As Banks Begin to Embrace Blockchain, Cross-Chain Interoperability Will be Vital to Mass Adoption
Back in September 2017, JPMorgan Chase CEO Jamie Dimon ridiculed Bitcoin, calling it a fraud “worse than tulip bulbs.” For the uninitiated, he was referring to the 17th century Dutch tulip market bubble, one of the craziest bubbles in recorded history.
Fast forward a few years, JPMorgan and other banking giants have been dipping their toes in the blockchain world. Blockchain enables the untrusted parties to securely transact without middlemen that add to the cost and slow down the transaction speed. Thanks to the self-executing smart contracts, it offers a simple and secure way to establish trust in a transaction.
Can’t afford to get left behind
It’s not just network efficiency or cost savings that attract banks to blockchain. Blockchains can dramatically improve the security of digital transactions and remove the potential for errors, confusion, and fraudulent transactions.
Blockchain and the distributed ledger technology (DLT) are disintermediating the key services that banks provide such as payments, clearance & settlement systems, fundraising, borrowing, lending, customer KYC and fraud prevention. They help simplify the movement of money and sensitive data across the globe.
Large banks have now become far less hesitant to experiment with blockchain. According to a Global Blockchain Survey conducted by Deloitte, more than 95% of the participant banks said they would make at least some investment in blockchain or DLT.
Blockchain today is a lot like the Internet of the 1990s. Organizations reluctant to understand and exploit its capabilities will likely be left behind. It is disrupting almost every industry, including banking – just like the Internet disrupted many in the 1990s.
A growing number of banks have joined blockchain consortiums such as the Hyperledger project and R3 to advance the global blockchain adoption.
Banks joining different consortiums highlights the facts that there is no standardized implementation of blockchain technology.
There are hundreds of public, private, and consortium blockchains deployed around the world. Even if a bank is part of a consortium, it won’t be able to communicate or exchange information with banks outside the consortium.
Today, blockchains exist in isolation. They might not gain mainstream acceptance until users are able to seamlessly access value and utility across the entire ecosystem. End users cannot be locked into a single blockchain or standard.
Cross-chain bridges would drive the future adoption
Cross-chain platforms provide interoperability between two relatively independent blockchains. They allow the siloed networks to speak to one another and exchange information.
Given that banks are building their Dapps on different blockchains, they would rely on cross-chain platforms to talk to one another. Projects like Wanchain have been building cross-chain bridges to connect the different networks to help blockchain reach its full potential.
Earlier this year, Wanchain launched the world’s first BTC-ETH direct bridge. It already offers decentralized bridges connecting Bitcoin, Ethereum, Wanchain, EOS, Binance Smart Chain, Litecoin, and XRP Ledger.
Wanchain’s cross-chain bridges use unified decentralized collateral pools maintained by its Storeman Group. When a user initiates a cross-chain transaction, the Storeman Group locks the original asset on the origin blockchain before minting a new token, pegged 1:1 to the original asset, on the destination chain.
Any blockchain – whether public, private or consortium chain – can easily integrate with Wanchain to establish connections between different ledgers and perform low-cost inter-ledger asset transfers.
Wrapping it up
The number of blockchain projects is growing rapidly as developers keep coming up with innovative ways to leverage blockchain’s capabilities. There are a wide variety of blockchain ecosystems such as Ethereum, Cardano, Polkadot, Solana, and others – each with their own set of advantages. It’s highly unlikely that there will be a single perfect blockchain platform that all the world’s banks could use to build their Dapps.
Cross-chain interoperability solutions like Wanchain enable the transmission of the world’s digital assets and data between various isolated blockchain networks in real-time. Truly decentralized and open finance must be connected to make banking services fast, secure, and affordable.