Blockchain Cryptocurrency Editor's Choice Europe Fintech

Zilliqa: Why Cross-Chain Interoperability is the Key to Securing Blockchain’s Future 

Blockchain has come a long way in its development. Its use has grown exponentially and is now being used to chart and record the ownership of NFTs, tracking cross border payments, and of course, enabling the use of crypto, amongst other things. Its ecosystem has flourished but what’s next?

Amrit Kumar is the President and Chief Scientific Officer of Zilliqa. Focusing predominantly on areas of security, privacy and applied cryptography, Kumar’s research has been widely published at conferences such as IEEE/IFIP and IFIP TC-11 SEC. Kumar received his PhD from Université Grenoble-Alpes, France and was hosted at Inria’s Grenoble centre. 

An expert in blockchain, he discusses how the technology’s consolidation is essential so that it can thrive, and that DeFi has enabled collaboration throughout the ecosystem:

Amrit Kumar, President and Chief Scientific Officer of Zilliqa
Amrit Kumar, President and Chief Scientific Officer of Zilliqa

Blockchain has undeniably come a long way: From non-fungible tokens being issued and purchased by luxury fashion houses and major financial institutions such as Visa to El Salvador’s recognition of bitcoin as legal tender. No longer limited to niche online communities in the darkest recesses of the internet, various use cases have attested to the underlying technology’s mass appeal. This year alone, the total crypto market’s capitalisation hit an all-time high, briefly touching $2.4 trillion — up from $200 billion in 2019.

A little over a decade on since Satoshi Nakamoto’s Bitcoin network whitepaper, the industry ecosystem has flourished, now home to a myriad of projects rooted in building a legacy atop of some of the space’s earliest players. After all, blockchain is like any technology, determined by trial and error and ongoing experimentation. From projects that have gradually faded into insignificance following the initial token sale boom of 2017 to security breaches that have dampened investor and community confidence, the opportunity to separate the wheat from the chaff has been critical to getting the space to where it is today. So what’s next?

Tackling the trilemma

Early on, Ethereum co-founder Vitalik Buterin once posed the blockchain trilemma quandary: How can you balance the need for decentralisation, scalability, and security in protocol design? The challenge was that projects were forced to compromise on at least one. First-generation players such as Bitcoin and Ethereum were able to uphold high levels of decentralisation and security but fell short when it came to scalability, leading to the oft-cited criticisms of blockchain’s true utility. Other protocols that had somehow managed to crack the speed challenge while offering security, missed the mark when it came to decentralisation. While a more centralised network could certainly meet far-spanning business use cases, issues in network governance begged the question as to whether such platforms were any better than their traditional counterparts.

Since then, the gradual evolution of protocol design has enabled the industry to move forward from the challenges posed by the blockchain trilemma. Zilliqa, for example, employed a novel approach to scalability via network sharding — a ‘divide and conquer’ approach to transaction processing that enables the network to scale linearly as transaction volumes increase. Ethereum, too, has since made significant strides, opting to adopt its own method of sharding as it transitions to Ethereum 2.0 as a proof-of-stake (PoS) blockchain. The growing popularity of PoS and other consensus protocol alternatives have made it so that a new generation of protocols is on the rise, either forcing legacy players to adapt and evolve or pushing them into gradual obsolescence.

At this stage, the time for blockchain infrastructure has passed, with developer communities equipped with the needed breathing room and foundational tools to develop new platforms and applications to further enrich project ecosystems.

A collaborative form of consolidation

But for any technology to excel, consolidation in the form of interoperability will be essential to ensuring the longevity of blockchain as an underlying technology that can power a myriad of applications, each necessitating different levels of security and forms of network governance. Over time, the space has recognised this need, largely driven by the growth of DeFi.

With Ethereum being the basis for many applications and projects across the DeFi ecosystem, over half of the top 20 ranked cryptocurrencies are compatible with the Ethereum Virtual Machine (EVM) or continue to make use of the ERC-20 token standard. Similarly, ‘wrapped’ tokens allow traditionally non-DeFi centric project ecosystems to benefit from these new financial instruments and applications. Take wrapped bitcoin (WBTC), for example — an ERC-20 token backed 1:1 by bitcoin held in a BitGo trust. Unlike most stablecoins, the amount of WBTC in circulation has been made public in order to provide users with the assurances that the underlying asset is securely being held. Today, the total value locked of WBTC now stands at over $9billion, now a leading asset across the DeFi space.

However, perhaps the most promising innovation in enabling greater collaboration across the industry has been the network bridge. These bridges allow for cross-chain interoperability, making it so that two disparate project ecosystems can communicate with one another. Here, cross-chain transfers can take place across two blockchains, promoting inter-blockchain liquidity while enabling decentralised applications to benefit from the perks of both networks. In recent months, a spate of projects have announced network bridges across leading DeFi protocols, be it Polygon, Ethereum, or Zilliqa. The potential here is significant, especially when considering the business case for blockchain. No longer forcing businesses to operate in siloed environments, businesses will be able to transact across networks, projects will equally be able to build across ecosystems — all without significant network latency or excessive transaction fees.

A lasting legacy

As the industry contemplates its future, one thing is for certain: A vibrant ecosystem has certainly offered developers, businesses, and users alike an abundance of choice. As more projects push for interoperability in order to build out a more diverse, multi-chain ecosystem, it appears crypto has gradually come to abandon the tribalism of the past. Looking beyond cries for token maximalism, DeFi has encouraged a new breed of collaboration — one that will enable the space to build across the boundaries of code.


  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

Related posts

Hodlnaut Launchs Crypto Interest-Earning iOS App and Bolster Its Affiliate Program

Francis Bignell

Understanding the urgent need for secure identity during COVID-19

Mark Walker

Financial Community Gains Quick Access to APAC Investor Event Coverage

Gina Clarke