Permissioned Blockchain

A permissioned blockchain is a type of blockchain where access to participate in the

network is restricted to a certain group of participants. Unlike public blockchains like Bitcoin
or Ethereum, where anyone can join the network, permissioned blockchains require
participants to be authorized before they can contribute to the network. Permissioned
blockchains are often used in enterprise and consortium settings where participants are known
and trusted, and privacy and control are important considerations.

Blockchain systems are global scale peer-to-peer systems that integrate many
techniques and protocols from cryptography, distributed systems, and databases. In a
blockchain system, nodes agree on their shared states across a large network of possibly
untrusted participants. Bitcoin and other cryptocurrencies are permissionless blockchain
systems. Permissionless blockchain systems are public where computing nodes without a priori
known identities can join or leave the blockchain network at any time. On the other hand, a
permissioned blockchain system uses a network of a priori known and identified nodes to
manage the blockchain. The main underlying data structure in blockchain systems is the
blockchain ledger, an append-only fully replicated structure that is shared among all
participants and guarantees a consistent view of all user transactions by all participants in the
system. Each block in the blockchain ledger includes a batch of transactions and the total order
of transaction blocks in the blockchain ledger is captured by chaining blocks together, i.e., each
block includes the cryptographic hash of the previous block. Figure 1 illustrates an example of
a permissioned blockchain system consisting of five nodes where each node maintains a copy
of the blockchain ledger.

The Blockchain Architecture consists of a set of nodes in an asynchronous large

distributed system. Nodes in the system might crash, i.e., when a node fails it stops processing
completely, or may behave maliciously, i.e., when a node fails it may act arbitrarily, often
referred to as the Byzantine failure model. To ensure consistency among the data replicated on
different nodes, blockchain systems use the State Machine Replication (SMR) algorithm,
where nodes agree on an ordering of incoming transactions, to ensure the copies of the
distributed ledger are identical. SMR regulates the deterministic execution of client
transactions on different nodes such that every non-faulty node executes every transaction in
the same order. In a permissioned blockchain system, nodes establish consensus on this unique
order in which transactions are appended to the blockchain ledger using asynchronous fault-
tolerant protocols, e.g., Paxos or PBFT.
Components of Permissioned Blockchain:

• Participants/Nodes: These are entities or individuals that are part of the permissioned
blockchain network. Nodes can be divided into different categories such as:
• Validator Nodes: Nodes responsible for validating transactions and adding them to the
blockchain.
• Endorsing Nodes: Nodes that endorse transactions by verifying their validity before
they are added to the blockchain.
• Consensus Nodes: Nodes that participate in the consensus mechanism to agree on the
state of the blockchain.
• Auditor Nodes: Nodes that monitor and audit transactions for compliance or regulatory
purposes.

Consensus Mechanism: Permissioned blockchains rely on various consensus mechanisms

to achieve agreement among network participants about the validity of transactions and the
state of the blockchain. Common consensus mechanisms include Practical Byzantine Fault
Tolerance (PBFT), Proof of Authority (PoA), Proof of Stake (PoS), etc.

Identity Management: Identity management systems are crucial in permissioned

blockchains to ensure that only authorized participants can access the network. Participants are
required to authenticate themselves before they can join the network.

Access Control and Governance: Permissioned blockchains have robust access control
mechanisms to manage permissions and data access rights. Governance frameworks define
how decisions are made regarding changes to the blockchain protocol, network upgrades, and
other governance-related matters.

Hyperledger Fabric

Hyperledger Fabric is one of the most prominent blockchain frameworks developed under
the umbrella of the Linux Foundation's Hyperledger project. It's specifically designed to be a
modular and customizable enterprise blockchain framework suitable for a wide range of
industry use cases. Here's an in-depth look at Hyperledger Fabric within the context of
blockchain technology:
Key Features of Hyperledger Fabric:

• Permissioned Network: Hyperledger Fabric allows for the creation of

permissioned networks where participants must be authenticated and authorized to
access the network resources. This is particularly useful in enterprise settings where
privacy, confidentiality, and regulatory compliance are crucial.

• Modular Architecture: Fabric's architecture is highly modular, allowing users to

plug in different components such as consensus mechanisms, membership services,
and smart contract execution engines. This modularity enhances flexibility and
allows organizations to tailor the blockchain network to their specific requirements.

• Smart Contracts (Chaincode): Fabric utilizes smart contracts known as

"chaincode" to define transaction logic and business rules. Chaincode can be written
in various programming languages such as Go, JavaScript, or Java, providing
developers with flexibility in implementing complex business logic.

• Channels for Data Privacy: Fabric introduces the concept of channels, which are
private sub-networks within the main blockchain network. Channels allow for
confidential transactions to be conducted among a subset of network participants
without revealing sensitive information to unauthorized parties.

• Endorsement Policy and Consensus: Fabric employs a unique endorsement

policy mechanism where transactions must be endorsed by a predefined set of peers
before they can be committed to the ledger. This allows organizations to enforce
custom endorsement policies based on their specific requirements.

• Pluggable Consensus Mechanisms: Fabric supports pluggable consensus

mechanisms, enabling organizations to choose the consensus algorithm that best
suits their needs. It offers various consensus options including Practical Byzantine
Fault Tolerance (PBFT), Raft, and Solo for development and testing purposes.
 • Identity Management: Fabric integrates with identity management systems to
authenticate and authorize network participants. It supports integration with
existing enterprise identity solutions such as LDAP and Active Directory, enabling
seamless integration with existing infrastructure.

• Private Data Collections: Fabric allows for the creation of private data collections,
which enable selective sharing of data among a subset of network participants.
Private data collections ensure data privacy and confidentiality while still
maintaining the integrity and immutability of the blockchain.

Use Cases:

Hyperledger Fabric is well-suited for a wide range of enterprise use cases across industries
including:

• Supply Chain Management

• Trade Finance
• Healthcare
• Identity Management
• Financial Services
• Government Applications
• Cross-border Payments

What is Hyperledger Fabric ?

Hyperledger Fabric is designed for use in enterprise-level applications, and it is
characterized by its modular architecture, permissioned network, and smart contract
functionality, known as “chaincode”.
• The platform provides a high degree of security, privacy, and scalability, and it
supports the development of custom blockchain solutions for various use cases
across industries such as finance, supply chain, and healthcare.
• Hyperledger Fabric operates as a network of nodes, where each node performs a
specific function, such as validating transactions, maintaining the ledger, and
executing chaincode.
 • Transactions are validated and ordered by a consensus mechanism, which ensures
the integrity and consistency of the ledger.

How does Hyperledger Fabric Work?

Workflow: For each and every transaction in the fabric, the following steps are followed-
1. Creation of the proposal: Imagine a deal between a smartphone manufacturer
company and a smartphone dealership. The transaction begins when a member
organization proposes or invokes a transaction request with the help of the client
application or portal. Then the client application sends the proposal to peers in
each organization for endorsement.
2. Endorsement of the transaction: After the proposal reaches the endorser peers
(peers in each organization for endorsement of a proposal) the peer checks the
fabric certificate authority of the requesting member and other details that are
needed to authenticate the transaction. Then it executes the chain code (a piece of
code that is written in one of the supported languages such as Go or Java) and
returns a response. This response indicates the approval or rejection of the
following transaction. The response is carried out to the client.
3. Submission to ordering service: After receiving the endorsement output, the
approved transactions are sent to the ordering service by the client-side
application. The peer responsible for the ordering service includes the transaction
into a specific block and sends it to the peer nodes of different members of the
network.
4. Updating the ledger: After receiving this block the peer nodes of such
organizations update their local ledger with this block. Hence the new transactions
are now committed.
Industry Use Cases for Hyperledger Fabric
1. Supply Chain:
Supply chains are global or regional webs of suppliers, manufacturers, and
retailers of a particular product. Hyperledger Fabric networks can improve the
transaction processes of the supply chain by increasing the clarity and traceability of
transactions within the fabric. On a Fabric network, enterprises having authentication
to access the ledger can view the data of the previous transactions. This fact increases
accountability and reduces the risk of counterfeiting of the transactions. Real-
time production and shipping updates can be updated to the ledger. Which can help
us to track the product condition in a much faster, simpler, and efficient way.

2. Trading and Asset Transfer:

Trading and asset transfer requires many organizations or members like
importers, exporters, banks, brokers. They work with one another. And even in the
era of digitalization a lot of paperwork is going on in this sector. But using
Hyperledger they can transact and interact with each other in a paperless way. The
Hyperledger fabric can add the same layer of trust as the document signed by a trusted
authority. This also increases the performance of the system.
Another benefit of Hyperledger fabric is that assets can be dematerialized on the
blockchain network with the help of Hyperledger fabric. Due to this traders or
stakeholder will be able to have direct access to their financial securities and they can
trade it anytime.
3. Insurance:
The insurance industry spends billions to avoid insurance frauds or falsified
claims. With the help of Hyperledger fabric, the Insurance company can refer to the
transaction data that is stored inside the ledger. Hyperledger Fabric can also make the
processing of claims faster using the chain code and automate the payment. This
process will be also helpful for multi-party subrogation claims processing. Where it
can automate repayment from the fault party back to the insurance company.
Verification of identity or KYC process will be easy using this private blockchain.

Benefits Of Hyperledger Fabric

1. Open Source:
Hyperledger fabric is an open-source blockchain framework hosted by
the Linux foundation. It has an active community of developers The code is
designed to be publicly accessible. Anyone in the community can see, modify,
and distribute the code as they see fit. People across the world can come and
help to develop the source code.
2. Private and Confidential:
In a public blockchain network each and every node in the network is
receiving a copy of the whole ledger. Thus keeping privacy becomes a much
bigger concern as everything is open to everyone. In addition to this one, the
identities of all the participating members are not known and authenticated.
Anyone can participate as it is a public blockchain. But in the case of
Hyperledger fabric, the identities of all participating members are
authenticated. And the ledger is only exposed to the authenticated members.
This benefit is the most useful in industry-level cases, like banking, insurance,
etc where customer data should be kept private.
3. Access Control:
In the Hyperledger fabric, there is a virtual blockchain network on top
of the physical blockchain network. It has its own access rules. It employs its
own mechanism for transaction ordering and provides an additional layer of
access control. It is especially useful when members want to limit the exposure
of data and make it private. Such that it can be viewed by the related parties
only. As an example when two competitors are on the same network. The fabric
also offers private data collection and accessibility, where one competitor can
control the access to its own data such that the data do not get exposed to the
other competitor.
4. Chaincode Functionality:
It includes a container technology to host smart contracts called chain
code that defines the business rules of the system. And it’s designed to support
various pluggable components and to accommodate the complexity that exists
across the entire economy. This is useful for some of the specific types of
transactions like asset ownership change.
5. Performance:
As the Hyperledger fabric is a private blockchain network, There is no
need to validate the transactions on this network so the transaction speed is
faster, resulting in a better performance.
Limitation of Hyperledger Fabric
Hyperledger Fabric is a robust and flexible platform for developing blockchain
applications, but like any technology, it has certain limitations:
1. Scalability: Hyperledger Fabric is designed for permissioned networks,
where the participants are known and trusted, which can limit its scalability
for large-scale public networks.
2. Performance: The performance of Hyperledger Fabric can be impacted
by factors such as network size, network configuration, and the complexity
of chain code, which can limit its ability to handle high volumes of
transactions.
3. Complexity: Setting up and configuring a Hyperledger Fabric network
can be complex, requiring a deep understanding of the technology and its
components.
4. Compatibility: Hyperledger Fabric is designed to be used with specific
programming languages, such as Go and JavaScript, which can limit its
compatibility with other technologies and programming languages.
5. Cost: Running a Hyperledger Fabric network requires infrastructure and
resources, which can add costs to the deployment and operation of
blockchain applications.
6. Interoperability: Hyperledger Fabric is designed to be used within a
single network, and its interoperability with other blockchain platforms is
limited.

COMPONENTS OF HYPERLEDGER FABRIC

Hyperledger Fabric, being a modular and flexible enterprise blockchain framework,

comprises several key components that work together to enable the creation and operation of
permissioned blockchain networks. Below are the main components of Hyperledger Fabric:

Membership Services Provider (MSP):

• The Membership Services Provider manages the identities of participants (nodes and
users) in the network.
• MSP defines the policies and procedures for authenticating and authorizing participants
to interact with the network.
 • MSP ensures that only authenticated and authorized users can access the blockchain
network.

Peer Nodes:

• Peer nodes maintain a copy of the ledger and execute chaincode (smart contracts) to
process transactions.
• There are two types of peer nodes: endorsing peers and committing peers.
• Endorsing peers simulate transactions, endorse their validity, and create transaction
proposals.
• Committing peers validate endorsed transactions and commit them to the ledger.
• Peer nodes communicate with each other to achieve consensus on the state of the ledger.

Ordering Service:

• The Ordering Service (also known as the Orderer) is responsible for ordering
transactions into blocks and distributing them to the peer nodes.
• It ensures the consistency and integrity of the ledger by sequencing transactions
according to a defined consensus protocol.
• The Ordering Service operates independently of the peer nodes and provides a
centralized or decentralized ordering mechanism.

Channel:

• A Channel is a private communication mechanism that allows a subset of network

participants to exchange transactions privately.
• Each channel has its own ledger and chaincode instances, enabling confidential
transactions among authorized participants.
• Channels provide privacy and confidentiality by restricting the visibility of transactions
to only the participants involved.

Smart Contracts (Chaincode):

• Smart contracts, known as Chaincode in Hyperledger Fabric, encapsulate the business

logic and rules governing transactions.
• Chaincode is written in programming languages such as Go, JavaScript, or Java.
• It defines transaction logic, data validation rules, and access control policies.
• Chaincode is invoked by clients and executed by endorsing peers to process
transactions.

Consensus Mechanism:
 • Hyperledger Fabric supports pluggable consensus mechanisms that determine how
transactions are validated and added to the ledger.
• Consensus mechanisms ensure agreement among network participants on the order and
validity of transactions.
• Fabric offers consensus algorithms such as Practical Byzantine Fault Tolerance (PBFT),
Raft, and Solo.

Cryptography and Security:

• Hyperledger Fabric employs cryptographic techniques to secure transactions,

communications, and data stored on the blockchain.
• Cryptographic primitives such as digital signatures, hash functions, and encryption
algorithms ensure data integrity, confidentiality, and authenticity.
• Fabric integrates with standard cryptographic libraries and protocols to implement
secure communication and transaction validation.

Identity Management and Access Control:

• Fabric integrates with identity management systems to authenticate and authorize

participants based on their roles and permissions.
• Identity management ensures that only authenticated users can access the network
resources and perform authorized actions.
• Access control policies define the rules and conditions for granting or denying access
to network resources.

These components work together to provide a secure, scalable, and customizable

framework for building enterprise-grade blockchain applications and networks. Hyperledger
Fabric's modular architecture allows organizations to configure and customize the blockchain
network according to their specific requirements and use cases.

CONSENSUS OF HYPERLEDGER FABRIC

Hyperledger Fabric, being a permissioned blockchain framework, offers flexibility in

consensus mechanisms, allowing network participants to select the consensus algorithm that
best fits their requirements. The consensus mechanism in Hyperledger Fabric is responsible for
ensuring agreement among the network participants on the order and validity of transactions.
Here are the primary consensus mechanisms supported by Hyperledger Fabric:

Practical Byzantine Fault Tolerance (PBFT):

• PBFT is a classic consensus algorithm designed to provide Byzantine fault tolerance

in distributed systems.
 • In PBFT, network participants (peers) communicate with each other to reach
agreement on the order of transactions.
• It requires a two-phase process: the pre-prepare and prepare phases, followed by a
commit phase to finalize the transaction order.
• PBFT ensures that the network can tolerate a certain number of faulty or malicious
nodes while maintaining consensus.

Crash Fault Tolerance (CFT):

• CFT is a simplified consensus algorithm suitable for crash-fault-tolerant

environments where Byzantine faults are not considered.
• In CFT, transactions are ordered through a leader-based approach, where a
designated leader node proposes the order of transactions.
• Other nodes in the network validate the proposed order and commit transactions
once they reach agreement.
• CFT is less complex compared to PBFT and is suitable for networks where
Byzantine faults are less likely to occur.

Raft:

• Raft is another consensus algorithm designed for crash-fault-tolerant systems,

offering simplicity and understandability.
• In Raft, the network elects a leader node responsible for coordinating transaction
ordering and replication.
• Transactions are replicated across the network through leader-based consensus,
ensuring fault tolerance and consistency.
• Raft provides a straightforward approach to achieving consensus and is suitable for
applications requiring ease of implementation and management.

Pluggable Consensus:

• Hyperledger Fabric supports a pluggable consensus model, allowing organizations

to integrate custom consensus algorithms based on their specific requirements.
• Organizations can develop and deploy their consensus algorithms by implementing
the necessary interfaces and integrating them with the Fabric framework.
• Pluggable consensus enables flexibility and innovation, allowing organizations to
experiment with new consensus mechanisms tailored to their use cases.

The choice of consensus mechanism in Hyperledger Fabric depends on various factors

including network requirements, fault tolerance objectives, performance considerations, and
the trust model of participating organizations. Fabric's modular architecture enables
organizations to select and configure the consensus algorithm that best aligns with their specific
needs, ensuring robustness, scalability, and integrity in blockchain-based applications and
networks.

DESIGN COMPONENTS OF HYPERLEDGER FABRIC BLOCKCHAIN:

Designing a Hyperledger Fabric blockchain involves several key components and

considerations that contribute to building a secure, scalable, and efficient distributed ledger
system. Let's delve into the details of designing a Hyperledger Fabric blockchain along with a
suitable diagram:

Network Topology:

• Design the network topology by identifying the roles of participating nodes such as
peers, ordering service nodes, and client applications.
• Determine the number and distribution of nodes across different organizations and
geographic regions to achieve fault tolerance and scalability.
• Establish communication channels and connectivity requirements between nodes to
facilitate data transmission and consensus.

Membership Services Provider (MSP):

• Define the membership services provider to manage participant identities and access
control policies.
• Establish authentication mechanisms and cryptographic protocols to ensure secure
communication and data integrity.
• Configure MSP policies to authenticate and authorize network participants based on
their roles and permissions.

Consensus Mechanism:

• Select the appropriate consensus mechanism based on network requirements, fault

tolerance objectives, and performance considerations.
• Evaluate consensus algorithms such as Practical Byzantine Fault Tolerance (PBFT),
Raft, or Crash Fault Tolerance (CFT) for achieving agreement on transaction ordering
and validation.
• Configure consensus parameters and network parameters to optimize performance and
reliability.

Channel Configuration:

• Define channels to establish private communication channels between subsets of

network participants.
 • Determine the membership and access control policies for each channel to restrict
access to authorized participants.
• Configure channel parameters such as block size, block time, and endorsement policies
to optimize performance and privacy.

Smart Contracts (Chaincode):

• Develop smart contracts (chaincode) to define transaction logic, data validation rules,
and business processes.
• Choose programming languages such as Go, JavaScript, or Java for implementing
chaincode based on developer expertise and application requirements.
• Define the interface and APIs for interacting with chaincode from client applications
and peer nodes.

Data Management and Storage:

• Design data models and schemas to represent assets, transactions, and state changes
within the blockchain ledger.
• Define data partitioning and replication strategies to ensure data availability,
consistency, and durability.
• Select appropriate data storage mechanisms such as LevelDB or CouchDB for storing
blockchain data and state.

Security and Privacy:

• Implement security measures such as encryption, digital signatures, and access control
to protect sensitive data and transactions.
• Configure network firewalls, intrusion detection systems, and monitoring tools to detect
and mitigate security threats.
• Define privacy-enhancing techniques such as zero-knowledge proofs and confidential
transactions to protect transaction privacy and confidentiality.

Diagram of Hyperledger Fabric Blockchain Design:

Below is a simplified diagram illustrating the design components of a Hyperledger Fabric

blockchain:

Client App
|
Peer Node
|
Orderer Node
Explanation of Components:

• Client Application: Initiates transactions and interacts with the blockchain network
through SDKs and APIs.
• Peer Node: Maintains a copy of the ledger, executes chaincode, and participates in
transaction endorsement and validation.
• Orderer Node: Orders transactions into blocks and delivers them to peer nodes for
validation and commitment.

OTHER CHALLENGES

Interoperability of Blockchain:

Blockchain interoperability is a term used in the bitcoin and cryptocurrency industry

to describe the process of blockchain-based or blockchain-related systems being able to
interact with other non-blockchain systems.
Blockchains are inflexible by design, meaning that it is not possible for one
blockchain to interact with another. This makes most blockchains incompatible with each
other. However, there are a number of blockchains in existence, each with its own unique
properties.
• The goal of interoperability is to make blockchains more compatible with one
another and to allow their integration into existing systems.
• Interoperability is the ability of two companies to work together on an existing
system that only uses blockchain technology in order to reduce the costs of
blockchain management and compliance for both companies.
• The concept of interoperability enables many new applications to be built on top
of existing frameworks, allowing users to access data from multiple blockchains
within a single application.
• For example, imagine using Ethereum as a basis for smart contracts within an
existing website, like WordPress or Shopify.

Here, we will discuss the following topics:

1. Importance of Interoperability In Blockchain
2. Why is Blockchain Interoperability Integral?
3. Solutions For Executing Blockchain Interoperability
4. How Does Blockchain Interoperability Work?
5. Advantages of Blockchain Interoperability
6. Disadvantages of Blockchain Interoperability
Importance of Interoperability in Blockchain
The blockchain is a distributed network of nodes from which no single node has a
complete copy of the ledger. This ensures that blockchains are not susceptible to physical or
digital theft and fraud, as the whole system is reliant on the credibility of thousands of
independent validators. It is important that blockchains maintain accurate records just like
traditional ledgers to promote trust in a system.
• Without this interoperability, it would be difficult for large companies to utilize
blockchain technology because they need access to an unlimited number of
independent parties rather than just one centralized authority.
• It increases the network of blockchains making the process more productive.
• It will help in getting rid of intermediaries, and third parties, synonymous with
centralized systems.

Why is Blockchain Interoperability Integral?

In its simplest form, a blockchain is a decentralized ledger that can store transactions without
the need for trusted intermediaries. Organizations use blockchains to track data and assets
across disparate systems while providing immutability. However, as the number of
blockchain networks operating in isolation increases, so too does the number of participants
looking to utilize these networks.
• Blockchain interoperability is important because it allows for different types of
blockchains, both public and private, to coexist in a world where their data can be
exchanged freely.
• It also enables different types of transactions on these networks, like those with
smart contracts or confidential transactions to take place simultaneously such that
all parties can see them.
• The result is a more efficient and simpler system for enterprises and individuals
alike. It streamlines how complex transactions can take place without requiring
middlemen, while still maintaining complete confidentiality.

How does blockchain interoperability work?

The cross-chain protocol permits data sharing across many blockchain networks and
streamlines interoperability between various blockchain networks. Users can communicate
with one another directly using the cross-chain protocol. As a result, blockchains with
comparable networks can exchange value and information.
However, it varies from network to network since no single predetermined approach can be
implemented in the same way in all networks. To facilitate transactions without using third -
party interfaces, each network utilizes a unique method for blockchain interoperability.

As mentioned, atomic swaps let two parties exchange their tokens across several
blockchains. In addition, blockchain networks can monitor the activities occurring on other
chains thanks to relays. They operate on a chain-to-chain basis, allowing a single contract to
serve as a central client of other nodes across many chains without using distributed nodes.
This allows it to instantly validate specific central headers and the entire history of
transactions. However, operating and maintaining the security of the relay approach costs a
lot of money.

Solutions For Executing Blockchain Interoperability

Below are some of the solutions for blockchain interoperability:
1. Polkadot:
It is an open-source blockchain platform and cryptocurrency that has taken blockchain
interoperability to another level.
• It provides interconnectivity and interoperability between the blockchains.
• It enables independent chains to securely perform transactions with each other
without a trusted third party and securely exchange messages.
• It unites a network of heterogeneous blockchains called parachains and
parathreds.
2. Hybrix:
It is an open-source blockchain platform that unites all digital ledgers.
• It aims to provide a solution to moving value between ledgers.
• It enables one token to exist on all ledgers.
• Hybrix is borderless as it is not restricted to any single distributed blockchain,
DAG, or another digital ledger.
3. Cosmos:
It is a blockchain interoperability project that enables blockchains to transfer
value with each other through IBC and Peg-Zones while letting them retain their
sovereignty.
• It creates independent blockchains called zones that connect to the main
blockchain called Cosmos Hub.
• The hub monitors and maintains the record of the state of each zone.
• It enables blockchain applications to scale to millions of users through horizontal
and vertical scalability solutions.
4. Blocknet:
It is a blockchain interoperability protocol that enables communication,
interaction, and exchanges between different public and private blockchains.
• It allows nodes on separate networks to communicate and execute both value and
data transfers.
• The team developed their own blockchain with a native token of BLOCK used to
pay execution fees.
5. Wanchain:
It is a decentralized blockchain interoperability solution and a sustainable
Layer 1 PoS blockchain.
• It allows for the exchange of assets and data between blockchains.
• It is a full Ethereum-like environment that works with industry-standard Ethereum
tools, Dapps, and protocols.

How Does Blockchain Interoperability Work?

Blockchain interoperability is the process of incorporating blockchain
technology into other types of business entities.
• This often involves an entity on a traditional company merging with a blockchain
project to allow the two businesses to work together more efficiently and
effectively than they could either separately or working with each other in the
past.
• Blockchains are limited to what they can do without cooperation from third-party
entities, so blockchain integration companies help integrate blockchains into other
systems like businesses or governments by using their particular know-how and
experience.
 • Companies specializing in this kind of integration often take on smaller projects
that are easier for them to handle than larger, more complex developments and
missions.

Advantages of Blockchain Interoperability

• Increases ease of sharing data: Blockchain interoperability increase the ease of
sharing and integration of data. This encourages blockchain transactions.
• Increases success rate of projects: Blockchain interoperability increases the
success rate of future and current projects especially the projects like healthcare,
finance, aviation, etc.
• Cross-chain transactions: It has eased the process of cross-chain transactions
as blockchains can share their data with one another.
• Enhanced privacy and security: Blockchain interoperability is a safe and
secure process thus there are no chances of fraud.

Disadvantages of Blockchain Interoperability

• Highly restricted: The process of blockchain interoperability is highly
restricted, though it can be complicated and complex for the users it ensures safety
while transferring data.
• Limited skilled manpower: Since this type of work is still new, it may be hard
to find qualified professionals to help blockchain integration companies with the
process since there aren’t enough developers out there yet who have experience
with this type of work.
• No Interoperability between two different networks: Currently blockchain
interoperability is possible between different blockchains of the same network.
• No reverse flow of blockchain: A blockchain registered on a node cannot go
back to its original location.

Scalability of Blockchain:

Scalability in blockchain refers to the ability of a blockchain network to handle

increasing transaction volumes and accommodate growing user demands without
compromising performance or efficiency. Scalability is crucial for mainstream adoption and
widespread use of blockchain technology. Key considerations for scalability include:

• Transaction Throughput: Scalability solutions aim to increase the transaction

throughput of blockchain networks, allowing them to process a higher number of
transactions per second (TPS) without sacrificing decentralization or security.
 • Layer 2 Solutions: Layer 2 scaling solutions, such as state channels, sidechains, and
payment channels, enable off-chain processing and aggregation of transactions,
reducing the burden on the main blockchain and improving scalability and efficiency.
• Sharding: Sharding involves partitioning the blockchain network into smaller shards
or segments, each capable of processing transactions independently. Sharding enhances
scalability by parallelizing transaction processing and increasing network capacity.
• Consensus Optimization: Consensus mechanisms play a significant role in scalability.
Optimizing consensus algorithms and introducing more efficient consensus
mechanisms, such as proof of stake (PoS) and delegated proof of stake (DPoS), can
improve scalability by reducing the computational overhead and energy consumption
associated with transaction validation.
• Horizontal and Vertical Scaling: Horizontal scaling involves adding more nodes or
parallel processing units to the blockchain network to distribute the workload and
increase capacity. Vertical scaling involves upgrading existing nodes or infrastructure
to handle higher transaction volumes and resource demands.
• Off-Chain Processing: Off-chain scaling solutions enable certain transaction
processing tasks, such as micropayments and non-critical data exchanges, to be
performed off-chain or on secondary layers, reducing congestion on the main
blockchain and improving scalability.

Trust minimization is a valuable security property that blockchain technology is

uniquely positioned to generate—replacing handshakes, brand reputation, and paper contracts
with guarantees based on computer code, cryptography, and decentralized consensus. These
superior guarantees provided by blockchains form the basis of cryptographic truth.
 Blockchains have succeeded in bringing trust minimization to new use cases including
monetary policy (e.g. Bitcoin) and digital asset trading (e.g. DEXs). However, blockchains
have historically struggled to maintain trust minimization for use cases that require speeds and
costs comparable to traditional computing systems. These scalability limitations can be felt by
users in the form of high transaction costs and cause developers to doubt whether blockchains
can support high-value use cases that hinge on handling data in real time.

With the ultimate goal of unlocking blockchain technology for all users and use cases,
scalability is at the forefront of blockchain research and development as a key element in smart
contracts becoming the preferred backend of major industries such as finance, supply chain,
gaming, and beyond. The following post provides an overview of blockchain scalability,
focusing on how blockchains differ from traditional computing before outlining the advantages
and trade-offs of different approaches to scaling the execution, storage, and consensus layers
of blockchains.