Originally used to allow the exchange of information by information technology or systems engineering services, it is now used more broadly to take into account the social, political, and organizational factors that affect system performance. Interoperability is therefore used to address incompatibilities that arise because components are different. This approach has made information technology and systems engineering a discipline that pays attention to social, political, and organizational requirements as well as technical requirements.

What Is Interoperability in Cryptocurrencies?

Interoperability in cryptocurrencies refers to the ability to view and share data across multiple blockchain networks.

Interoperability is considered advantageous because it works with blockchain. With Interoperability and blockchain, there is no need for centralized custody platforms and cryptocurrencies can be traded across blockchain networks. In other words, Interoperability contributes to the development of the blockchain network by allowing users to trade across multiple platforms. Interoperability is important in making it easy for systems to exchange data in an organized and efficient manner. Some blockchain networks need more solutions to connect them, and one of those solutions is tokens.

Why Is Interoperability Important?

In blockchain, networks grow by being connected to each other. Investors or users can get more out of blockchain technology if blockchain networks are interconnected. The goal of cryptocurrencies is to eliminate intermediaries. Therefore, a third party overseeing transactions between blockchain networks is unacceptable. Only Interoperability, which connects networks in an integrated way, helps transactions to take place without the need for a third party.

Interoperability in blockchain networks benefits increased efficiency all across the Web 3.0 ecosystem. It allows users to quickly exchange data and assets between blockchains, increasing flexibility for everyone involved in the network. Through interoperability, smart contracts can run on different systems instead of being tied to a single chain.

How Does Interoperability Work?

Interoperability encompasses multiple systems set up for users to view, manipulate, and access data shared in other systems. The data management process requires systems to adopt data formats and structure protocols. It enables data to be made more meaningful and shared more effectively. It then links data elements with a controlled and shared vocabulary using semantic methods. The vocabulary is linked to the ontology. Ontology, as a data model, contains concepts and their relationships within a specific domain. By using standards, organizations can share their data more effectively and independently from other information systems.

Every blockchain network is different. Therefore, multiple approaches are needed for Interoperability. The one thing that all approaches have in common is the absence of third-party integration. Web 3.0 therefore maintains its status as a decentralized technology. A common method to perform transactions between blockchain networks is atomic exchange, an application that works around peer-to-peer (P2P) cryptocurrency platforms.

What Are Atomic Swap and Interoperability?

Atomic Swap refers to the exchange between two different tokens. At the same time, Atomic swap is a method used to eliminate the risk of another party. For instance, if investors x and y have two different cryptocurrencies and users want to swap cryptocurrencies, Interoperability allows for a peer-to-peer and secure swap.

What Are the Advantages of Interoperability in Blockchain?

Some advantages of Interoperability in blockchain networks are:

• Through interoperability, users can seamlessly transact in the different blockchain networks without the need for a centralized intermediary or third party.
• Through interoperability, more collaboration can be achieved across sectors. Through interoperability, data can be easily shared between interconnected chains.
• Through interoperability, blockchain networks can grow faster. Interoperability not only makes data available to more users, but also helps the entire cryptocurrency ecosystem grow. It makes trading easier for users.