Blockchain Interoperability Could Significantly Reduce Crypto-to-Crypto Transaction Costs

Blockchains might soon be able to communicate with each other because of projects like Metronome and Cosmos. According to a recent Bloomberg report, both Metronome and Cosmos have reached key “developmental milestones.” Lucas Nuzzi, lead technical analyst at Digital Asset Research, stated:

“We are very close to achieving interoperable blockchains, and this has the potential of changing the entire cryptocurrency market."

Lucas Nuzzi

Per the New York based researcher, the development of interoperable blockchains could pave the way for the emergence of numerous blockchain-powered apps. Additionally, it could potentially increase the value of cryptocurrencies as more people and businesses begin to adopt them, Nuzzi added. 

Cryptocurrency Exchanges Might Lose Business

Cryptocurrency exchanges might also be affected due to the development of interoperable blockchains. Recent data shows that the top 10 digital currency exchanges will earn approximately $1 billion from transaction fees annually. Currently, traders who want to buy Ethereum (ETH) usually have to use a cryptocurrency exchange to convert their Bitcoin (BTC) to ETH, or any other crypto of their choice. When one cryptocurrency is exchanged for another, the digital funds are transferred or moved from one blockchain to another, in this case from the Bitcoin blockchain to the Ethereum blockchain.

One of the major issues with trading cryptocurrencies this way is that the process can be very slow and the transaction fees can be very high. Reportedly, once interoperable blockchains emerge, transaction fees might be significantly reduced, or even eliminated. In order to resolve these issues with current blockchains, the “built-to-last” cryptocurrency Metronome (MET) will enable users to transfer their MET coins from the Ethereum blockchain to the Ethereum Classic (ETC), Qtum, and Rootstock blockchains. 

Although this type of digital funds transfer can be done using many of the current blockchains, MET coins will not reportedly have to be converted into any other coin or token as they are moved from one blockchain to another. Meanwhile, the Cosmos project will allow crypto traders to exchange Bitcoin (BTC) for Ether through its decentralized exchange (DEX). This could potentially eliminate the requirement of having to go to a centralized exchange to conduct the transaction, which is often slow and costly. 

Slow Transition to Full-Fledged Blockchain Interoperability

The Cosmos project offers a “decentralized network of independent parallel blockchains” and is called the “internet of blockchains.” Developers of Cosmos claim that their DEX will be as fast, if not faster, than the current centralized exchanges. The Cosmos team has revealed that most of their development work is done, and the beta version of their network will be launched some time this summer. 

The project leaders of both Cosmos and Metronome have acknowledged that to achieve full-fledged blockchain interoperability will take time. Lex Sokolin, fintech director at Autonomous Research LLP, has attributed the expected slow transition to interoperable blockchains partially due to the different approaches by regulatory authorities to regulating cryptocurrencies throughout the world. Sokolin noted:

“Perhaps building interoperability into the protocol at this stage is a useful solution, but until economic activity actually shifts into public crypto, it’s a battle for the merely imagined future. Real economic activity cannot shift into the chains until regulation is settled.”

Lex Solokin

Ravencoin Vulnerability Allowed Attackers to Increase Total Supply by 1.5%

Attackers have exploited a vulnerability found in Ravencoin, an open-source fork of Bitcoin that launched in 2018, to generate extra RVN tokens “beyond the coinbase of 5000 RVN per block.”

According to a Medium post published by Ravencoin lead developer Tron Black, community members from the CryptoScope team reached out to the Ravencoin team with the findings. Both teams then worked together to stop the exploit from being leaked, and started “code review to detect, isolate, and fix the issue.” The post reads:

A community code submission caused a bug that has been exploited. Law enforcement has been notified and is working with us. The vulnerability does not allow the stealing of RVN or assets that you own and control, but the minting did create RVN that should not exist.

In total, the extra coins that were minted beyond Ravencoin’s total 21 billion supply are the equivalent of 44 days worth of mining, or about 1.5% of the RVN tokens that will ever exist. Black’s suggestion on the post was for the community to absorb the economic cost of the extra tokens, or to move the halving 44 days earlier.

He added the minted RVN tokens were moved to an exchange and traded, and as a result were mixed with other circulating RVN tokens. This means that trying to burn the tokens, even if with community backing, will “cause irreparable harm to innocent victims.”

The burden, Black added, is currently being shared across all RVN holders in proportion to their holdings in the form of inflation. The developer urged users to keep trading to a minimum until a fix is issued. Details on the vulnerability will not be revealed until the fix is implemented.

Featured image by Tyler Quiring on Unsplash.