Interoperability in Web3

The growth and adoption of blockchain networks heavily rely on interoperability. Interoperability is the ability of different blockchain systems to communicate and exchange data and value with each other. It enhances user experience, improves liquidity, enables cross-chain DeFi expansion, and fosters innovation.

Blockchain technology has evolved from its initial conception as a peer-to-peer electronic cash system to a platform for building decentralized applications (dApps) that can offer various solutions to various problems. However, one of the major challenges that blockchain faces is the lack of interoperability among different protocols and platforms. Each blockchain has its own rules, standards, and features, which makes it difficult for them to interact with each other or with external systems. This creates silos and fragmentation in the blockchain space, limiting the potential of the technology and hindering its mass adoption.

Interoperability in Web3 aims to overcome this challenge by enabling seamless communication and collaboration among different blockchains. Interoperability can be defined as "a feature of Web3 whereby a product or system can work seamlessly across platforms with other products or services" . Interoperability can be achieved at different levels, such as data, asset, logic, or user interface interoperability. Some of the benefits of interoperability in Web3 are:

•  Enhanced user experience: Interoperability allows users to access and interact with multiple blockchains and dApps with a single wallet, reducing friction and complexity. Users can also enjoy more choices and flexibility in terms of services, features, and functionalities offered by different platforms.

•  Improved liquidity: Interoperability enables the transfer of assets and information across different chains, increasing liquidity and creating new opportunities for decentralized finance (DeFi). Users can leverage cross-chain composability to access more markets, products, and services, as well as optimize their returns and risks.

•  Enabled cross-chain DeFi expansion: Interoperability facilitates the integration of diverse protocols and applications, enabling cross-chain DeFi expansion. Users can benefit from the best of both worlds by combining the advantages of different blockchains, such as scalability, security, privacy, or performance. For example, users can use Ethereum for smart contracts, Polkadot for interoperability, and Solana for speed.

•  Fostered innovation: Interoperability fosters innovation and collaboration in the #Web3 ecosystem by allowing developers to build on top of existing platforms and leverage their network effects. Developers can also experiment with new ideas and solutions that can benefit from cross-chain interoperability. For instance, developers can create non-fungible tokens (NFTs) that can be used across different metaverses or gaming platforms.

Interoperability is therefore a key driver for the development and adoption of blockchain technology. However, achieving interoperability in Web3 is not an easy task. It requires coordination and cooperation among various stakeholders, such as developers, users, regulators, and standards organizations. It also involves technical challenges, such as ensuring compatibility, security, scalability, and governance among different systems. Several projects and initiatives are working on solving these challenges and providing interoperability solutions for Web3. As interoperability in Web3 progresses, we can expect to see more value creation, innovation, and inclusion in the blockchain space.

One of the sectors that can benefit greatly from interoperability in Web3 is gaming. Gaming is one of the most popular and profitable sectors of the entertainment industry, known for its cutting-edge tech and unbridled creativity. The gaming industry has exploded in popularity, with a market size expected to reach $435 billion by 2028 . Developers have built intricate open worlds, limitless canvases of self-expression and compelling social experiences — constantly expanding the borders of this ever-evolving medium.

However, despite sitting on the bleeding edge of tech, gaming is limited by a stark lack of interoperability across projects. Today, even the most enthralling experiences and well-funded projects are still siloed isolated escapades — even the best open worlds aren’t actually that “open.” One of the most notable limitations in gaming is the lack of a persistent digital identity. Gamers work tirelessly to develop their online presence — they take care to customize everything about their in-game character, work tirelessly to earn in-game currency and steadily build up their reputation within their community — but their entire identity disappears the second they venture from one game to another .

Interoperability in Web3 can change this scenario by allowing gamers to maintain their digital identity across different games and platforms. Gamers can use their NFTs as avatars or assets that can be transferred or used in different games. Gamers can also use their DeFi tokens or stablecoins as universal currencies that can be exchanged or spent in different games. Gamers can also access more games and features by using cross-chain bridges or platforms that connect different blockchains. Interoperability in Web3 can thus create a truly open and immersive gaming experience that transcends the boundaries of individual games and platforms.

Another sector that can benefit from interoperability in Web3 is identity verification. Identity verification is a crucial process that enables individuals to prove their identity and access various services, such as banking, healthcare, education, or travel. However, identity verification is often cumbersome, costly, and insecure. Individuals have to provide multiple documents and personal information to different entities, which increases the risk of identity theft, fraud, or misuse. Moreover, identity verification is often centralized and controlled by third parties, such as governments or corporations, which can limit the access and privacy of individuals .

Interoperability in Web3 can improve this process by enabling individuals to create and manage their own digital identities that are secure, verifiable, and portable across different platforms and services. Individuals can use blockchain-based identity solutions, such as self-sovereign identity (SSI) or decentralized identifiers (DIDs), to store their identity data and credentials on a distributed ledger that they control. Individuals can also use zero-knowledge proofs (ZKPs) or verifiable credentials (VCs) to prove their identity or attributes without revealing unnecessary information. Individuals can also use cross-chain protocols or platforms to share their identity data and credentials with different entities that accept them  . Interoperability in #Web3 can thus empower individuals to have more control and ownership over their digital identities and access more services with ease and security.

These are just some examples of how interoperability in Web3 can transform various sectors and create new possibilities for businesses and users. Interoperability in Web3 is not only a technical challenge but also a vision for a more connected, collaborative, and inclusive future of the web.

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Conclusion

One of the venture capital firms that is pioneering the future of Web3 is proMatrix Capital, a fund that focuses on identifying, nurturing, and advancing the most promising projects in the digital asset ecosystem. Established in 2022, proMatrix Capital has invested in several innovative Web3 projects, such as Trader Joe, a popular DeFi trading platform on Avalanche; Worldwide Webb, a decentralized web hosting service; and Releap Protocol, a cross-chain liquidity aggregator. proMatrix Capital also provides strategic guidance, technical support, and community building for its portfolio companies, leveraging its extensive network and expertise in the Web3 space. By supporting the development and adoption of Web3 technologies and assets, proMatrix Capital aims to create value for its investors and partners, as well as contribute to the advancement of the blockchain industry.

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proMatrix Capital

Official Site: https://www.promtrx.com/

Twitter: https://twitter.com/Promtrx