The Interoperability Conundrum and the Next Generation of Universal Applications | by Nervos

Listen up people. You can't create an app on one blockchain and reach users in every blockchain.

Whoa, whoa, whoa. Shots fired. Yes, you can. Yes you can.

Yes you can.

Build on one blockchain and reach every blockchain. No way.

Yes, you can.

Yes you f ing can.

Yes you can.

Alright, smarty pantsers. I bet you can't use one crypto of your choice and one interface to interact with every single blockchain.

Yes you can, Steve. I said fine.

Yes, you can.

Wait. One crypto, one interface?

You're dreaming.

Okay, well, what if you've built your app already? Surely you can't just magically access users outside the blockchain it was built on.

Yes, you can.

Fall. Read my lips, read my eyes.

Yes you can.

You can't port your code to every blockchain. You can't.

Oh, come on. Yes you can.

Yes you can.

Okay, so you're telling me the Nervos platform will be your universal passport to blockchain?

Hmm?

Yeah.

Okay, got it.

Hi everyone, I'm Giovanni. Welcome to today's livestream event brought to you by Nervos. As you saw in the video, there were pretty incredible things about blockchain that we didn't even think they were possible. Still, let's see how Nervos plans to tackle some of the critical challenges that the blockchain faces nowadays with its interoperability solution. So let's get started with the first segment of the show which is a Fireside chat with the co founder at Nervos, Kevin Wang. So welcome to our Fireside chat with Kevin Wang, co founder at Nervos Network. How are you doing, Kevin?

Hi, I'm good. Good to be here.

So can you share your view on the current status of blockchain technology? Why has it not taken off yet?

Yeah, so the current state of blockchain reminds me a lot of the Internet in the early 90s. The pre browsers age. It's this small niche but super interesting new platform where new use cases like emails and messaging started to emerge. Early adopters started to use it, more people started to pay attention, but it's still too complicated to explain and use for the common folks. So using the Internet at the time you will need to how to use the terminal and text based tools like Elm Gopher. I think today we're in a similar place with the blockchain. We have just found some promising use cases on the blockchain such as Defi, but it's still just too complicated for the less technical users to use. A defi app. Today, for example, as a new user, I'll have to kyc one exchange, buy some eth, install a wallet, create a account, write down 16 words that I'm not supposed to ever lose, and learn everything about gas prices, sending transactions, so transaction confirmations and etc. And that's only for Ethereum, right? And by the way, if I want to use Bitcoin and want to use some other blockchain assets, then I have to repeat all the steps. So for the Internet, it's the browser that came and solved a lot of the issues. And then for most people today, Internet now is, it's interchangeable with the web. That's because the browser is able to hide all these complicated protocols and technologies below it and provides an intuitive way of interaction with users. So users don't have to understand servers, databases, encryptions, all they have to do is just click buttons and links on their browser and use username and password and things like that. So currently, I think in the blockchain world, what's bridging the gap between what users need to understand and what they already trained for. Internet experience is the centralized exchanges where users can enjoy this Internet like experience. They can go and sign in and then they can trade and they can, you know, some centralized exchange will have other defi products. So they essentially serve as the gateway and interfaces to the decentralized world. But however, the compromise here is that users have to trust a centralized entity. I think the key ingredients of sort of the solution to this problem would be there are two things. So one is the interoperability, blockchain interoperability, and then the other is low friction user onboarding. So what interoperability will bring is to remove the boundaries of cryptocurrencies and assets on multiple blockchains and then so that they come in front of users just as, you know, crypto assets. And when you log into a centralized exchange, right, you can interact with any crypto assets you want. You don't have to understand which blockchain they reside and you know, you can operate them in a unified way. And then the other one is low friction user onboarding. So this is where we need to meet users, where they are and allow users to use the tools they're already familiar with to interact with the blockchain. And obviously I'm happy to explain a little bit further.

So you mentioned that interoperability is a key element that could make blockchain system far more effective and usable. Still, fierce competition among different blockchain networks has been Preventing interoperability to actually take place in the crypto system, in the crypto space. So would you agree with this statement and what would be a possible solution?

Yeah, we feel the days of intense blockchain competition are softening because we're realizing that there probably won't be one blockchain that ruled them all. So, for example, Bitcoin will be and probably continue to be the most popular store value blockchain. And programmable blockchains or smart contract platforms will start to realize that they need to work together to create a true network that's powerful, viable, and then cater to needs, the users. And then each different platform probably have their own philosophy, geographic focus, users and then specific use cases, and even sometimes whether or not they're regulatory compliant. So we see that this multiple blockchain world will continue to exist and we're already seeing that blockchains are taking steps to be able to work together and really just serve the needs of the users.

So at the moment, there are already a few examples of interoperability solutions available in the crypto space. So could you explain what are the more established ones and what are the limitations that you see in those interoperability solutions?

Absolutely. So when we talk about cross chain interoperability, I think most people will start to think about Cosmos and Polkadot for those projects. Interoperability only applies to blockchains built with their own framework. So instead of this interoperability framework with everyone, what they really are promising is if you build with my frameworks, then I'll promise that you will be compatible interoperable with other blockchains built with my frameworks. So for Polkadot, it's the substrate framework, and for Cosmos it's the Cosmos SDK. So that's one example. Right. So the two interoperability networks themselves, Cosmos and Polkadot, they're not interoperable. So there are other interoperability solutions where they focus with bridging assets or enable trading across multiple blockchains. Right. So they are very narrow use cases, but they don't allow developers to build general applications.

And so Nervos is proposing its own solution for interoperability. Could you tell us how this solution is better than the ones that you just mentioned?

So for us, when we started to think about how we can enable this interoperability between blockchains, we started backwards with how we would enable user to be able to use and develop to build the true and perfect cross chain decentralized applications. So we believe that a perfect solution would allow users to seamlessly access and Operate cryptocurrencies and assets on all blockchains. Again, just like how they would in centralized exchanges, but under the COVID we provide the plumbing and then the plumbing is going to be trustless and non custodial again. Instead of prescribing tools to enable interoperability within our own world, the blockchain, to build our own frameworks, we want to connect to everyone. We want to connect to every existing blockchain like Ethereum, Polkadot, Bitcoin and others, and allow interoperability with these most meaningful blockchains already have a lot of assets. So instead of building our own little world of interoperable blockchains and apparently a.

Key component of your solution is this Universal Passport. Can you tell us a bit more about what universal Passport is and what role it plays in your interoperability solution?

Universal Passport on the technical level is sort of the melting of many components together. So on a high level, what it enables is that every app built on Larvals will automatically be fully cross chain applications or multi chain applications to give you some examples. Right? So if you're building a dex, a decentralized exchange, it's a dex that can trade all assets on all blockchains seamlessly. If we're building a lending app, then users will be able to collateralize and borrow any assets from any blockchains. And if you're building a derivative app, you are able to express long, short positions on assets from different blockchains. So for users that are not currently using blockchain, so that's another big deal and we feel not many people are paying attention to. For people that are not currently using blockchain, they're new users onboarding to the blockchain world. It needs to be as simple as hooking into their existing identity solutions, such as username and password solutions, electronic passports in some countries, or even just emails. So in all these scenarios, users shouldn't have to pay the transaction fees with something they don't understand and they have to go to a central exchange to buy. But you know, they can pay for exchange transaction fees with, if they have crypto, they can pay with any crypto that they want. Again, because all these blockchains, we build the plumbing for all these blockchains to connect together. They can build when they pay with any transaction fees, sorry, transaction fees with any crypto or just fiat, you know, if that's all they have. Imagine the ability, for example, right, to log in your bank account and be able to click a button and then lend $10,000 to a lending pool on the blockchain and generate yield with a single click of button. I mean that's I think what needs to happen and that's the experience we want to enable for new users.

Thank you for your presentation, Kevin. Now let's have a look more deeply into this interoperability solution through a demonstration of gliaswap, a Dex demo project that is going to launch on Nervos.

As mentioned in Canvas presentation, Novos provides users and developers a universal passport which means users on other blockchain systems can use node applications just as they use native ones, and applications built on top of nodes will have the ability to interoperate with any other blockchain and reach every user in blockchain space. And the more exciting thing is that this is not just an idea or a plan, but something we can do on earth today. So here I want to show you a real example of interoperability 2.0 and how these components like PW4 Force Bridge protocol power the applications on NAVAS. Yes, it is GlassWeb, a decentralized exchange currently running a novice testnet and this is intended to be a demo product for the community and it's already Open source on GitHub. So welcome to FormKit based on the Glass web to build your own Dapps. Today I'm gonna do a very quick tutorial on how to place trends and show you guys what makes Gnats web different. Before using this Dens demo, clean some test tokens that you need and after that the first thing you are going to do is to connect your wallet. This is all the supported wallet you can connect. You may notice it is quite special here. As a DAPP on nuvsk gliosweb does not require you to install a node exclusive wallet. Instead you can directly use your metamask or wallet. Net. Actually the Dex demo is able to support most of mainstream wallets. Not only Ethereum wallets but also EOS wallets, Tron wallets and so on. So built on this demo you can easily connect all kinds of blockchain users to your own product. Let's connect Metamask in here. Let's take a look at the user's assets first in Metamask those are users Ethereum assets and as for novice assets, we provided a small panel to show them. This is a CPP balance and this is Glia. Glia is a test as UDT we deployed on testnet. They also have some CKERC20 tokens which are the mirror assets we will mention later. Let's Go back to the main page. In this version, Glassweb already supports placing limit orders and there are also some useful data displayed for users. This is the market out book and this panel shows the users on limit orders. Now let's say I want to use Ether to buy some ckb. You may wonder how can chain assets cross different blockchains and how this works. Actually this is powered by Forcebridge, a crossing protocol. I'm gonna go ahead and confirm that. Confirm that and wait for that to go. Okay, this may take several minutes to place an order on chain. Let's talk something about how this works. Actually many startups are now developing crosschain swaps but limited by the layer 1 based chain. User experience on these exchanges may be sort of terrible. Like users may need to download two wallets and then do two or three signatures to swap different chains assets. But just as you can see on Glassware, you only need to connect your existing wallet. No matter you are Ethereum user, Eos user or Chon user. Just connect your existing wallet. Then once you can trade assets across different blockchains. Okay, that's gone through. As you can see, the order is now open chain and waiting to be matched. This order may be matched with other orders by the DealMiner which is an independent role that anyone can become. We open Source a software DealMiner software for basic use. You can download in here and this is just provided as a starting point for you to develop your own solution. Okay, let's head back to Glios web. We just use Ether to buy ckb. Of course you can change between sigbns, UDT in Glios web like you said KB to buy Glia. We'll try it out. I'm going to make in fixed order. Make an order, Confirm that. Okay, this made pretty quick. Okay, this order is placed successfully here. You can also swipe Ether to its mirror assets on those like swap eth to stick Ether or stick Ether to Ether. Let's try it out. Swap Ether to sticky Ether. Okay, confirm that. From that waiting to go through. Okay, just wait. Okay. Successfully you can check your sticky ether in here. Okay, already receiving your wallet. Okay. That's all the functionalities we currently support. Really easy to get started and it's already deployed on Testnet. You can go to this website to try it out. And this is our projected roadmap. As you can see, development is going to continue in next year and we are also working on the EMM pool development. Hopefully it will come soon. So we will keep deliver and stick Managers.

So interoperability still poses serious challenge to blockchains, despite the solution that we just turned. Now to further explore this issue, we brought together a round the table discussion on the future of interoperability in blockchain. Please welcome DO Kwon, co founder and CEO of Terraform Labs, Souravis Surinawakun, CEO and co founder of Band Protocol, Curtis Spencer, co founder and partner at Electric Capital and Kevin Wang, co founder at Nervos. Let's begin the discussion asking what interoperability means for our panelists. So let's start with Kevin, who is looking to build this universal passport for the interoperability of blockchain. So what do you think is the importance of interoperability for the future of the blockchain ecosystem? Kevin?

So from our point of view, we feel that in the future when users are using blockchain, it will be increasing, that blockchains themselves will be sort of hidden behind beneath the user interface. So what users really want to use are applications and assets. And if you look at today, asset wise. So mostly our assets are mostly are on the Bitcoin and the Ethereum blockchains. And then users I think are also mostly on these two blockchains. But with more sort of blockchains coming on the horizon, blockchains like Libra or even some permissioned geographic specific blockchains that can bring a lot of users. And we also have applications where Bitcoin. Bitcoin is mostly like one application platform and Ethereum has many applications, but we're also seeing platform with, you know, designed to serve very specific purposes such as, you know, NFTs and gaming and so on. So if we fast forward a few years, we see that there will be multiple blockchains exist in the future and all serve very different purposes. And they have some are asset heavy, some are very application specific heavy, some will focus on being a general platform, some being very specific built one for one use case and some are more decentralized and some may be more private or even aim to be regulatory compliant. So in that world, the way we look at it is when user users use blockchain tech, right? So they don't want to know all the specifics of how to interact with a specific blockchain, right? Just like today when you browse the Internet, you just go to visit Amazon and then you want to just buy some Christmas gifts, right? So that's really what you care about. You don't necessarily want to know what stack Amazon is built on and the specific plumbing from your browser to Amazon I think in the future it will be the same. So users want to be able to interact with assets, crypto assets, and then they want to be able to use applications and they want to use services and then they want to transact and then they want to use probably sort of currency that they feel comfortable with. So and that demands that as platforms we need to think about how to make the plumbing so that the platforms can interact with each other. And this is really what we talk about, interoperability. And if you look at today, I think from the asset size, there are a lot of assets that are already cross chain. For example, the fiat based stablecoins like usdt, usdc, they're already on multiple blockchains and then they provide bridge mostly through centralized services to transfer these assets across different blockchains. And then for users, I think most users probably have Bitcoin and Ethereum wallets that they can use on different blockchains. And again applications, I think we're seeing sort of the emergence of one chain or one application chains that instead of building dapps on the platform people, developers also build an application for their own blockchain with the benefit of, for example, they can have dedicated mempool, they can control the validators and then issuance and sort of have predictability on cost and so on and so forth. Right? So yeah, so I think it's very important. And then this is when we're talking about building this interoperability solution that's sort of the future that we look forward to. And then we want to be able to sort of serve this need. And then, you know, this example that I've used a few times, we want to be the browser, right? Be like the browser that people can use and then interact with different blockchains without having to know the plumbing and the mechanics, how it actually works under the COVID because it's not that important.

Thanks, Kevin. So now I would like to know a little bit more from an investment standpoint. So Curtis, as a venture capitalist, what promise would an interoperability solution need to make you get you on board? What is the cross chain functionality that attracts you the most from an investment standpoint?

Yeah, it's a good question. You know, high level, I think interoperability has been a challenging space to invest because traditionally usually the things in the middle often get squeezed. So an example would be kind of in the outside of the blockchain world you have the CPU manufacturers and then Windows and then you have all these people in the middle that are like putting together machines. So you have your gateways and your Dells and historically value has accrued to either Windows or Intel and oftentimes in the middle you get squeezed, I think with blockchain because you can have these sort of user owned economies in the interoperability layer. The FAT protocol thesis may play out here interestingly, where you can have these intermediate layers actually accrue a lot of value. When we're looking at things to invest in here, we bucket it into three requirements. One is there has to be an interesting market. Two, a good developer and user experience. And then the last one is scalability and technology. Does it actually work? And to dive in on the market side, there's going to be a lot of chains happening and certain connections between these other chains are going to be more valuable.

Right.

So a Bitcoin to Ethereum bridge is probably the most valuable bridge that we can build right now. So we think that market is particularly exciting. But I think over time you're going to see more bridges come around. An example would be stable coins across many different chains. And then developer experience, I think Kevin was alluding to this a little bit, is the user, when they come in to build on this thing, needs to be able to write code, have it work and it doesn't need to feel like they're the machine, they're running through all these motions. It should ideally feel like you're interacting with a centralized piece of software. Then in terms of scalability, I think this is one of the bigger issues in the space is right now most of the things happening on chain are really led by whales because it's too expensive for a user to come in and participate. Traditionally in the gaming market you might have a freemium model where users can come in and play a game for free and the company makes most of the money on the whales. This is inverted in blockchain. You can come and participate in say uniswap liquidity, but it's really limited to funds and people that can put up these massive gas fees. And so we look for scalability solutions that might enable like a freemium model potentially to play out where you can come in and play on a much cheaper layer too and actually get your feet wet. In working with blockchain systems right now it's like you're limited to centralized exchanges. That's where you can do things on a much cheaper scale.

Scale.

But we hope to replace those one of these days.

Yeah. And I think that's key to obtain real adoption for these kind of products. And I also want to know from service. So I know that at BAND protocol you are mainly dealing with Oracles, which are essentially third party services that connect smart contracts with external off chain information. So how does an interoperability blockchain solution tie into what you at BAND are trying to accomplish?

Yeah, sure. So I think there are two parts to that, right? And it's because fundamentally blockchain itself are designed to be deterministic, right? It's supposed to be self contained, meaning it's not supposed to rely on any external information to operate, right? You think of Ethereum, you think of Bitcoin, you know, fundamentally at a protocol level, they don't really depend on any external information because they want themselves to be deterministic as much as possible. And that present a lot of conflict because essentially, you know, a lot of these application decentralized finance that you're seeing, including lending money market entrances, a lot of these actually, I mean almost all of them actually depends on external information, right? Whether that be price of cryptocurrencies, whether that be price of stocks, as we see with mirror, a lot of these external information to the blockchain itself. And that's why for us, as an Oracle solution, we need to be able to bridge that real world data across multiple blockchain. Because now you start seeing a lot of more use cases across multiple one. I mean, that's why we work with Metaverse, we work with Terra here to bring information for the smart contract to use, right? Not to mention of course Ethereum, Polkadot and Cosmos and, and many other blockchain. And so I think fundamentally every blockchain is designed to be that way and that's why they sort of need an Oracle solution. And as far as when we design our protocol, we want to make sure we can address a different need of these different layers, layer one. And because of them they have different design, different scalabilities. That was one of the main challenges that we tried to work with because obviously we don't want to maintain 10 separate architectures for 10 separate blockchain, right? We want to make sure we can maintain one and that would be able to address the need of all. So I think that's fundamentally the first part, the second part is, which is quite interesting as well, because again, Oracle actually may tie back into this cross chain functionalities. Because if you think about this cross chain functionalities, the reason why it's really difficult right now because it depends on communication between different blockchain and that's almost the same challenge that Oracle face. Basically. How do you know what happened on the Other sheet, how do you know this is finalities? Because in blockchain again you never get to 100%. And that raised the question who's going to relay data from chain A to chain B? How can you trust that relayer? How can you trust that state of the data is correct? And that's one of the big challenge that we've been working with as well with some of the projects here in the space who try to explore this interoperability between Bitcoin, Ethereum, Bitcoin, Polkadot and Cosmos and all these different chain. And I think we are starting to see early design, but it's going to be a while before we can truly create a truly decentralized cross chain functionality there for sure.

So now let's turn to do so I know that at Terra is you are basically dealing with stablecoins and with the usage of stablecoin to facilitate E commerce. So what kind of role does interoperability play in your product and on E commerce in general?

I think for a payments application we don't really have any blockchain interoperability at all. Like isolated to that application. We don't need it, right? So it's just a question of processing transactions, making sure that, you know, like on the application layer we're creating great products. But like if you ask the question of like why is interoperability needed for applications to work together? I think like this, this analogy is the best way to look at it. So after Covid hit, a lot of people started to do everything in their homes, right? So you could technically eat in your home, you can work in your home, you can take calls in your home, you can sleep and you know, watch movies and do everything. But I mean there's a reason why you miss the times before COVID when you didn't have to do that, right? So the thing is like for example, like if you eat out at a restaurant, like that chef is able to build, you know, dishes much better than the eggs you can cook. And then if you went to see a movie at a theater, there's some benefits to doing that, right? So the reason why there's interoperability in the defi stack is because, for example, if we're working with band oracles, they're able to produce prices at a higher fidelity and resolution than what we would be able to do in house. So if you're thinking about network effects, you really want to make sure that there's interoperable bridges to all those different core pieces of infrastructure that has a strong network effects in the domain in which they excel.

So moving on to the following question, I'm curious to know. Currently there is an overwhelming dominance of two main blockchains, which is Bitcoin and Ethereum. So these are the biggest, the most established blockchain in the crypto space. And I would like to know, is this dominance an obstacle that needs to be overcome in order to realize the full potential of interoperability? And if so, how can we overcome? Maybe Kevin can give us his perspective.

I think it's very, again it's very typical. I remember my early days as student in college. This is, you know, the late 90s, early 2000s. You know, at the time the Internet is not at all like the way it is today. There were only very few dominant websites and it felt like, you know, that's people's needs are pretty much served and.

Then.

You know, you just need to go to the directories on Yahoo and then you know, go to, I remember like what I used for search. It's not Google, it's something else. Right. So I think as we grow as an industry and as we serve more and more people, we're going to start to stretch the limits of the boundaries of existing platforms and then people again will have more specific needs. So I think today Bitcoin and Ethereum are pioneers and then one is the most valuable assets and one is the most diverse sort of application platform. But again we're seeing a long tail of both application specific blockchains as well as other sort of general platforms with some other unique features are coming up. So I don't see this as a hurdle. Right. I see this as the natural evolution of decentralized networks in general. So there are these low hanging fruits and then applications that most people probably use. But then as the ecosystem grow, we'll see more users coming, bring you more diverse demands. Some are on feeds, some are decentralization, some are on like I said earlier, it could be regular compliance or some other needs. So yeah, so I think we'll go diverse from here. Mm.

Maybe Suravis can give us his perspective about this issue regarding the dominance of Bitcoin and Ethereum and the impact that have on the development of interoperability.

Sure. I think similar to what do said. Right. I think we envision a world where a lot of these different blockchain will start to see more specialization because people make different trade off. You will see one blockchain that is decided to be for payment system. You will see one blockchain that decided to be really Scalable at the trade off of decentralization, for example. And I think because of that right now we still don't see many use cases outside of three minute Bitcoin because the newer chain are still starting. And as Kevin said, I think over the next few months and years we're going to see much more, hopefully promising use cases potentially similar to Ethereum, but work faster and probably cheaper. But right now we haven't seen that yet. And that's also the reason why we don't see that interoperability, because why would you want to port let's say asset on Ethereum to other blockchain right now when there's no solution that require that? But we start to see that. I mean we start to see that with Solana, we start to see that with Novos and different other blockchain and it's a bit of a chicken and ache. But once that happened, we can envision a world where the asset or the settlement layers stay on Ethereums, where a lot of the assets are there, but then it can be moved toward other chain to execute, let's say trading Dexes. And I think that fundamentally it takes time and hopefully I think over the next few years I'm actually quite bullish that we're going to see much more use cases outside of Ethereum.

Curtis, from an investment standpoint, what do you think? You think that Ethereum and Bitcoin are not going to eat the whole blockchain space, leaving very little space for this other chain to be useful and to connect with each other in this interoperability solution. What's your standpoint on this?

So I think a lot of the new chains are very additive to these. At first I think you need to decouple Bitcoin and Ethereum because they're solving really different things. I think Bitcoin has showed us you can create an asset out of thin air essentially and people will believe it has value. And you can't recreate the circumstances of Bitcoin at this point. And so I think Bitcoin ends up creating this great response reserve asset to be used across all these other chains. And I think Ethereum has shown us what an issuing platform can look like. I think that was the killer use case initially and now it's providing a bunch of other use cases. It's pretty interesting, but it also seems to me a bit like going back to early days of how Twitter started. Twitter started as this monolithic application and I'm kind of diving in more on like the technical side right now. When you, when you start off like a company, you often build it in this like one monolithic code base. And at some point it like breaks down and Ethereum is sort of breaking down with gas fees, at least Ethereum 1.0 is. And at some point you need to move into this like specialized service oriented architecture where each service is starting to do things very specially. So like you might have a service for search, a service for user management, a service dedicated for just password changing. And each of those services can exist and are specialized. And I think that's like where we're starting to scratch the surface now of these other blockchains coming online and other layer twos as well that are specialized for a specific use case. So like DYDX is a good example of this. It's like a specialized derivative exchange on Ethereum that's now going to be run with the starkware Dex.

Right.

It's very specialized for this one use case and I think we're just gonna see more and more of that. But I don't think it's like Bitcoin eating, you know, the lunch of these. It's, it's more like, it's, it's all additive. That's sort of a multi chain future.

So if we, if we believe that this interoperability future is possible and it's possible to realize this, this ideal. So what are the other challenges that are stood there today? An obstacle that need to be overcome to realize the full potential of interoperability in the crypto space though maybe you can give us your perspective on this.

So the question is, how do I see an interoperability future?

I mean now we're talking about the obstacles. So what are the obstacles that you think are the main one that need to be overcome before we can realize this future?

Yeah, so I mean if you think about it like bridges have a consensus mechanism like any other blockchain, right? So in some sense, like if you have a set of blockchains, you need to form consensus around the state that maps the transfer of messages or tokens from one blockchain to another. So the big challenge is that you need to strike the right trade off between sort of enforcing the rules of the bridge on what is supposed to be sovereign blockchains because it's sort of like the meta state. If like a lot of the applications depend on the bridge for the correct to record the correct state of things, then that case in some sense like the rules of the bridge become more important than the underlying blockchains that they house. So you Know you start to face a lot of the same scalability problems, rule enforcement problems, sovereignty problems and things like that that sort of plague the layer one blockchains as well. So there's a number of different bridging solutions that are coming out with a different set of trade offs. You have something that is entirely centralized custody plays like wbtc. You have something that's capital inefficient but pretty interesting like tbtc. There's generalized messaging platforms coming from Cosmos and ibc, IT and XCMP in Polkadot. But what I would say is that there's an opportunity because none of the bridging solutions that are either in production or close to production have yet found the right set of trade offs to be able to solve this problem.

Yeah, what you said about this sovereignty problem reminds me a little bit of how the European Union works. So in the European Union like single states don't want to give up too much of their sovereignty, but they need to make a compromise in order to create this union, this connection between the different states. So I think it's an interesting comparison with the blockchain ecosystem. So Kevin, what do you think are the main obstacles?

So I think there are, when we talk about challenges we can look at from four different angles. So we have, we have assets in the interoperability context and then we have applications and then we have users and also applications or developers. I think currently a lot of the interoperability protocols focus on assets, which means if I can transfer assets from here from chain A to chain B and how I would do that. And then there is also the sort of the application side which means how can an application on chain A execute or call another application on chain B either atomically or have some sort of boundaries or guarantees? I think that's again it's a big topic. And then you have the sort of the user side which means how can a user with their wallets and user interface and learned how to operate with one blockchain to operate in this multi chain environment where potentially I click a button and that might touch three different blockchains. But what is the user experience going to be, how that going to work? And the fourth thing is applications, right? So we have applications that could be building on different blockchains. But you know, how do you make sure that they sort of, they can either evolve together and share the same code base or maybe there is abstraction layer that can serve for this application to compile down to different blockchains. I think those are all like a very early ideas that Are people experimenting? But, yeah, but you know, what we're seeing is these four different angles of when we talk about interoperability. And. Yeah, so for Nervos, for example, and we're basically tackling pretty much all four of these, I think on the cross chain, sort of atomic or compatibility issue. That's, that's a hard one, right? That's a little bit difficult. And then we have a concept where we call crossing continuation. I think we're going to have a demo coming out to show how that works. I think that's a good step towards that direction. But the other ones, I think we have good solutions that we want to be able to show pretty soon. Awesome.

Looking forward to it. So now I would like to know now for a very pragmatical standpoint. So for a crypto beginner, someone who is about to enter the crypto space, why should he be excited about the concept of interoperability and how is interoperability going to make his life easier and more pleasant in the crypto space? Maybe Curtis can start.

Yeah, I mean, I think the first thing there is, if we're using the word interoperability to a noob, like we've lost already, like, that's it's over, right? You know, I think users need, like, we have to bring the applications to the users and like, why they should care. And I think like the user story right now, like, you know, where we want to be is like, I can buy Bitcoin somewhere and earn 5% interest on it and that's it, I'm done like that. That, that's my product, right? And where we're at now is like, I have to fiat on ramp to Coinbase, wait, wait a couple of days, buy Bitcoin, then move Bitcoin like out to a Trezor, then figure out a way to get wbtc, then move WBTC onto Ethereum, then put that into compound and generate my, my apr. And I think it like, once you've created that many steps for the user, it's kind of over. So, you know, I think like Doe brought up that you have these things like WBTC and TBTC and this whole spectrum of interoperability and trust there. I think we need to shield all of that from the user, right? Like, there should be one user experience where you can come in and have this all done for you in one place. And I think the people that win that and the companies that win that will really accrue a ton of value because they're owning that user relationship. And right now the centralized exchanges are actually in the best position for that because they own the user at the very first step, which is like when they convert fiat into crypto. And I think for decentralized versions of these things to exist, it's much more challenging. But we have to like find ways to it to allow that to happen. And right now it seems like it's going to be in partnership like the DC FI instead of pure defi. But it's stepping stones to get to a more decentralized future.

Service. Maybe you can give us your perspective on what a newbie should look forward to in terms of this interoperability solution.

Right? Yeah. So I think Curtis is spot on. Right. I think like he said, from a user perspective, he shouldn't be aware of what's going on behind the scene. And I think the benefit is clear. I mean you're probably going to be earning higher yield, right? Because you're not going to buy Bitcoin, withdraw it, wrap it around, transfer to Ethereums, find the best lending solution for your Bitcoin.

Right.

You hopefully wouldn't be able to do that without knowing a lot of all this noises or even more even simpler than that. Right. Tether, for example, right now there's also benefit, for better and for worse. I transfer my tether through Tron just between different exchanges simply because the fee is much lower than what is on Ethereum, where a lot of users probably don't even realize that. And so there are clear benefit to this cross chain functionalities already. The exciting part is how to make that seamless for users, how to make sure users don't have to be aware of that. But they get the cheaper fee, they get the higher yield and the overall better user experience. And I think if that become the realities, then we're probably going to be able to draw a lot more people, the normal people that not have to be crypto native like us, to interact with this protocol and actually drive more adoption across multiple blockchains.

Yeah, I guess the main point is making these kind of processes almost invisible so that users don't even realize about the work that is behind it. So Joe, maybe you want to add something more about what a beginner in the crypto space could draw from interoperability.

Yeah, I think it's like a trivial solution to hide and abstract what bridge is being used to the user. Right. So I don't think that in and of itself is a difficult problem to solve. I'm sure if you slap on a couple of quality application developers on TBTC they'll shack that away until kingdom come where you might have like a service provider from those costs. But I think it speaks to a larger need for abstraction across the entire crypto industry. So I don't know if many of you have been sort of getting into the yield farming game, but what's kind of really interesting is that even for really simple defi profit schemes, it's really hard even for somebody that's inside the industry to understand how all of it works. And then once you, after you do all of that research and then you submit a transaction to MetaMask and then you wait for a while and then it's like it fails for no reason. It's kind of hilarious that Ethereum is like the only platform where it charges you like $5 to for you to ask whether your transaction can be included. So yeah, that's kind of really interesting. But like, so I mean, I think what would be kind of interesting is if there were like defi protocols that allow you to set like a specific profit strategy like on like a web console, and then like you just press a button and it consolidates all the signatures and the transactions that you need to send into one and then that takes care of everything for you. From an interoperability standpoint, what could be interesting is if you could call smart contract functions and things like that across bridges, even across multiple hubs, and then all you needed to do is to sign a transaction on the origin chain, either via a user or via a smart contract, then in that case the bridges are truly interoperable because bridging across different ecosystems doesn't sort of bastardize the user or the developer experience.

Thanks. So maybe Kevin can wrap up the discussion now and can tell us a concrete example where crypto beginner can benefit from interoperability. Just give us specific examples that come to your mind.

Yeah, I was actually going to comment on what do just said and it's actually opposite what beginner would think. Yeah. But I just want to mention a big part of interoperability and including what Joe just mentioned in the end could be enabled by account abstraction. It's a topic that we actually put, you know, a lot of thoughts in and look at how to actually make that happen. And I think that could be the secret sauce to like to make it happen in the end. Yeah, so yeah. Okay, so back to your question. Beginners probably don't care and they shouldn't care about account abstraction at all. Yeah, I think again, I think, you know, in the end, using the blockchain should just be like using the browser, right? I go to a site, I do some things, or maybe just like using the centralized exchange, I go there, I use a way to identify myself that I'm most comfortable with or some cryptographic solution at hand. And then I have the entire world of decentralized service in front of me, hopefully entirely decentralized. I think that would be where we want to be, but. Yeah, but you know, at the same time, like what Curtis said, I think there may be some centralized elements has to be there to enable that user experience. But you know, I think as the industry want to grow, we have to just, you know, we have to make sure that users can come and use apps. We have to go beyond sort of the hobbyist stage and then just, you know, be more welcoming to more people.

Thanks a lot guys for the in depth discussion. And finally, let's take a look at the new Nervos.

Sa.

Thanks everyone for joining us today. If you want to know more about Nervos, just check the link in the description below or head over to www.nervos.org. i'm Giovanni, your host. See you next time.