Blockchain interoperability is a term used to describe the process of blockchain-based or blockchain-related systems being able to interact with other non-blockchain systems.
Blockchains cannot interact with each other, which means most blockchains are incompatible. However, several blockchains exist, and each has its own unique properties.
- The goal of interoperability is to enhance compatibility between blockchains, allowing them to work together and integrate into existing systems.
- Interoperability is defined as the ability of two companies to collaborate on an existing system that only employs blockchain technology to lower the costs of blockchain management and compliance for both companies.
- Interoperability gives the liberty to the new apps to be created on top of the existing systems and allows users to access data from multiple blockchains within a single application.
- For instance, Assume using Ethereum as a basis for smart contracts within an existing website, such as Shopify or WordPress.
What Are Oracle Networks, and How Do They Work?
Oracle networks are a method to connect blockchains to external data sources, like legacy systems and other off-chain networks. This enables the access of real-world data for the smart contracts and this can be used to create decentralized applications (dApps) that react to external events.
How Does Blockchain Oracle Work?
Read this section to learn about the workings of blockchain oracle.
Orcale implementation process
Whenever a blockchain application requires off-chain data, it will request the Oracle network via a Requesting smart contract. Within the Oracle network, a Service Level Agreement (SLA) contract is established, comprising three subcontracts:
- Reputation contract: This contract tracks Oracle node’s past performance and restricts any untrustworthy ones based on their history.
- Order-matching contract: This will send the data request to verified Oracle nodes, collect their bids, and select the appropriate nodes to fulfill the request.
- Aggregating contract: The contract sends data requests to Oracle nodes using an on-chain programming language. This request will be translated into off-chain language and recover data from external sources through APIs and again translated back to the earlier one before sending it to the Aggregating contract.
Six critical steps of blockchain oracle operation
For the proper functioning of the blockchain oracle operation, there have to be six basic and critical steps and they are listed below:
Step 1: Smart contract requests data: The smart contract initiates the process by requesting specific data that can be anything like stock prices or weather info.
Step 2: Oracle network comes into action: The request is received by Oracle nodes and these nodes can be independent computers or servers which is operated by individuals or organizations.
Step 3: Data retrieval: The required data will be extracted from external sources like APIs, web servers, or physical sensors.
Step 4: Data validation: Post retrieval, the data will be validated to check their accuracy and reliability. Different methods will be involved in this process depending on the chosen oracle system.
Step 5: Data transformation: Since the blockchains have specific data structures, validated data should be converted into a blockchain-readable format.
Step 6: Data delivered to smart contract: At last, the formatted data is delivered to the smart contract and used to perform its tasks or fulfill its agreements.
How is Blockchain Related to the Internet of Things (IoT)?
Blockchain and the Internet of Things (IoT) are the two emerging technologies that can be amalgamated to address security, privacy, and potential challenges in IoT. blockchain has a decentralized and tamper-proof nature and this will be helpful for creating a secure and transparent IoT network.
Blockchain and IoT can be integrated in several ways and they are listed below:
1. Secure communication
Blockchain allows secure communication between devices, thereby attenuating cyber threats and data breaches.
2. Decentralized data
The decentralized nature of blockchain terminates the need for a central authority, which can improve the security and scalability of IoT networks.
3. Transparent data exchange
Blockchain is capable of creating a transparent system that enables devices to work together.
4. New business models
Blockchain allows new business models and revenue streams.
5. Improved efficiency
Blockchain enhances IoT efficiency by ensuring secure, transparent, and automated operations and maintenance.
What is a Cross-chain Transaction?
Cross-chain transactions are also known as inter-blockchain transactions or cross-chain swaps. This is a critical concept in the blockchain and cryptocurrency space. They permit the flow of digital assets and data between different blockchain networks. In short, cross-chain transactions work to bring various isolated blockchains together, permitting them to interact and exchange values.
Cross-chain technology allows different blockchains to communicate and share assets, dealing with the challenges of interoperability. This allows seamless transfers and interactions between blockchains that possess unique protocols, consensus mechanisms, and native assets.
How Are Blockchain and Artificial Intelligence (AI) Connected?
Blockchain and Artificial Intelligence (AI) are the two innovative technologies that have arisen in the last ten years. AI is a technology that is used by machines to assist humans and make decisions, on the other hand, blockchain is a distributed ledger that allows for secure, transparent, and tamper-proof applications. The combination of blockchain and artificial intelligence can transform various industries by enhancing their security, transparency, and overall efficiency.
ChatGPT is the best example that AI is capable to learn and produce like humans. If you ever used ChatGPT you might know that it will deliver responses like humans to your text-based queries. This is employed by many companies as it could improve customer experience and automate tasks. If this is associated with blockchain, it can make wonders.
Thinking about how this amalgamation is possible? Here is the answer.
The combination of both technologies can be found in cybersecurity. You might be aware that the cybersecurity threats are exponentially increasing and the conventional methods are out-rated to solve new attack vectors. If there are two technologies, AI can be implemented to detect and respond to threats, and blockchain to ensure the security and integrity of data. By incorporating blockchain and AI, it can create more secure and efficient cybersecurity systems for individuals, governments, and businesses.