Imagine a world running on Polkadot
Isolated blockchains are very much akin to the corporate Ethernets and web-services of the 90s that were living in their cozy little worlds, which in the longer run made their use cases rather limited, and even useless at times. Similarly, blockchains of today are completely isolated from one another, and technical solutions of leveraging inter-blockchain interactions are now at the nascent stage. Pursuing the sweeping vision of interconnecting all the existing blockchains into one global network takes a lot of thought, and until that finally occurs, the majority of blockchain startups are destined to remain completely cut-off with no chance to scale or exchange data. In this blog we will touch upon #Polkadot’s ongoing effort to be one step closer to decentralized interoperability.
How interoperability brings us closer to scaling and adoption
Now it’s nearly impossible to imagine a viable software product that is isolated from the World Wide Web and thus doesn’t exchange data with other apps. Take, for instance, email and online hosting products that were a perfect use case for private corporate networks in the 90s. All of them have evolved into free-bee analogues now available to anyone with an Internet connection. More so, the majority of popular apps are now integrable, by design - Slack with Asana, Dropbox with Google Mail, Apple with Netflix. This integration makes some routine user journeys seamless and accessible. Each of these integrations increases user freedom and choice while compounding the network effects of these services.
The blockchain ecosystem today is very much like the Internet of the 90s. Lots of isolated networks have been created, with each of them occupying a very specific niche providing the user with a limited set of features. Each of the them, Ethereum, ZCash, NEO, Stellar, or Bitcoin, can be characterized by their own set of assets and applications, and until there is a way for them to interoperate instantly, they will remain cut-off from one another. That’s especially true for decentralized financial services that are often deployed on different blockchains, as their utility is based on being able to connect to other services to exchange personal user data. Hence, consumer products will realize their full potential only when they can trustlessly exchange data.
Polkadot parachains - a perfect tool for scalability
A parachain, or a parallelised blockchain, is a main building block of the network being at the core of Polkadot’s ability to scale and interoperate. Polkadot network is made of potentially infinite number of parachains with different characteristics by design. The core function of Polkadot parachains is onboarding newly built blockchains at their launch. What this means is that any custom-made blockchain can connect to the Relay chain and exchange data / transactions with all the other parachains (and bridged chain) running on the network. Any team can virtually launch their blockchain and instantly start communicating with the Polkadot network, ideally creating some novel use cases for their product. Thanks to parachain’s composability, you can actually mix-and-match product features on the go. More so, specific parachains can be charged with some more complex or specific functions, like implementing data storage or transaction operations. Ultimately, parachain onboarding resolves the security issue of newly launched blockchains, since developers won’t need to think of consensus algorithm or security concerns. On top of from supporting its native parachains, Polkadot allows for existing blockchains with their own state histories and consensus mechanisms to link with the network by virtue of bridges, provided that these blockchains match certain criteria.
Interconnected global infrastructure running on Polkadot
With Polkadot parachains we are one step closer to uniting the splintered blockchains laying the ground for a global blockchain ecosystem. We are now considering what would the world look like, when all the blockchains are integrated into a single ecosystem with multiple parachains exchanging data and states? First off, there will be a possibility to transfer assets from one chain to another with more assets becoming accessible for more users, thus merging the liquidity of different ecosystems (like, for instance, DEXes). This has been the major concern of the crypto industry for quite a while, and parachain integration would eventually allow to make a breakthrough in secure asset exchange. Another exciting opportunities is using the assets built on one smart contract within financial ecosystems built on another, for instance, as collateral (take the recent example of Dharma and Centrifuge). Taking into consideration the ongoing tokenization of assets, the world of finance will get access to a whole new collateral base.
Essentially, with everything interoperable businesses and dApps will be able to launch parachains and build custom blockchains to solve a specific business task with predefined toolkits like Substarte. These dApps - unlike the Ethernets of the 90s - will be integrated into global Polkadot ecosystem by design and operate assets and data of multiple blockchains. Ultimately, in the digital world running on Polkadot, hundreds of #DeFi apps, blockchain games and tokenized assets will be interacting with one another in a trustless manner.
On the user side, a lot will change for the better as well. Social networks powered by interoperable blockchains will be able to interconnect to exchange valuables, data and liabilities. For instance, tokenized assets of online games can be used as collateral, there will be more room for financial derivatives, and many more other potential use cases. Surely, this is not going to happen overnight. Meanwhile, the Polkadot community has been growing with more than 20 teams building parachains as we speak. Data storage, decentralized finance, social security - all stand as proof to the fact that use cases for interoperable chains are indeed limitless. Let’s consider some of these futuristic, or even exotic, if you may, use cases for dApps made possible with Polkadot onboarding.
Derivatives, or options, distributed as rewards in decentralized gaming, for instance, for assassination of a monster in the game. With gaming and cybersport continue to gain traction in the community, this is surely one of the industries with lots of new use cases and applications for financial instruments.
The market of interactions between game realities of different blockchain networks. Thanks to blockchains of multiple kinds, a new generation of games able to exchange financial flows will emerge. Use cases span from selling skins and other game items to joining communities, and so forth.
Linking Chinese digital economy market with the Western world, which will be impossible to ban on the government side. This use case is more likely to be executed mainly on Chinese blockchains, like NEO.
Compliant investment in various privacy focused coins and assets by virtue of building separate parachains in jurisdictions where it’s not possible to invest in those types of assets under the existing legislation.
Some of the cryptoeconomic primitives, such as TCRs, will be able to include elements (services and other) that run on multiple blockchains.
A whole new class of digital tokens that by design combine features of other tokens and coins and run on a variety of blockchains. For instance ‘a stable coin of stable coins’.
Networks of oracles that deliver data to a number of blockchains. For these types of networks integration via Polkadot is extremely important, since the data that they deliver is likely to be used by dApps running on multiple blockchains.
Digital institutions, like pension funds and investment entities, will get an opportunity to invest and trade a wide range of digital assets built on different blockchains without having to use a centralized crypto exchange or any other middleman. Basically, institutions will be able to set up their own digital custody and operate assets via decentralized exchanges.
The likes of financial supply chain, as well as other concepts of tokenization of business integration, will get integrated with decentralized organizations built on the basis of different blockchains. In other words, they will become far-reaching and inclusive integrating more than a single network.
Integrating blockchains into Polkadot framework will eventually build up ‘the Internet of Internets’. Once assets and their newly built derivatives are tokenized and connected to one single network, everything - from data to valuables - will interoperate. The most exciting part is that we cannot foresee the finite number of use cases and products, since combinations theory, or mix-and-match, comes into play here - the more elements there are, the more combinations are possible. We’re pretty much excited to see how that plays out eventually, are you?