Connecting Distributed Ledgers: Surveying Novel Interoperability Solutions in On-chain Finance
It addresses the problem of fragmented distributed ledgers for researchers and practitioners in on-chain finance, but is incremental as a survey and framework proposal.
This paper surveys novel cross-chain interoperability protocols in on-chain finance, analyzing their design and limitations, and proposes metrics and models to evaluate their performance and financial impact.
This paper emphasizes the critical role of interoperability in enabling efficient and secure communication for the fragmented distributed ledger ecosystem, particularly within on-chain finance. The purpose of this study is to streamline and accelerate empirical research on the intersection of cross-chain interoperability solutions and their impact within on-chain finance. The analysis examines the relationship between financial use and interoperability while comparing the properties of novel cross-chain interoperability protocols (LayerZero, Wormhole, Connext, Chainlink Cross-Chain Interoperability Protocol, Circle Cross-chain Transfer Protocol, Hop Protocol, Across, Polkadot, and Cosmos), focusing on their design, mechanisms, consensus, and limitations. To encourage further empirical study, the paper proposes a set of network metrics and sample statistical models and provides a framework for evaluating the performance and financial implications of interoperability solutions.