How Blockchain interoperability could bring Bitcoin to DeFi

Blockchain interoperability—having different blockchains talk to one another—is quickly becoming possible. That could help bring Bitcoin to decentralized finance.

In a candid tweet last month, Ethereum co-founder Vitalik Buterin called out the lack of compatibility between Ethereum and Bitcoin. “It’s embarrassing that we still can’t easily move between the two largest crypto ecosystems trustlessly,” he said.

Buterin’s call for compatibility between blockchains is already being answered, developers working on the matter told Decrypt. Take Cosmos’s Inter-Blockchain Communication protocol; Komodo; or Ren, a Singaporean company that’s bringing Bitcoin to Ethereum’s DeFi space. Vitalik: your wish is coming true.

What is Inter-Blockchain Compatibility?

Inter-blockchain communication is, quite simply, technology that lets blockchains speak to one another. As it stands, it’s not possible to use Bitcoin in an Ethereum smart contract because they’re part of two different blockchains. It’s like trying to run Windows programs on macOS—it just doesn’t work. 

This limits the crypto industry. Because blockchains can’t communicate with other blockchains, Bitcoin developers are condemned to working with software that’s purpose-built for the Bitcoin blockchain; it’s the same for Ethereum, blockchain’s other major ecosystem. That’s a big problem: those networks are huge, and billions of dollars worth of crypto-assets move across them each day. That they can’t speak to each other limits their potential.

Protocols that facilitate inter-blockchain compatibility get around this. They let blockchains interoperate; with these protocols, it’s possible for, say, the Bitcoin blockchain to talk to another blockchain, like Ethereum.

One of the most famous is the Inter-Blockchain Communication protocol. It was created by Jae Kwon in 2014, and it powers the Cosmos ecosystem—an collection of interoperable dapps. There are others, like the Polkadot…

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