The art of the possible with Web3 interoperability

While the Web3 industry is still on the rise, the catalyst that will kick this revolution into high gear is hidden in the tech stack. Major improvements in Web3 interoperability will unlock new use cases and upgrade the foundational systems we rely on every day. And over time, blockchain interoperability is sure to impact every industry around the world.

What is Interoperability?

Interoperability, simply put, is the ability to move something from one system to another. This could be something as simple as texting an iPhone from an Android phone, or something more complex like transferring a token across blockchains. A seemingly intuitive action such as transferring money is surprisingly complicated: we rely on interoperability not only to move currency from one system to another, but also to protect against double spending: a flaw in which the first system to asset sends keeps a copy for use.

In the Web3 field, it’s hard to find an area that isn’t affected by interoperability. The fundamental networking concept is baked into the code of every project, from Binance to OpenSea. Upgrading Web3 interoperability is like updating the engine in a car; improving this foundational foundation will strengthen all that is built upon it.

Real world example: Gamers are building a truly open world

Real-world examples abound, but before we get into more long-term and visionary use cases, let’s start with a few tangible examples that are especially ripe for innovation through interoperability. Two industries with huge potential are gaming and identity verification.

We start gaming. As one of the most popular and profitable sectors of the entertainment industry, gaming is known for its advanced technology and unbridled creativity. The game industry has become extremely popular, with a market size expected to achieve $435 billion by 2028. Developers have built intricate open worlds, boundless canvases of self-expression, and immersive social experiences – constantly pushing the boundaries of this ever-evolving medium.

However, despite being on the cutting edge of technology, gaming is limited by a major lack of interoperability between projects. Today, even the most compelling experiences and well-funded projects are still isolated isolated escapades – even the best open worlds aren’t really that ‘open’.

One of the most notable limitations in gaming is the lack of a lasting digital identity. Gamers work tirelessly to develop their online presence – tailoring everything to their in-game character, working tirelessly to earn in-game currency and steadily building their reputation within their community – but their entire identity disappears once they venture from one game to another.

Promoting freedom of development

Some games like Roblox have already started addressing these issues. Roblox is designed as a platform for game developers to launch their projects. Using a central hub, players can seamlessly jump from project to project without ever leaving the Roblox platform. Projects across the platform use the same Roblox-approved digital currency, and players keep their wealth and identity with every project they load.

However, to achieve this level of interoperability, Roblox had to make sacrifices in developer freedom and game design. All Roblox projects must be built using Roblox-mandated tools, including a coding language and rendering engine, leaving developers with little freedom when it comes to art style and advanced game design.

Other projects have embraced designs that preserve developer freedom, but these also come with drawbacks. Take a game like Decentraland. This native game from Web3 tokenizes many in-game assets, allowing them to exist outside the boundaries of the game, just like a crypto token or NFT.

This hands-off approach does not limit developers. Everyone is free to interpret the tokens as they please. But transferring Decentraland tokens is complex, usually involving wallets, gas fees and – most critically – cross-chain bridges.

Bridges in particular are notorious for falling victim to high-profile attacks. Over $2 billion this year alone stolen in cross-chain bridge hacks. This means that when moving assets between games, players often have to risk having their account wiped out by a hack – which would mean losing their identities and all the assets they worked so hard to earn.

A more secure and robust interoperability standard is needed to ensure secure transfers and streamline the process. Ideally, it should be as simple as loading a Roblox game, not as complicated as a science project.

On the horizon: solving a growing identity crisis

Another real-world example ripe for further innovation through interoperability is identity verification. The ability to prove your identity is crucial to a well-functioning civilization and economy. Having a formal way of identifying ourselves, our ideas, and our material possessions is what allows us to barter and create global markets. But currently, identity verification infrastructure is very limited.

While global standards exist, e.g. passports, these records are kept strictly by governments and are extremely limited in the details they contain. Take a moment to think about the many elements of your identity (school transcripts, degrees, certifications, work experience); none can be encoded into a passport. In fact, they are all administered by different parties: your degree can only be verified by your university; your work experience by your employer. We rely on a confusingly tangled web of identity verification that makes due diligence inefficient and allows fraud to fester.

In addition, much of the world lacks any form of identity verification. A wonderful 1.1 billion people around the world have no means of proving their first and last name, date of birth or nationality. This leads to great difficulties in opening a bank account, voting in elections, finding a job and ultimately participating as an integrated member of society.

Advances in identity management

Blockchain technology can be used to improve the management and storage of digital identities, providing a unified and tamper-resistant infrastructure that provides security and authentication through cryptography.

Blockchain brings exciting improvements to identity management through an interoperable and verifiable way of unifying identity information such as attributes, claims, attestations and credentials. For example, an identity can include memberships, certifications, qualifications, and even peer recognitions.

Even more powerful is the potential to preserve the privacy of this data while verifying its accuracy using a cryptographic concept called “zero-knowledge proofs”. In particular, zero-knowledge proofs can be used to verify identity tokens (or owner-approved parts only) and prove they are accurate while preserving privacy.

Great progress has already been made in realizing digital identity solutions. Soulbound Tokens – which can never be transferred to another user – can be used to display certifications, experience, memberships and degrees and can be verified in an instant. In addition, digital cryptography is cheap, especially when compared to the physical security measures built into IDs and passports. And it will likely expand access to low-income demographics that have long been ignored.

However, all this functionality is arguable without the means to easily share and verify soul-bound tokens across platforms. Tools like passports are useful because they can be verified by countries around the world – the product of a robust universal standard agreed upon by numerous independent governments.

In the same vein, it is important to establish a protocol to ensure that Soulbound tokens and other tokenized identity solutions are easily interoperable in an increasingly heterogeneous Web3 ecosystem.

Looking ahead: visionary use cases

The benefits and capabilities of Web3 interoperability are especially tangible in gaming and identity verification, but their reach extends across a wide range of industries that rely on legacy systems and communication standards. Moving beyond near-term use cases, compelling visions and new areas of disruption are on the horizon. Areas like voting are ripe for disruption, and blockchain-based voting may not be far off.

Because blockchain is decentralized and can be anonymized, it contains all essential elements for making shared, fair and democratic decisions. In addition, there is no possibility of manipulation, recording errors or sabotage.

Along with voices, many have speculated on the huge potential that interoperable blockchain technology holds for improving healthcare, particularly revolutionizing the way medical records are stored, recorded, owned and shared. Of course, this must be done in a way that preserves privacy and provides absolute security, and there are several compliance-related requirements that should be carefully considered.

As we move into the future and Web3 development continues at breakneck speed – breaking new ground and introducing unpredictable new use cases – it’s important not to lose sight of the bigger picture.

Web3 projects must evolve to be accessible and universally intertwined, not tucked away in isolated silos. Robust interoperability is the key ingredient that transforms a neat proof of concept into a must-have tool with real-world usability.

Theo Gauthier is CEO of Toposware.