclusivity — Does the solution demand a rigid blockchain or token compatibility standard, and does it work for a large subset of blockchains?
- Efficiency — Does the solution cost a lot of resources (time, computing power, gas) to work?
How do Projects Today Approach Interoperability?
The majority of interoperability solutions that exist in the industry today leverage three different technical structures: notary schemes, sidechains/relays, and hash-locks.
1. Notary Schemes
The role of the notary is to constantly monitor events on multiple blockchains so it can serve as of link between them. Consider a cross-chain transaction between Blockchain A and Blockchain B. The Notary will verify that an event has transpired on Blockchain A before transmitting a transaction on Blockchain B.
Because notary schemes rely on a trusted third party(ies) to validate that an event occurred on a certain chain, we mark it low/medium on decentralization, depending on how many trusted parties are involved. However, because notary schemes can work across various chains, it gets high markings for Flexibility. Notary schemes are as efficient as their underlying chains, so we mark them as Medium/High for Efficiency.
2. Sidechains / Relays
A ‘sidechain’ is as subordinate blockchain that is attached to a parent chain (like Bitcoin or Ethereum for example) and can read and verify information directly from it. Sidechain based systems employ a process called ‘pegging’ to transfer assets between the mainchain and side chain.
Sidechains rely on smart contract to verify transactions without reliance on third parties, therefore we mark them High for decentralization. However, sidechains require a close structural relationship with the parent chain so they can read data from each other, and therefore are restricted by a compatibility standard in order to participate in the network, therefore we rate it Low on Flexibility. Finally, sidechains are as efficient as their parent chain, so we mark them a Medium/High for Efficiency.
3. Hash Time-lock Contracts (HTLC)
Hash-locking, the underlying technology used in ‘Atomic Swaps,’ is a cryptographic smart contract that facilitates cross-chain transactions between two counter-parties who do not trust each other. A simplified explanation of a hash time-lock smart contract is an escrow account that returns the values inside the account to the initiating party unless a condition is met by a counter-party within a fixed period of time.
Because there are no third parties in HTLCs, Decentralization receives a High. However, HTLCs require a fairly time-consuming and cumbersome process and both blockchains must support smart contracts and similar hash algorithms to be compatible. Hence, we give HTLCs a Medium on Inclusivity and Low on Efficiency.
DCRM — Fusion’s Vision for Decentralized, Unbiased Interoperability
The nuts and bolts of DCRM are described in previously shared articles, here and here.
DCRM uses a decentralized custody approach, where the distributed network serves as the protector and facilitator of asset exchange across heterogenous chains. Therefore, we mark decentralization as High. DCRM tackles interoperability at the encryption level, interacting directly with external blockchains in their native encryption schemes and imposing no standards or changes onto the chain. Therefore, we market Inclusivity as High. Finally, because the Fusion blockchain is highly efficient in speed and gas consumption we mark Efficiency as High.
The vision is for DCRM is to be supported by a large decentralized network of voluntary nodes. To identify and resolve various practical business adoption issues, we are starting with a peer-to-peer network setup as discussed in our Journey of Interoperability. As these issues are resolved and a suitable governance structure is implemented, we will open a fully distributed and unbiased interoperability solution.
Fusion released Universal Short Account Number (USAN) Swap, enabling users to trade their USAN numbers for any other digital asset within the Fusion ecosystem. USANs are now selectable as a tradable asset on www.myfusionwallet.com and compatible with the Quantum Swap marketplace.
Node Stats Monitor
A new and improved Node Stats Monitor that is a major upgrade on the previous version was released by Fusion during the month of October. All 300+ Fusion nodes (that opted to be included in the public node stats) display efficiently so you can easily check on the performance of your own personal staking node and the overall state of the network.
The Fusion staking community successfully implemented a hard fork to execute on the community voted ‘state change’ solution to the wallet theft, introduce upgrade 3.1 to MainNet (that had already been trialed on TestNet_ and add a new block synching function.
The vast majority of nodes quickly transitioned to support the upgrade with no hiccups. We thank the staking community for their support!
Fusion launched the 2 Million FSN Community Campaign to harness the potential of the open-source community. The campaign empowers individuals with diverse skills to contribute to the project and help lead Fusion into the future. All registrations can be submitted to this Google form.
Less than 48 hours after going live the foundation had received close to 150 applications to register to be apart of the Fusion Open Source community with more than 400 applicants at time of writing.
New Partnership with Morpheus Labs
Fusion announced an exciting collaboration with Morpheus Labs to grow our open source community and unleash the power of the crowd to further drive innovation. Morpheus Labs provides a collaborative environment for developers to build and manage projects within a dashboard, they will be leveraging their platform to support Fusion’s open source community.
Partnership Update from Realio
Realio continues to enhance their issuance platform with onboarding and KYC for entities, not just individuals. The integration with Fusion protocol is proceeding and we had our kick-off meeting with their developers. We are also had meaningful discussions with asset originators to digitize assets through Realio x Fusion.
In late September, we mirrored YAD’s $5 million real estate deal on the Fusion Mainnet as a test deal, demonstrating how loans would be represented as time-locks. Real estate collateral, debt, and payment tokens were created and distributed from 1 issuer wallet to 9 investor wallet. YAD is also in discussion with our issuance partner Realio to bring to market a digital offering through Fusion.
Fusion CPO John Liu caught up with Blockchain Brad for a marathon 90 minute interview to chat about all the innovative technology in development at the Fusion labs.
The conversation focused on interoperability, the new partnership with Morpheus Labs and adoption progress on the Fusion Blockchain.