Blockchain has become a reality within the financial services industry. Yet organisations that are looking to scale and harness the power of blockchain technology are still struggling with interoperability. In this article, we explore the importance of interoperability and the benefits it can unlock for businesses.
Ambitious projects like the tokenisation of funds and commercial bank deposits and the creation of green bonds, will all face the same hurdle when owners seek to trade in diverse networks, but also the ability to co-exist in a CBDC and stablecoin reality not too far away.
Creating digital assets or tokenising existing portfolios in private chains means creating something similar to an intranet. A successful tool for enabling better internal communication, collaboration and productivity, but limited in its ability to connect to the outside world.
What is interoperability in blockchain, and why is it so important?
Blockchain interoperability can be defined as the ability for different blockchain networks to communicate and share data with each other. This enables an efficient and scalable financial ecosystem, as information and assets can flow seamlessly between different networks, reducing the need for intermediaries and improving transactional efficiency.
This is crucial as a thriving financial system relies on transactions that involve multiple parties and blockchain networks, making interoperability necessary for secure, timely, and cost-efficient data and value transfers.
In addition, blockchain interoperability has the potential to revolutionise traditional securities markets, by enabling the frictionless trading of tokenised and digital assets. Tokenisation is the process of converting traditional assets, such as equity, fiat and bonds, into digital tokens. However, unless these assets can be transferred across networks, the potential of these digital assets is limited.
At Quant, we believe that standards and interoperability are catalysts for mass blockchain adoption and is the gateway to new products and services that truly impact people’s lives. That is why, in 2018, we sought to overcome this challenge by creating Overledger, the world’s first API gateway for interoperability. Overledger acts as a decoder layer that can be plugged into any network, as well as between networks and traditional technologies.
Because Overledger is created and maintained by a team of DLT and cyber security experts, it is resilient, secure and efficient and relies on mature cloud technology.
As Overledger orchestrates all communications between multiple points, it adds an extra layer of security to transactions and data exchanges on the blockchain. (When used with Overledger Authorise, the security effect is manifold.)
Another way to achieve interoperability is through bridge technology, where a portal between two or more networks is created to enable the seamless transfer of assets. Although our bridges follow the latest security protocols and were developed in partnership with the IETF (Internet Engineering Task Force), many bridges out in the market can pose severe risks to your assets. You can learn more about how to safely use bridges here.
It’s clear that the industry needs interoperability. Although there is a clear ambition for financial institutions to achieve interoperability – with various initiatives and projects already underway – businesses need the technology infrastructure in place to deliver against this mission. Continuing to build a new economy on disconnected, disparate systems will lead to technical debt, cost implications and inefficiencies.
To discover how Quant enables interoperability between multiple networks and integrates blockchain with other systems, all while maintaining high-grade security compliance, contact our team of experts today.
How Quant can help
