ICF’s report on 2024 Cross-Chain Interoperability highlights the growing importance of cross-chain networks, interoperability protocols that are key to the success of these ecosystems and the emerging trends that will shape the future of the decentralized network.
The total volume of transactions across all the interoperability protocols was $41 billion as at October 2024, the latest date the ICF provided. Ethereum dominates flows nominally, leading inflows and outflows across different blockchains.
According to the report, Ethereum is a major cross-chain destination, and has a combined volume of over $10 billion. The report highlights Ethereum’s position as the most important network for facilitating asset transfers.
The latest trends in emerging technologies and protocols
The cross-chain interoperability market is dominated by a few major players. ICF’s October total value-locked (TVL) for 43 interoperability protocol was $8 billion.
Interchain’s own Inter-Blockchain Communication protocol (IBC), which connects 117 chains, has been leading the way in terms of network connectivity. However, more recent protocols such as Hyperlane, (which links 120 chains), and LayerZero, (which connects 114 chains), have also caught up.
Circle’s CCTP is the best solution to handle high volumes of cross-chain transactions.
The report highlights the growth of intent-centric bridge protocols. The protocols such as Stargate or Across allow users to define their desired outcome (e.g. an asset transfer between blockchains) without having to worry about technical details.
“Intent-centric bridging protocols have emerged as the preferred method for quick and cheap cross-chain asset transfers,” The report highlights their increasing importance for improving the user experience and streamlining operations across chains.
Innovation in the future and its challenges
This report highlights the growing interest in Zero-Knowledge Proofs (ZKPs), as an instrument to enhance scalability, security and interoperability in Blockchains. ZKPs enable the verification of transaction across multiple networks, without having to rely on third party validators. This reduces costs and improves efficiency. ZKPs will continue to evolve and are expected play a major role in the interoperability phase for blockchains.
Fragmentation continues to be a challenge for the whole space. The interoperability of new networks becomes increasingly complex as they proliferate. While interoperability protocols have made strides, the sheer diversity of blockchain ecosystems — including different consensus mechanisms, data structures and security models — presents barriers to seamless integration, the report notes.
Even though solutions such as IBC and LayerZero have made progress, there still isn’t a universal bridge that connects all top chains.
It is difficult for protocols that are designed to work on one network to be adapted to another. The promise of an interconnected blockchain eco-system cannot be achieved without addressing fragmentation. In order to maximize the potential of dapps as the blockchain industry grows, it will be important to find ways to integrate disparate eco-systems.
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