Mary Amakihi 
Governance Mechanisms Influencing Blockchain Interoperability
Blockchain interoperability aids blockchains in communicating with other blockchains, thereby improving efficiency. This article discusses some governance mechanisms influencing blockchain interoperability.
Blockchain is a distributed digital ledger that records and verifies transactions across numerous computers (or nodes) to provide data openness, security, and immutability.
It eliminates intermediaries and enables trust and traceability in various sectors. On the other hand, effective governance structures are required to maintain the integrity and progress of blockchain networks.
Within a decentralized ecosystem, these models govern how choices are made, protocols are updated, and address conflicts.
Let’s understand what blockchain interoperability is about before we get into the governance mechanisms influencing blockchain interoperability.
What is Blockchain Interoperability?
Blockchain interoperability is the ability of a blockchain to exchange data with other blockchains freely. For example, every item possessed and every transaction made are documented on a given blockchain.
Any economic activity on one blockchain may be represented on another with the correct interoperability solution.
This means that the economic activity from one chain can extend to another, which is one of the primary features of blockchain interoperability solutions.
One of the initial contributions to the field of blockchain interoperability was the concept of trustless cryptocurrency exchange, achieved by atomic cross-chain swaps, also known as atomic swaps.
Using atomic swaps, users of various cryptocurrencies can exchange assets in a trustless and atomic manner.
Atomic swaps, however, do not allow a token to be transferred from one blockchain to another because a specified quantity of assets is destroyed on the source blockchain, and the same amount is (re)created on the destination blockchain.
As the name implies, atomic swaps enable token exchanges rather than transfers across blockchain boundaries. This means that atomic swaps always require a counterparty willing to trade tokens.
Online markets act as a back door for token exchange. To date, however, this has necessitated the establishment of a trustworthy, centralized authority, which contradicts blockchain’s decentralized character.
As a result, cross-chain technology is fast being explored as the best way to improve blockchain interoperability.
How Blockchain Interoperability Works
The cross-chain protocol allows data to be shared across multiple blockchain networks and simplifies interoperability. The cross-chain protocol will enable users to communicate directly with one another.
As a result, comparable blockchain networks can trade value and information.
However, it differs from network to network because no single predetermined approach can be adopted in all networks similarly. Each network employs a distinct mechanism for blockchain interoperability to facilitate transactions without third-party interfaces.
As previously stated, atomic swaps allow two parties to exchange tokens across several blockchains. Furthermore, relays enable blockchain networks to monitor activity on other chains.
They work on a chain-to-chain basis, allowing a single contract to act as a central client for other nodes across several chains without using distributed nodes.
This enables it to validate specific central headers and the transaction history in real-time. However, managing and maintaining the security of the relay approach is expensive.
How is Blockchain Interoperability Important?
Interoperability in blockchain technology helps to solve the problem of assets and data interacting across several chains.
When two parties use the same blockchain platform, such as Bitcoin, digitally exchanging data and value is simple. The same cannot be said when the parties use separate blockchain systems.
Indeed, the digital transfer process is made substantially more complicated because organizations worldwide use blockchain technology inside various blockchain networks.
On the other hand, interoperability is expected to significantly decrease such difficulties, making it much easier for parties to transact across blockchains and reap the benefits of blockchain interoperability.
Financial ecosystems, for example, run on several blockchains, making it hard for financial organizations and their clients to engage, transact, and communicate with one another in the financial services business.
If these blockchains connect, data and cash can be exchanged between economic ecosystems cost-effectively, quickly, and securely.
That gotten, let us proceed to get acquainted with blockchain governance.
What is Blockchain Governance?
Blockchain governance can be defined as the combination of norms and culture, rules and codes, people and structures, all of which promote coordination and collectively determine the technology.
Blockchain governance guarantees the network runs smoothly, is secure, and evolves consistent with its stakeholders’ interests and values.
It entails making decisions about protocol upgrades, changes to consensus methods, network characteristics, economic incentives, and other factors that affect the blockchain’s general operation.
Let’s see the governance mechanisms influencing blockchain interoperability.
Governance Mechanisms Influencing Blockchain Interoperability
Different blockchain networks use different governance mechanisms, and the chosen governance structure can substantially impact the network’s interoperability.
Here are several typical governance frameworks that facilitate blockchain communication:
- Off-chain Mechanisms
- On-chain Mechanisms
Off-Chain Governance Mechanism
Off-chain governance methods are used by Bitcoin and Ethereum, as well as most other Proof-of-Work blockchain systems, to enhance interoperability.
Users, node operators, developers, and miners are the primary stakeholders in these blockchains, and they all act as checks and balances on one another.
Off-chain governance in a blockchain ecosystem works when all stakeholders simultaneously agree and implement all required modifications and implementations.
If consensus cannot be established, the network is likely to fork or break into two chains running different software versions. The chain with the highest transactional hashing power deemed the original chain’s successor.
Protocol development in an off-chain approach occurs at conferences, internet forums, and mailing lists, among other sites. You must participate using these means.
A quick look at the history of Bitcoin’s block size discussion exposes the informal, off-chain methods that influence whether or not modifications are made and the problems that can occasionally accompany those processes.
The Bitcoin community disagreed about whether the size of Bitcoin blocks should be expanded to accommodate more transactions to extend Bitcoin’s transaction processing capability.
The block size argument raged throughout the off-chain process, spanning several platforms and events.
Several agreements were signed and broken over several years, multiple conferences were organized to host in-person debates, and blockchain splits were threatened and eventually executed.
Bitcoin Cash is the most noteworthy example of a digital asset that lost consensus with the main Bitcoin blockchain and currently operates as a separate and independent blockchain with virtually identical code.
The long and inefficient argument over Bitcoin scaling illustrates two disadvantages of off-chain governance: it can be difficult to record your input as an individual user, and improvements can take a long time to implement.
On-Chain Mechanisms
Another governance mechanism influencing blockchain interoperability is the On-Chain mechanism. On-chain governance is a technique that allows a decentralized community to update a blockchain by voting directly on-chain.
On-chain governance for a blockchain ecosystem usually takes the form of a vote on Proof-of-Stake blockchains, and you must typically own the blockchain’s native token to participate in its governance.
The number of coins you hold determines the weight of your vote. Users, developers, and transaction validators are familiar stakeholders in on-chain governance.
If you own MakerDAO’s MKR token, for example, you can vote on governance activities proposed by the Maker community via its decentralized autonomous organization (DAO).
These include changes to MakerDAO’s debt system, such as adding a new sort of collateral. Each proposal is coded as a smart contract, and when it receives the necessary number of votes, modifications to the blockchain are implemented instantaneously.
EOS is yet another blockchain with on-chain governance. You can choose the network’s transaction validators if you own an EOS coin and vote for them in elections.
You can vote for up to 30 transaction validators in EOS, with each coin equaling one vote. You can assign your voting authority to another user if you want to refrain from engaging in on-chain governance.
On-chain governance expands the number of people involved in blockchain governance procedures, reduces the risk of chain splits and forks, and allows individual users to record their input.
Some on-chain governance systems retain some off-chain characteristics. For example, even if proposals are encoded in smart contracts, they are frequently discussed in forums, blog posts, and Twitter before being voted on.
Despite demonstrating significant potential in a short period, on-chain governance has been subject to criticism.
On-chain processes have been criticized as plutocratic because the number of coins you own determines the weight of your vote, resulting in whales disproportionately impacting the system.
And skeptics are concerned that coin-rich whales may vote for blockchain modifications that are most beneficial for them rather than what is best for the long-term sustainability of the blockchain ecosystem.
Conclusion
Blockchain governance is more than a theoretical argument or an academic concept. It is a rallying cry, imploring us to reconsider how we govern and make decisions in the digital age.
We can pave the way for a more interoperable, decentralized, inclusive, and equitable future by engaging in ongoing experimentation, research, and open discourse.
