The need for blockchain to be interoperable and why it matters

By Kai Waehner, Field CTO and Global Technology Advisor at Confluent

 

In mid-2022, it would be fair to say that crypto is not having the best time. The value of various crypto assets everywhere is falling despite the fact the topic itself has become a very hot one even within the mainstream media.

While things seem bleak – and don’t forget they did in 2018, too – it is important to remember that ‘crypto’ as a category far exceeds ‘just’ a digital asset that is traded for monetary value, and does still contains many real-world uses underpinned by cryptographic systems.

In addition, while the value of crypto currency may be dropping, blockchains and the underlying distributed ledger technologies – are still functioning, and so too are the systems that are built on them – smart contracts enable various innovative use cases, no matter what industry. For instance, the unique game changer of a NFT is not selling a digital picture of an ape for a million, but providing identity management across all technologies, devices, and other interfaces.   .

Ultimately blockchain shave allowed for systems to be both secure and efficient, and cost effective too. However, while that may sound perfect, will not replace all other solutions – so that is why it is vital that blockchains still incorporate a high level of interoperability with other data sources.

 

Why does data interoperability matter for blockchains?

Take for example, a large digital exchange that is trading crypto currencies. While elements of the system will be built on various blockchain networks, the exchange also wants to be able to process data quickly and take action as the result of various events – such as a customer making a purchase of an asset.

As soon as the customer has hit confirm on that purchase, they expect to see a few things happen instantly. Things like their available balance updating to reflect it, the asset itself showing straight away within their portfolio, maybe even confirmation via a notification just for extra piece of mind. All of these things require the use of a technology other than just the blockchain, such as a core banking platform, a CRM, fraud detection, or other customer-related applications.

So that is where interoperability and advanced data steaming – moving data around various parts of the business while still enabling independent and truly decoupled applications – technology such as Apache Kafka really come into play. With Kafka, the business has effectively a central hub that can act to ensure that these steps can be done within the business, all before offloading the actual purchase of the asset onto the blockchain network.

 

To blockchain or not to blockchain

While the above example may serve to explain the merits of interoperability within blockchains, it is just scratching the surface of what use cases can (and should) make use of Kafka. No, blockchains themselves were revolutionary and allowed for a great deal of new solutions for some specific use cases, but they are not the

be-all-and-end-all and should – for their sake – integrate effectively with other systems.

Blockchains have limitations such as how much data can be processed per second, how many sources it can be shared with at once, and how scalable they are, that means they cannot be used for certain tasks or functions. At this point the benefits of blockchains are clear – with high profile solutions across almost every sector – but there are still points where more traditional IT systems make more sense in the real world.

If your business does need a blockchain (and there are plenty of use cases that do) then it makes sense to build one around Kafka. That way, the Kafka network can do almost all of the businesses data processing and then once done, offshoot the required data back onto the blockchain network. With Kafka almost acting as the brain for the network.

If it does not need a blockchain, then making use of Kafka makes more sense as it means that businesses can be sure that all of the data flowing around their business – even from other blockchains – to other services is safe, compliant and easy to work with.

 

If motion matters, go with Kafka

So, how do you know if your business needs a solution such as Apache Kafka? How can you tell if you’ll need interoperability across your blockchain network and business? Well, in short, if your business needs its data to constantly be in motion – with events causing continual actions and results – then it needs Kafka.

Both blockchain and Kafka are two incredibly powerful tools for a business to use. As such, it should never be an either-or scenario. If your business does not need a blockchain, build it without. If it does, build it with one and Kafka as well.

Right now, businesses are building solutions with Kafka and blockchain that truly have the potential to change how we live. But it’s those who do it effectively with interoperability that will take home the prize.

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