Data sharing between organizations, whether they are in the private or public sector, is still a difficult and impractical process nowadays. While most organizations are already engaged in a digitalization process, they do not all use the same software applications and databases. This usually means that it is difficult for them to share data automatically without significantly modifying existing software configurations.

If there’s one thing which perfectly illustrates the current need for better data interoperability – regardless of the industry: healthcare, transportation, supply chain, government, public sector or others – then the Covid-19 pandemic can be taken as a good example. As the pandemic still wreaks havoc around the world, with new virus strains causing a spike in infections – although the approved vaccines bring a much-needed glimmer of hope – we can see that many industries suffer from the lack of interoperability. 

Let’s take supply chains, for instance. After the pandemic hit, companies around the world, from both the private and the public sectors, have shown different degrees of ability to respond and different response times. This revealed a breakdown in the collaboration required to track, trace, authenticate, finance and clear medical goods, supplies and other vital elements through trade channels in a trusted, verifiable and efficient manner. As a result of this, many actors involved in the supply chain believe there’s a real need for an interconnected and interoperable supply chain across the globe. 

What is interoperability?

Interoperability is a characteristic of a product or system, whose interfaces are completely understood, to work with other products or systems, at present or in the future, in either implementation or access, without any restrictions. While the term was initially defined for information technology or systems engineering services to allow for information exchange, a broader definition takes into account social, political, and organizational factors that impact system to system performance. Therefore, interoperability involves the task of building coherent services for users when the individual components are technically different and managed by different organizations. 

In a white paper titled “Inclusive Deployment of Blockchain for Supply Chains: Part 6 – A Framework for Blockchain Interoperability“, the World Economic Forum (WEF) together with Deloitte define interoperability as “the capacity of computer systems to exchange and make use of information. It is the capacity of systems to collaborate with each other, where collaborating in this sense entails the ability to transfer information or an asset between two or more systems while keeping the state and uniqueness of that entity consistent. The distributed nature of blockchain makes this ordinarily straightforward concept quite complex. In addition, interoperability for blockchain platforms implies that transactions involving parties or assets that belong to different blockchain platforms can be executed as if they belonged to the same blockchain platform. Successful interoperability enables the user to trust that “I know what I see is what you see” within a single platform, as well as across platforms.”

In focus: blockchain-based interoperability

“Contrary to common belief, this specific challenge is not only a technology problem, but also a problem in governance, data ownership and commercial business models in terms of how they incentivize ecosystem stakeholders to collaborate with each other”, state World Economic Forum representatives commenting on the matter of achieving better interoperability. For information exchange to be interoperable, it must be widely interpretable between multiple information systems. At a more granular level, it focuses on the accuracy, consistency and reliability of information exchanged between systems.

At several World Economic Forum events and meetings, blockchain interoperability emerged as a topic of much debate. Typical questions included: “Can blockchains speak to each other? Will the industry get to one global blockchain to rule them all? What blockchain platform should we use? Why don’t we simply enhance our communication protocols to application programming interfaces?” Blockchain technology can help build an ecosystem where data can be shared among several entities efficiently, securely, and transparently with the major benefit that that system participants will not be required to make major changes to their infrastructure, and will be able to continue to work with the same software applications and the same databases.

Interoperability for blockchain and legacy systems

Why do legacy systems and DLT solutions need to embrace each other?” is one of the questions that WEF’s “Bridging the Governance Gap: Interoperability for blockchain and legacy systems” white paper, published in December 2020, tries to answer. “In the past 10 years, blockchain and distributed ledger technologies (DLT) have generated tremendous interest and activity from developers, enterprises, venture capitalists, regulators and users alike. The innovation of blockchain technology leads to an important question about how legacy digital systems, operated by enterprises, governments and institutions, will be affected. Presently, the answers to this question have varied from one extreme (“all legacy systems will be replaced”) to the other (“DLT is too slow and unproven to actually replace any working legacy system”). 

However, the eventual answer may lie somewhere in between, where the utility of select legacy systems is upgraded by DLT integration wherever appropriate, and DLT solutions witness a growth in enterprise adoption. Multiple reports analysing the blockchain/DLT adoption by organizations have pointed out that blockchain integration with other systems (e.g. other blockchains or other non‑DLT information systems) is one of the crucial challenges. Early experiments on interoperability have demonstrated DLT‑to‑legacy integration to be useful in many use cases (e.g. reinsurance) in establishing trust among multiple parties.”

Making legacy systems and DLT solutions work together

The paper adds: “Blockchain and distributed ledger technologies (DLTs) are backend infrastructure that store and transfer data among parties within a shared ledger without the need for traditional intermediaries. Since the ledger is redundantly processed and updated by a decentralized network of computers instead of a centrally managed server, users can generally trust the integrity of the data and computations without the need for trusted authorities. The objective is to use a blockchain as a shared ledger for exchanging value between disparate entities in order to achieve greater efficiency, heightened transparency and a reduction in complex reconciliation.”

One of the most discussed innovations in blockchain technology is smart contracts – conditional business logic (if X event happens, then execute Y action) that is executed on the blockchain. These also allow the creation of digital assets where the smart contract uses embedded logic by defining how those digital tokens function (e.g. represent voting rights or a stake in protocol revenue). 

Since smart contracts operate on a blockchain, in general no counterparty or external entity can tamper with the terms, execution or outcome, providing the user with technologically enforced guarantees that the contract will be fairly honoured.2 Given the nature of these guarantees, smart contracts are being looked at as a new form of multiparty business automation.

Smart contracts – providing more value to enterprises

While simple smart contracts can be created within isolated blockchain environments to store data or execute transactions between users, they stand to provide more value to enterprise and other ecosystems when connected to data and systems outside of the blockchain. “For instance, if an insurance service provider wishes to automate the dispersal of flight insurance claims, it could do so via a smart contract.

But for the smart contract to execute, it needs accurate information on the scheduled and actual departure times of the flights, as well as the ability to settle in fiat currencies on traditional payment rails. Since blockchains do not natively generate this information or provide connections to traditional systems, a piece of infrastructure called an “oracle” must be adopted to connect the smart contract to external resources”, reads the report. 

Additionally, since a smart contract cannot execute on software outside of the blockchain, the oracles provide the smart contract with inputs and also take the outputs and execute them as actions on external systems. In order to ensure communication between off‑chain legacy systems and on‑chain smart contracts and to be able to expand the utility of smart contracts beyond just DLT applications, adopting an approach towards building secure middleware solutions (developed using open‑source technology platforms) that anyone is able to connect to and build on as needed, along with governance models that harmonize inter‑system communication, is required.

Modex BCDB for system interoperability

We are living in an increasingly digital society in which data has become the most valuable asset a company owns. This has led to a somewhat accurate comparison between data and gold. But an equally valid comparison is that between data and oil because similar to crude oil which acted as a foundation for the world economy, high-quality raw data places itself at the foundation of the emerging AI economy. 

Modex Blockchain Database (BCDB) is a new technological solution that merges traditional and new technology to provide an answer to the storage demands generated by the rise of digital assets. By leveraging its intricate technological layer, Modex BCDB ushers in a revolution in data storage mediums by facilitating the creation of data trusts that reshape the way in which companies collect, process, and extract value from raw data.

Modex BCDB provides an alternative to existing data sharing mechanisms by facilitating a new type of data organization and management model, a data trust which reimagines the access, management, utilization, and processing of data to achieve compliance with international regulations concerning the processing of sensitive data. Furthermore, Modex BCDB addresses one of the main pain points faced by data sharing mechanisms, the interoperability of software, and database systems. 

Companies rely on different software applications and database engines that make data sharing operations difficult to perform without modifying existing system configurations, a time and resource-demanding process that opens up a new venue of cybersecurity risks. Thanks to its non-invasive approach to implementation, the solution provided by Modex helps companies set up a data ecosystem backed by blockchain, traditional data storage, and innovative data management mechanisms that guarantee trust and system interoperability through this unique technological fusion. Read more about this here.