Op-ed: Interoperability needs its ERC-20 moment

Undoubtedly, one of the prerequisites for the mass adoption of blockchain technology is secure and seamless cross-chain interoperability. Many potential applications, particularly in complex and regulated sectors, simply can not be deployed without common guidelines and interface definitions.

Imagine a world without ERC-20, the de facto standard for issuing fungible tokens on the Ethereum blockchain. Every project that issues a token on Ethereum would follow its standard and one project’s token would be incompatible with another’s. Applications like decentralized exchanges could still theoretically be built, but their growth would be hamstrung by the need to follow standard-agnostic design principles.

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Each token would represent an ad hoc integration and users could only use applications that explicitly support their token. Without a standard defining a set of rules and functions, the development of Ethereum’s ecosystem would have been greatly hampered.This is the current state of blockchain interoperability.  

However, because the ERC-20 standard has been vetted and adopted, all applications can interact with, manage, and trust unknown fungible tokens. Even tokens deployed after the creation of a specific application can be used without any additional engineering work required, and tokens can be compatible with multiple applications. This is the power of an open, unified standard. This is what blockchain interoperability so desperately needs. 

The benefits of an open, unified standard for blockchain interoperability may be even more profound. 

A common plug-and-play architecture that follows a vetted, standardized framework could span three layers – messaging, function calls and applications. This would enable secure and seamless communication between EVM and non-EVM blockchains alike. Prioritizing interchangeable components will also accelerate the development of true blockchain interoperability powered by multiple providers. 

Establishing such a standard has the additional benefit of assisting enterprises and regulators in comprehending the technical intricacies to develop a fair, informed regulatory framework. Developed alongside technical advancements, a fair balance between innovation and regulation could then be achieved.

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Blockchain technology has the potential to change the world for the better. Secure and seamless blockchain interoperability between blockchains and blockchain-like systems are a prerequisite for mass adoption. Without an open, unified interoperability standard, true mass adoption will remain out of reach.

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Author: Temujin Louie

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