Harmony (ONE) and Cross-chain interoperability
The world of Blockchain has recently seen a plethora of revolutionary concepts such as Yield Farming, NFTs (Non-fungible tokens), and much more come to fruition. However, in order for such concepts to be successful, we need a stable base to build upon, starting from the protocol level. Issues such as the Blockchain trilemma need to be addressed more efficiently.
This article provides a holistic view of the unique approach of one such Layer 1 Blockchain protocol: Harmony (ONE), towards achieving blockchain interoperability and providing a seamless cross-chain platform.
The Need for Cross-chain Platforms
Mass adoption seems to be a challenge for most Blockchain platforms, no matter what they offer. With all the hype that Blockchain has created, expectations have also skyrocketed in the past couple of years.
In order to meet these expectations, Blockchain platforms are looking at a future where they complement each other. If one platform provides better transactional finality and another platform provides better privacy, we should be able to get the best of both worlds.
This brings us to the concept of Cross-chain platforms. Essentially, cross-chain interoperability refers to the ability of a blockchain platform to share data with others.
An analogy to understand the concept of interoperability would be fiat currencies. If you travel from the US to China, you need to get your money converted from USD to RMB. If this facility of International money transfers or conversion of currency was not available, you would be unable to buy anything in China.
Same applies to the world of Cryptocurrencies and Blockchain. If you have 100 ether but want to transact on another platform, you need to follow a process of converting your ethers into the native currency of that platform.
The importance for Blockchain interoperability cannot be overstated at this time. The question of the hour is: Which Blockchain platform is the most capable of facilitating such cross-chain interactions. One of the possible winners here is the Harmony protocol.
Why the Harmony Platform?
Most Blockchain platforms facilitating interoperability, at present, come with some trade-offs such as lack of flexibility in Polkadot and Cosmos and lack of scalability in Atomic Swaps.
If we consider the popular platforms — Polkadot and Cosmos, what they facilitate is the option to be a part of a separate cross-chain ecosystem rather than connecting existing Blockchains directly. This approach may represent a befitting solution for Blockchain interoperability but it is far from being complete.
The main barrier however is that these cross-chain platforms require a number of components, such as network load balancer or an efficient way of cross-chain communication, to achieve complete interoperability and these components aren’t expected to be generally available anytime soon.
This is where Harmony swoops in.
With the different components required to facilitate complete Blockchain interoperability already in production, Harmony is paving the way for the next revolution.
Getting into the technicals, let’s look at how Harmony is able to provide cross-chain interoperability with the Binance chain.
To send tokens, for instance, the complete logic is executed through smart contracts which eliminate the possibility of discrepancies. What these smart contracts do is consume tokens on the Harmony blockchain and mint tokens carrying the same value on the Binance chain. How this is achieved in a decentralized manner is described in the section below.
This task is completed through two main concepts: Multi-signature wherein multiple validators sign the transaction to provide better authentication and Threshold Signature Scheme where such encryption is performed which works on both the Blockchains.
How the Cross-chain process works in Harmony?
Essentially, every Blockchain platform has some nodes that are responsible for various aspects such as validating the transactions on the network, maintaining a ledger, participating in consensus, and much more.
According to Harmony, the key to interoperability is for allowing these nodes to operate in different networks. Having the availability of validators in its own network, Harmony has approached the interoperability solution by incorporating the light clients(nodes) of the other Blockchain platforms into their own network.
Sounds simple? It is not the concept but the way Harmony has achieved this feature. Essentially, a node of another Blockchain is not just replicating the data from one Blockchain to another, it is validating the transactions at a lower fee and then transmitting them to the Harmony nodes which becomes a “commit then verify” architecture.
Cross-border payments and Harmony
Another major aspect that requires cross-chain interoperability is cross-border payments, asset transfers, and cash-flow management on the Blockchain networks.
The crypto exchanges are isolated. Even if we consider the availability of stable coins, there are many Blockchain platforms that do not support certain stable coins such as USDT.
To combat this problem, Harmony creates a liquidity pool. Think of it as an ATM machine. Different people having cards from different banks can come and swipe their cards at an ATM machine to get the money from their accounts. Taking this a notch higher, think of it as a machine which can automatically convert your native currency to the currency of the country you are withdrawing from.
This machine is Harmony. By integrating the existing networks that allow you to convert your fiat currency into crypto and vice versa, Harmony has created an ecosystem for end-to-end transfers.
Let’s look at a real-world scenario where Harmony adds value in our lives:
If you are in the US and buy Binance USD from the Binance gateway of the US, you won’t have any facility to convert it into WazirX INR available in India. What you need to do here is to withdraw your crypto from Binance US, get USDs, convert these USDs to Indian rupees, and then buy the same crypto from an Indian Gateway say WazirX.
On the other hand, with Harmony, your life becomes easier.
Focusing on the major players in the commerce segment, Harmony has teamed up with some major fiat gateways such as Binance US and CoinDCX to facilitate end-to-end transfers between the US and India(dollars to rupees) through the integration of the stable coins such as Binance USD and WazirX.
So, with Harmony, you can easily transfer your crypto from the US to India. This transfer holds immense influence when it comes to implementing a cross-border business such as it would be in the case of a supply chain, where the payment can be done easily and instantly through crypto. This transfer happens through the conversion of one stable coin into Harmony-One assets and vice versa.
Fundamentally, in the scenario outlined above, your Binance USD will be converted to ONE tokens and your ONE assets will then get converted into WazirX INR in India.
Apart from the Indian market, Harmony is currently looking to incorporate the markets of Indonesia, Korea and Singapore.
A sign of what’s to come
This is just the beginning of what Harmony could bring to the Blockchain world. Currently, Harmony has prototyped its cross-chain feature with Ethereum, Binance Smart Chain, and Polkadot. Implementations for Uniswap V2, Chainlink oracle, and Bitcoin are along the way.
Harmony’s approach has the potential to be a key player of Blockchain interoperability.
