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Blockchain Interoperability: Why It Matters and How to Make it Happen? – ReadWrite



Stephen Tse

The blockchain industry market size is estimated by some to reach more than $69 billion in the next six years. The market capitalization of the entire cryptocurrency market already sits over $2 trillion. Blockchain and cryptocurrencies may once have been only for nerds and tech geeks, but things have changed significantly since.

Today, governments, businesses, institutional investors, and individuals are growing more optimistic about the evolving blockchain space. To support the argument, we have the numbers we shared.

Yet, it won’t be wrong to say that the industry and technology are both in their early stages. There are challenges blockchains face hindering their way to mainstream adoption.

One of the key challenges blockchain technology faces today is the lack of interoperability, a.k.a. cross-chain compatibility. So, what’s that, and what have we to gain from it?

Understanding the Basics of Blockchain Interoperability

Many things are so common that our brains often choose to ignore them. Such is the case with interoperability, not just of blockchains but of so many other technologies. To start with, let us take examples of some things that we’re familiar with: mobile phones, computers, and email.

Emailing wouldn’t be half as efficient and impactful as it is today if only two email platforms built on two different infrastructures were not interoperable.

For example, what if you couldn’t send an email from an account on Gmail to an account on Outlook? Surely, emails wouldn’t have made it this far into the future.

The same is the case with mobile and computer operating systems. What if you couldn’t call an Android user from your iOS device? Or, what if two users using Zoom on Windows and macOS couldn’t video call each other? What if it was not possible to send money from the Android version of Google Pay to its iOS version? The lack of interoperability would’ve made things fairly difficult for users.

The Interoperability of Blockchain Success Today is as Important as Cell Phone and Email Interoperability Was in the Beginning.

The blockchain industry is growing, and numerous promising blockchains are coming up, each claiming to be better than the other. Yet, they’re growing parallelly because the traditional architecture of blockchains does not allow them to communicate with each other. This forces blockchains to operate within siloes.

Every blockchain network represents an entirely new set of records and hosts different applications. They use different consensus protocols and take a unique approach toward blockchain, creating separate ecosystems not ready to interoperate with others.

Separate systems is true for every major blockchain, including Bitcoin and Ethereum. But thankfully, we have solutions such as the Harmony blockchain that help these blockchain networks interoperate. This ability of blockchain networks to communicate and share data with each other is what we call blockchain interoperability.

Now, the question is, why do we need interoperability?

Need for Blockchain Interoperability

Satoshi Nakamoto created the first blockchain, Bitcoin, to offer freedom to users who so far relied on intermediaries to process financial transactions. Since then, finance has been one of the principal target areas for most blockchain projects.

Then came Ethereum and showed the world that blockchain use cases range way beyond monetary transactions. Six years since the launch of Ethereum, we have blockchains disrupting every large industry from supply chain to video games, real estate to healthcare, and agriculture to entertainment.

The Rapid Expansion of Blockchain

As this rapid expansion of blockchain happens across industries, there are numerous blockchains that strictly focus on beating each other with better features. The features will include: greater scalability, faster block times, higher security, and so on.

The Main Point of Interoperability

Even in offering better features, these projects miss one critical point, i.e., without interoperability, the adoption of blockchain will be highly segregated and restricted.

The best example is to think of the two biggest blockchain networks — Bitcoin and Ethereum. The first supports the most widely used cryptocurrency, BTC. The second supports the most number of decentralized applications (dApps) and a majority of the decentralized finance (DeFi) ecosystem worth billions of dollars.

How to Use My Funds

Due to the lack of direct interoperability between Bitcoin and Ethereum, users of the world’s largest cryptocurrency cannot use their funds within the world’s largest DeFi ecosystem. This creates a barrier to the adoption of DeFi and cryptocurrencies.

Users cannot even transact BTC for ETH directly without going over to a centralized cryptocurrency exchange. It is also impossible to directly send tokens like USDT from the Ethereum blockchain to another blockchain such as Binance Smart Chain even if both blockchains individually support USDT or another token.

Supply Chain in Blockchain

Another great example can be the supply chain sector. Blockchain has a huge potential of disrupting supply chain processes. This could be for supply chains of healthcare, food, aviation, luxury items, or other industries. But if only blockchains are not interoperable, transmitting data from one to the other would be almost impossible. This would restrict companies from switching from traditional infrastructure to blockchain technology.

If we speak of implementing blockchain to the traditional financial system, lack of interoperability can be an even bigger nightmare. That is because if two banks use different blockchains, customers of those two banks will be completely cut off from each other.

It would be either too complex or totally impossible to transact between bank accounts of those two banks. This will create a rather segregated system than an integrated one like blockchain pioneers envision to create.

This is why blockchains must communicate with each other.

Now, we are left with another question… how do we make blockchains interoperable?

Blockchain Interoperability Solution

We aren’t the first people to be discussing the interoperability challenges of blockchain technology. The topic has been discussed and debated at length ever since blockchain started making inroads into major industries. All this has successfully led us to where we stand today in the blockchain space.

There are not one but multiple blockchain networks that offer interoperability solutions to other blockchain networks. Some of the most famous of these solutions include Polkadot, Cosmos, and Harmony.

Blockchain networks take different approaches to offer blockchain interoperability.

Polkadot and Cosmos follow a similar approach where they create a separate ecosystem that can contain different blockchains and enable them to communicate with each other.

Bridges make one of the three major components of the Polkadot blockchain and allow the network to connect with other blockchains. Cosmos, on the other hand, uses its inter-blockchain communication (IBC) protocol to enable interoperability. However, there are several incomplete components of these networks that are delaying their progress.

Harmony, which has recently emerged as one of the most trusted interoperability solutions, takes a slightly different approach. The platform has been successful in bridging Ethereum and Binance Smart Chain to its ecosystem.

How Does the Platform Bridge?

The platform bridges by deploying smart contracts on all blockchains and allowing the same set of nodes to read and validate relevant transaction requests on all blockchains. This is a unique approach as blockchains have their own exclusive nodes that can validate transactions only on one network.

How Do the Nodes Work?

These nodes keep an eye out for crypto transactions requesting a cross-chain transfer between the bridged blockchain networks. Once they find a request, they approve the transaction on the blockchain where the request originated and relay that information to the other blockchain. Then on the second chain, the same amount of assets are minted.

These functionalities have slowly started taking blockchain toward a future where blockchains can interoperate.

The Future of Blockchain Interoperability

Interoperability is a must for blockchains to gain adoption across the several industries that they can disrupt. There’s a ray of hope that very soon, blockchain interoperability will be more seamless.

Not only will we be swapping crypto assets across blockchains but also sharing other information such as supply chain records, health records, certificates, and so on.

Harmony’s vision is bringing the beauty of trustless consensus to 10 billion people. The only road to that vision is through interoperability.

Image Credit; worldspectrum; pexels; thank you!

Stephen Tse

Founder and CEO of

Stephen Tse, Founder and CEO of, has been obsessed with protocols and compilers since high school. He reverse-engineered ICQ and X11 protocols, coded in OCaml for more than 15 years, and graduated with a doctoral degree in security protocols and compiler verification from the University of Pennsylvania.
Stephen was a researcher at Microsoft Research, a senior infrastructure engineer at Google, and a principal engineer for search ranking at Apple. He founded the mobile search Spotsetter with institutional venture capital; Apple later acquired the startup.


Fintech Kennek raises $12.5M seed round to digitize lending



Google eyed for $2 billion Anthropic deal after major Amazon play

London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs



Deanna Ritchie

As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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UK seizes web3 opportunity simplifying crypto regulations



Deanna Ritchie

As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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