Connecting Distributed Ledgers: Surveying Novel Interoperability Solutions in On-chain Finance

TL;DR

This survey reviews recent cross-chain interoperability protocols in on-chain finance, analyzing their mechanisms, properties, and limitations to facilitate empirical research and evaluation.

Contribution

It provides a comprehensive comparison of novel interoperability protocols and proposes metrics and models for evaluating their performance and financial impact.

Findings

Compared properties of multiple interoperability protocols

Proposed network metrics for evaluation

Framework for assessing interoperability solutions

Abstract

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.