Cross-Chain Blockchain Networks, Compatibility Standards, and Interoperability Standards: The Case of European Blockchain Services Infrastructure

Introduction

This chapter highlights the need for interoperability and compatibility standards in the development of cross-chain Blockchain networks. Interoperability here implies the ability for two systems to communicate and exchange data (Wegner 1996). This is different from compatibility, which is about two different systems working together in the same environment without disrupting the functions of one another (Braunstein and White 1985). The Cross-chain Blockchains of interest to this chapter are networks of heterogeneous Blockchain platform that are compatible and can exchange data with one another (Zhao and Li 2020). One could also call it an Internet of Blockchains. The idea and the concept is novel. This is because end users can connect to a service provider and benefit from the services of many other service providers who from different Blockchain networks collaborate with a service provider to deliver a service. Technically this is possible. In fact, as will be mentioned in this chapter, some Blockchain service providers are developing these solutions.

Although this idea sounds interesting, there is a lot going against this idea. The first is that Blockchain is not a standardized technology. There are different types of Blockchains technologies operating under different technical specifications (Sharma 2019). This has resulted in the existence of Blockchains that are not interoperable and not compatible due to the absence of universally accepted interoperability and compatibility standards for Blockchains (Kot 2018) (Lima 2018) (Chang, Lakovou and Shi 2018). This makes the idea of creating Cross-chain Blockchains challenging. Blockchain service provider are currently trying to solve this problem but their efforts are geared towards enabling interoperability between the major Public Blockchain Platforms such as Bitcoin and Ethereum etc. They do not necessarily consider different private Blockchains that are not operating on the aforementioned platforms. Hence, the challenge of random Blockchain platforms becoming interoperable and compatible with other random platform still exists. This implies that there is the need for universally accepted interoperability and compatibility standards that will enable the exchange of data and enable compatibility between any two Blockchain platforms.

The development of cross-chain Blockchain platforms that will be of regional or global significance will be a daunting task. One of the major barriers will be regulatory barriers. These regulatory barriers could be either sectoral, national or regional in nature. A current example is the challenge posed by privacy laws such as the European General Data Protection Regulation (GDPR) (CMR 2019). Currently this law does have an impact on single platform Blockchains at the national and at the cross-border level. It definitely has the potential of scaring away organizations from adopting Blockchains. This is because Blockchain does not grant anonymity to the stakeholders on the platform. As will be mentioned in this chapter, certain services do require anonymity of the client. Therefore, privacy laws will be a problem. This problem will still exist when cross-Chain Blockchains come into existence. This dilemma led to the investigation that resulted in this chapter.

The guiding question this chapter aims at providing answers for is: how can cross-chain Blockchains be standardized to enable technical interoperability and compatibility and still become useful to different organizations operating in different sectors of the economy in the midst of barriers such as regulation? To answer that question, there was no other place to turn to than the European Union (EU). The EU the home of the GDPR and they have a vision and are working to achieve the vision of facilitating a continental cross-chain Blockchain networks. It is therefore interesting to see how they navigate these challenges and what lessons one can learn that will be beneficial for the development of global technical and compatibility standards for Cross-chain Blockchains.

This chapter is divided into 5 sections. The introduction is followed by a brief overview on the necessity of interoperability and compatibility standards. The third section highlights the EU Blockchain initiative and the role of Interoperability and compatibility standards in the process. The fourth section provides a discussion on how the initiative can inspire the development of interoperability and compatibility standards for Cross-chain Blockchain networks. The final section is the conclusion.