A Study On Interoperability Between Blockchains And Its Antitrust Implications

Author: LawSphereX

Category: Technology, Cyber & Privacy

Published: 2026-08-23T17:25:33.262066+00:00

Updated: 2026-08-26T17:12:33.163+00:00

A STUDY ON INTEROPERABILITY BETWEEN

BLOCKCHAINS AND ITS ANTITRUST IMPLICATIONS

Dackshata Srihari, School of Law, SRM Institute of Science and Technology, Kattankulathur

CHAPTER I: INTRODUCTION

The blockchain technology was introduced to the world through a white paper by developer(s) under the pseudonym Satoshi Nakamoto in the year 2008, and since then it has taken over the technological world with its enhanced features. As a distributed ledger system, one of the unique activities of a blockchain includes enabling safe, secure and transparent documentation and most importantly it ensures that the ledger cannot be tampered with. The Fortune Business Insight (market intelligence company) had estimated the market size for the blockchain technology globally as around USD 17.57 billion in 2023 and is also estimated to grow to USD

87.84 billion in 2024. Whereas Statista valued the market value to be 5.85 billion dollars in

2021. From these estimated statistics, we can see that there has been a progressive development

of blockchain technology over the years. With developments arise new innovations. And now with the blockchain technology’s different types of Use Cases, the growth of the technology is guaranteed across various sectors and industries.

1.0 History of Blockchain:

In the year 1991, with an aim to improve the system of untampered documented timestamps, a blockchain project was initiated by two researchers, Stuart Haber and W. Scott Stornetta. It might be surprising to know that the concept of blockchain came 20 years before the invention of bitcoin. Their research paper titled “ How to time-stamp a digital document”, detailed the Time Stamping Service (TSS) on digital records which verifies the originality of the document using digital signatures or hash functions. These documents are then chained together where a time sequence is created. Subsequently, in 1998, a theoretical decentralized digital currency was designed by Nick Szabo, known as “BitGold”, which paved the way to a decentralized future since it is termed as a “a direct precursor to the Bitcoin architecture”.

He also proposed a chain sequence with documents that are time stamped by using “hashcash”, which is the

predecessor of the Proof of Work (PoW) system. Two years later, Stefan Konst, a computer scientist, through his research paper titled “Secure Log Files Based on Cryptographically Concatenated Entries”, aimed at securing the chains through cryptography. By compiling all these ideas regarding a distributed ledger enhanced with cryptography for security, in 2008, Satoshi Nakomoto establishes the concept of blockchain through a white paper, and later in 2009 executes it by making the first ever blockchain to be used as a ledger for all the transactions made using bitcoin therefore, making the theory into a practical use case.

1.1 Concept of Blockchain Technology:

A blockchain is a digital ledger that consists of records of transactions in relation to assets in

the form of money, house, etc. The access to this ledger is restricted to only the authorized users. The access shared between the users allows any information shared to be transparent, fast and inalterable. And what makes it different from a traditional database is that the ledger cannot be altered or tampered with even by an administrator. The interesting aspect of blockchain technology that significantly makes it different from the usual centralized database is that the former is of decentralized nature where no single entity has control over the ledger, whereas the latter allows only a single entity to be responsible for controlling the ledger.

A traditional database allows the data stored to be modified by the admin, whereas modification of data is not possible in blockchain technology, as it functions as an open ledger system, where it decentralizes control therefore preventing the risk of modification of data by others.

1.2 The Advent of Cryptocurrency:

The regular money that is in use everyday is governed by the Reserve Bank of India, or any other regulatory authority in different countries. Therefore, it is known as centralized currency. But cryptocurrency is a decentralized digital currency since it has no single authority governing it, therefore making cryptocurrency more beneficial than the centralized currency. Since the transactions recorded in the digital ledger (blockchain) are done through cryptocurrency, everyone who is part of the transaction has access to the information that cannot be tampered with. It enhances security leaving no room for data mismanagement. The security is guaranteed through the concept of cryptography. Cryptography as defined by Merriam-Webster is an act

of “enciphering and deciphering of messages in secret code”, for which the key is given only to the person to whom it was intended for. Through its encryption techniques, cryptography ensures prevention of unauthorized access to the data. Cryptography is used in cryptocurrency to secure the transactions and verify them.

1.3 Growth of Blockchain:

The Covid-19 pandemic had an adverse effect on the digital technology and the cryptocurrency market. Contrastingly, post pandemic also witnessed the growth in the technology as reconstruction of digital strategies has led to wide adoption of the technology across various sectors, including retail and healthcare. Due to the technology’s cutting edge encryption and decryption algorithm, the application of this technology has been expanded to various sectors to make financial transactions easy and accessible. In India, steps to legalize cryptocurrency have been undertaken by the government and moreover, the businesses in India are keen on adopting the blockchain technology to boost innovations. Tech Mahindra in collaboration with IBM and Microsoft has utilized the Distributed Ledger Technology (DLT) to track Unwanted Customer Communication.

1.4 Interoperability:

Interoperability is the ability of the computer systems or programs to exchange information (Oxford). It is the process of seamlessly sharing data and assets without any intervention or any other extra work. It enables cross-chain communication and allows systems to interact with each other.

1.5 Interoperability of Chains:

P.Wegner says “Interoperability is the ability of two or more software components to cooperate despite differences in language, interface, and execution platform”. The initial function of a blockchain when it was first introduced, is to function as a safe and secure ledger used for transactions, where these chains worked independently, isolated from other chains, with each having its own core strengths and weaknesses, therefore creating isolated ecosystems in the blockchain space. Now everybody with access to the internet can create different blockchains across different industries and sectors. Now imagine all these different blockchains manage to get past their differences in platforms, interface and language so that they can trade information

and assets with each other. This bridging between blockchains is known as interoperability. The prime objective of interoperability is to enable different blockchains to communicate with each other where information is shared securely and exchange relevant data like tokens. Interoperability between blockchains also helps in creating a more connected ecosystem in comparison to its predecessor that only operated as isolated networks as it fosters the transfer or exchange of assets from one blockchain to another different blockchain boosting innovation and creating an effective market.

1.6 The Technical Aspect of Interoperability:

There are various types of interoperability blockchains in the form of protocols. The crosschain protocols enable direct communication between independent blockchains. Whereas the blockchain bridge as its name suggests connects two blockchains for exchange of assets. The interoperability platforms act as middlemen that provide standard format for different blockchain networks for the purpose of interaction. When two parties try to exchange a token from a different blockchain, the Cross-Chain Token Exchange occurs. For example, X holds A tokens on Blockchain 1 and wants to exchange them for B tokens on Blockchain 2. This swap can be done using a Decentralized Exchange (DEX) with a built in cross-chain messaging protocol.

Another type of interoperability includes the Atomic Swaps with Hash Time-Locked Contracts (HTLC), where smart contracts are time bound enabling the token to be locked and only to be unlocked when the cryptic code is revealed by the parties involved. Only then the exchange takes place, but if the code is not revealed on time by the party initiating the exchange, then the exchange would not occur. . For instance, If X and Y want to trade cryptocurrency across different blockchains, X creates a code and puts it in a smart contract containing cryptocurrency

1 in Blockchain A, and waits for Y to provide the code. Similarly, Y creates a code and puts it

in a smart contract containing cryptocurrency 2 in Blockchain B, and waits for X to give the code. Once X reveals the code to Y, Y can use the code to unlock the contract on Blockchain B and receive cryptocurrency 1. But if X does not reveal the code within the specific time limit

set, the smart contract automatically returns the cryptocurrency to Blockchain A. Similarly, there are many more types of interoperability such as cross-chain token transfers, general cross-chain message, heterogeneous blockchain sharding, etc. But contrastingly, instead of using these bridges as a tool to achieve cross-communication, a communication

protocol known as the Inter-Blockchain Communication Protocol (IBC) is used as it sets standard rules that are to be followed to enable connection between blockchains.

1.7 The Interoperable Protocols:

Blockchain refers to a ledger incorporating blocks chained together in a row. This ledger is then distributed and operated by a network of nodes (computers) that store the transactions. Miners or any other validators verify the validity of the transactions. Consensus mechanisms such as Proof of Work (PoW) and Proof of Stake (PoS) are different types of protocol that are used to reach an agreement regarding validity of the transactions. The validity of the transaction is determined by each ledger. The validity does not remain constant however and it keeps changing. Each blockchain uses different technical frameworks for different purposes. While Ethereum (ETH) uses PoS, Bitcoin uses PoW. Therefore, effective communication between these isolated blockchains becomes a far-fetched dream. This results in a fragmented ecosystem, which urgents calls for the need for cross-chain technology.

The cross-chain technology acts as a bridge where it enables users to use ETH’s apps via payment through Bitcoin (example), benefitting both the blockchains. To initiate interoperability between different blockchains, a standard framework needs to be set and that’s where the Cosmos Network comes in with their IBC protocol. Despite the fact that the cross-chain aspect of interoperability boosts development and innovation, the fact that it also paves way to security breach cannot be ignored. The IBC protocol sets the framework that enables safe and secure interaction between the chains through its working mechanisms that include secure communication channels, packets containing data about the sender and the receiver which is relayed to verify its authenticity, and verifying its validity through consensus mechanism.

1.8 Network Effects:

Network effects are referred to as how a platform or service becomes valuable when there is an increase in the number of users. It is based on the concept of “More users, More value”. If the platform attracts more users, it enhances the system’s functionality as it helps with connection. Therefore, the value of the blockchain depends upon the number of users. The

value of a token depends on whether others will accept it in the future. If blockchains enable the use of smart contracts, the network effects depend upon the number of applications. The most predominant blockchains benefitting from network effects would be ETH and Bitcoin.

1.9 Market Structure:

The global blockchain interoperability market is estimated to be valued at US 200 million dollars in 2023 and is projected to reach US 3 billion dollars in 2034. The driving forces of the market would be the growth of DeFi (Decentralized Finance) Apps, NFTs, and DEXs, Cross-chain trading, etc. (Fortune Market Insights). While these solutions and applications could be the driving factors, the sectors and industries that would inculcate these would be banking, finance, healthcare, gaming, IT etc.

1.10 Anti-competitive Nature:

The blockchain, true to its objective, is a spectacular innovation, but it also enables systems or networks to be divided into separate and isolated parts where they are unable to communicate with each other effectively. Interoperability aims to bridge the gap between these isolated blockchains thereby creating a uniform ecosystem to function effectively. But at the same time, the interoperability protocol also brings along with it potential antitrust concerns. Exchange of information is one of the primary features of interoperability. But this feature could also in return be risky since the information includes investments, marketing strategies, prices, profits and losses, etc. , could also lead to coordinated market manipulation. Another potential anti-competitive concern would be the formation of a cartel in the blockchain ecosystem.

For instance, if the predominant blockchains colluding with each other could put up walled gardens, where they exchange information between themselves, it would lead to excluding other competitors in the market. Network effects as mentioned before, also plays a major role in determining the anti-competitive nature of a blockchain, since if the value of one blockchain increases due to the number of users, there is a possibility of the blockchain abusing its dominant position, thereby creating unfair trade practice in the competition.

1.11 Pro-Competitive Nature:

The decentralized nature of blockchain resonates the same objective as Competition Law, as

both seek to achieve a market free from monopoly. In blockchain, the concept of trust cannot be jeopardized as no third party is relied upon to administer the ledger, therefore enabling the users to have complete control over their data, which establishes that it is pro-competitive. Moreover, since it is obvious that anybody with access to the internet can participate in the blockchain network, it facilitates free and open participation in the competition to the new entrants. Since transparency is also one of the benefits of interoperable blockchains, all transactions will be recorded to promote accountability. The DLT of the blockchain system also ensures that it becomes impossible for businesses to engage in unfair practices.

1.12 Anti-competitive Laws Governing Blockchain Technology:

In India, the enforcement of competition policy is initiated under the Competition Act of 2002, under its regulator CCI (Competition Commission of India). The Act aims to eradicate practices that have adverse effects on competition, promote fair and just competition in the market, while also ensuring the consumer’s interests are prioritized and protected. The blockchain technology, in India, is governed by the Competition Act as per section 2(h) which defines an enterprise as any firm or person engaging in provisions of service in any nature. Since the blockchain technology offers the service of a distributed ledger system, it comes under the purview of the definition given under the Act.

1.13 Statement of Problem:

With Blockchain technology implicating superiority over the conventional database system due to its distributive data storage function, and is gaining popularity in the field of finance, healthcare, etc., interoperability between blockchains has become the next BIG thing in the cryptocurrency world. Since the interoperability between blockchains strengthens the network between predominant blockchains, it provides quite difficulty for the new entrants to compete, therefore limiting and making competition unfair. This paper aims to address the following: a) Need for Regulatory standards b) Security and scalability flaws c) Governance over blockchain technology

1.14 Scope of the Study:

The study focuses on anti-competitive implications of interoperability between blockchains and also identifies potential areas to be considered for imposing regulation in future. It might also offer Competition Regulators recommendations to analyze the existing laws regarding blockchain technology and how new policies and rules could promote fair competition in the blockchain ecosystem. Overall, this study aims to promote innovation in the blockchain space while ensuring fair competition is in place.

1.16 Research Gap:

Despite extensive research on blockchain technology and the antitrust implications on its decentralized nature, there is no research in regard to the need for regulations specific to interoperable blockchain technology. There is also a lack of comprehensive study regarding potential anti-competitive nature in relation to interoperability.

1.17 Chapterization:

Chapter I: The first chapter deals with Introduction, Need and Scope of the study, Market structure, Data and Statistics of the blockchain ecosystem, regulatory authorities, and the chapterization. Chapter II: The second chapter gives a theoretical and research review of the research and an elaborate literature survey of the subject under study. Chapter III: The third chapter deals with the Research Methodology, Sampling Method, Sample Size, Study Population, Pilot Study, Limitations. Chapter IV: The fourth chapter contains data analysis of the research findings and their corresponding interpretation. Chapter V: The fifth chapter summarizes the findings, suggestions, and conclusions.

CHAPTER II: REVIEW OF LITERATURE

2.1 Theoretical Review:

This chapter dwells on investigating the basis for this research study. Literature review seeks to acquire relevant knowledge in terms of established facts, opinions and theories as opined by renowned and established authors through authentic and reliable means of publishing. A thorough work invested in literature review helps one understand the nature of the research, its scope, objectives and thereby tune the intention of this study as to what needs to be accomplished. This literature review seeks to examine the interoperability between blockchains and its potential antitrust concerns.

2.2 Blockchain Technology:

The main objective of blockchain technology is to create a decentralized environment where no third party has control over the transactions and data. It is the underlying technology that enables bitcoin and at the technology’s core, the data structure keeps record of the transactions in the network. (Chowdhury, 2018) The concept of a global digital currency that does not incorporate any intermediary has been in existence for almost 3 decades. The first successful cryptocurrency would be Bitcoin, which was based upon the blockchain technology, known for its public ledger that is used for all transactions, the upside being that it also resolves double-spend problems by combining P2P technology using cryptography. (Efanov, Roschin, 2018) Blockchain architecture is divided into three categories: applications, decentralized ledger system and Peer-to-Peer (P2P) network.

The applications consist of application software which creates and stores public and private keys used for transactions, Whereas, the decentralized ledger consists of transactions that are grouped together in blocks which are cryptographically linked together. (Sarmah, 2018)

2.3 Advent of Cryptocurrency:

Cryptocurrency is a digital asset and is used as a medium in exchange ensuring safe and secure transactions. The first ever cryptocurrency is the Bitcoin, which was made in 2009.

Bitcoin uses cryptography to gather data which goes through the blockchain. Cryptocurrencies are decentralized in nature therefore, it makes it difficult for law to govern them. (Milutinović, 2018) In a blockchain, when a user initiates a transaction, it will be broadcasted to all nodes in the P2P network. The data contained in the blockchain is accessible to the public, but the pseudonymous nature of a blockchain does not expose the user’s identity during the cryptocurrency transactions. Therefore, it also assures protection of privacy. But it does not necessarily mean privacy protection is beneficial since abusing this feature is also a common occurrence in the blockchain ecosystem. (Zheng, 2021) Digital currencies use cryptography to make transactions, which in return makes the transaction effective by preventing fraud and enhancing security.

All these transactions are stored in the blockchain once it is verified, and these payments are verified through the blockchain technology’s consensus mechanism. The users keep their bitcoins in their wallets which is susceptible to thefts, but the main target for theft is the exchanges that occur rather than the wallet. (Gandal, Halaburda, 2014) The fundamental idea of cryptocurrency transactions is to record every event that occurs throughout the network, including the current balance being held. As an illustration, user A completed a transaction that has been verified by the beneficiary, at which point the transaction was distributed throughout the blockchain network so that everyone could view it and sign it by electronically transmitting a private key to the system. Once the transaction is completed successfully, the information is kept in a block-based container.

Since the information recorded in these blocks is permanent, it cannot be changed, stolen, or faked. Eventually, the collection of blocks will unite to form a single entity. (Amsyar, 2020)

2.4 Interoperability Between Blockchains:

A transaction's legitimacy is contingent upon the ledger's current state; a transaction that is

approved at one time may not be approved again or vice versa. This also applies to smart contracts, which are viewed as a unique subset of transactions that have an impact on the ledger's state. As a distributed ledger, blockchain requires state synchronization to be maintained and that is where consensus mechanism comes in. (Lafourcade,

Lombard-Platet, 2020) HTLC resembles safe online safety deposit boxes. Each party locks their products or money, and only a unique key from the other party can open the other's box. The item is returned to its box if the delivery person fails to show up. (Madine, 2021) While blockchains are capable of fulfilling the specific requirements and are able to meet the demands of the users, they are unable to communicate with each other effectively. Therefore, a user on one blockchain needs either have an account on that blockchain or switch to the target blockchains in order to communicate with another user on that other blockchain. This is where interoperability becomes useful and effective. (Khan, 2021) Interoperability in blockchains can be classified into two categories: cross-chain and multichain.

A trust anchor that is built into the protocol allows blockchain to communicate with one another in multi-chain interoperability. Every blockchain engine instance comes with an interoperability protocol and data format that are compatible with other mini-blockchains. Think about Polkadot's parachains. Each parachain, or mini-blockchain, interacts with other parachains through the built-in interoperability protocol XCMP. (Belchior, 2023)

2.5 Interoperable Blockchain Market Structure:

The market for blockchain interoperability across the globe is experiencing significant growth due to the increasing demand for seamless communication and asset transfer across various blockchain networks. Countries like the United States, United Kingdom, China, Japan, and South Korea are at present represented as significant countries with high growth potential in the blockchain interoperability market. (Saha, 2024) Out of the various interoperable solutions available in the blockchain technology the crosschain bridging has the potential to become the dominant segment with a projected 27.3% CAGR. Whereas, out of the interoperable applications dApps has the potential to become the dominant segment with a projected 27.1% CAGR. (Saha, 2024)

2.6 Anti-competitive nature:

For the benefit of the blockchain users, fair rules that are based on acceptable criteria must be

created beforehand. The primary issue related to using blockchain technology is the exchange of information between blockchain competitors in an anti-competitive manner. A standardization agreement's main goal is to specify the technical or quality standards that must be met. These agreements, however, may occasionally lessen or restrict competition in terms of cost, innovation, and technological advancement, as well as create barriers to entry. (Gupta, 2023) In the past, antitrust law has made it abundantly evident how crucial the innovation process is to maintaining consumer welfare and market efficiency. Protecting the innovation must be prioritized over competitor protection when it comes to the application of antitrust legislation.

Blockchain is the next big thing in technology, and like operating system markets and the Internet network, an antitrust intervention might be necessary for this technology to advance. (Massarotto, 2020) If conventional antitrust laws like the rule of reason test and the per se rule are applied to modern, more complex economic scenarios, they appear to be adequate. (Massarotto, 2019)

2.7 Pro-competitive nature:

Blockchain has made it possible to build trust without using a third party. All transactions are time-stamped, and the blockchain rules can't be changed. This means that people who use the blockchain can believe that the network is honest without having to rely on a third party or a central authority. In contrast, competition law is in a tough spot right now. Gradually, the world's economy has moved online since the COVID-19 pandemic. While competition rules do exist, they aren't very useful in the economic markets for improving consumer welfare. (Yawar, Shaw, 2022) Blockchain technology doesn't just prove difficult for competition authorities. It also gives them a lot of chances to get help with their work. It will also be easier to control who has access to the file, which will better protect the rights of defenders.

Competition officials and courts may also be able to see a stream of data on blockchain that contains all the transactions that are important. This information will also make it easier for competition officials to keep an eye on markets and find cartels and other activities that hurt competition beforehand. (Lianos, 2018)

CHAPTER III: RESEARCH METHODOLOGY

3.1 Objectives of the Study:

3.1.1 Primary Objective:

To study the antitrust implications of interoperability between blockchains.

3.1.2 Secondary Objective:

● To study the anti-competitive and pro-competitive nature of blockchain technology ● To identify the awareness of basic information about blockchain technology and its benefits ● To study the current market structure of blockchain technology and the need for a regulatory framework to govern it.

3.2 Hypothesis of the Study:

Based on the above given objectives, the following hypothesis was formulated: Hypothesis - 1 There exists potential anti-competitive and pro-competitive effects from blockchain technology. Hypothesis - 2 Blockchain communicating with each other will lead to good and fair competition Hypothesis - 3 Interoperability can promote innovation in a fragmented blockchain ecosystem.

3.3 Research Design:

A research design is the logical and systematic planning and directing of a piece of research.

The research design of the present study is analytical in nature, and for the expert interview it

was done using a descriptive approach in a structured format. Analytical research involves critical thinking skills and the evaluation of facts and information and descriptive approach involves gathering quantitative data through pre-defined structured questions. In this study, analytical and descriptive approaches are applicable in all stages in the research work.

3.4 Sampling Method:

● Survey: The study is based on Convenience Sampling by recruiting participants who were readily available to complete the survey online. ● Expert Interview: Purposive Sampling method was used to identify and select experts with recognized experience and expertise in the field of blockchain technology.

3.4.1 Study Population:

● Survey: The population of the research is the students, employees, and employers in Chennai. ● Expert Interviews: The population of the expert interviews is employees and experts in the field of blockchain technology with years of experience working in the field.

3.4.2 Sample Size:

Sample size acts as the representative population of the whole universe hence the size of the sample is an important factor in determining the validity of the study. The sample size of the study is 87 respondents and 2 expert interviews.

3.5 Methods of Data Collection:

Data is a set of information which enables the researcher to find a solution to a problem in hand. Data also includes descriptive facts, non-numerical information, quantitative and

qualitative information. The researcher had collected data from both primary and secondary data.

3.5.1 Primary Data:

Primary data is a type of information that is obtained directly from first-hand sources by means of surveys, observation or experimentation. It is data that has not been previously published and is derived from a new or original research study and collected at the source. The scales used

3.5.2 Secondary Data:

Secondary data is research data that has previously been gathered and can be accessed by researchers. Secondary data is readily available from the other sources and as such, there are no specific collection methods. This includes data from journals, magazines, newspapers and the internet.

3.6 Pilot Study:

Pilot study is a type of miniature version of the same research, which is conducted in-order to understand and evaluate the feasibility of the research/study in terms of time, cost, adverse events, and statistical variability of actual research. The pilot study was done, by collecting data initially from around 20 students in a law college.

3.8 Limitations of the Study:

● The research takes into account a sample size that may not be entirely reflective of the entire population. ● Findings based on expert interviews may not capture the full spectrum of perspectives on blockchain technology. ● Since the field of blockchain technology is constantly evolving, findings might not capture the latest developments.

CHAPTER IV: DATA ANALYSIS AND INTERPRETATION

THEMATIC ANALYSIS OF THE INTERVIEW

Two interviews were conducted to gather data and information on blockchain technology. It also sheds light on several important themes related to current market structure and the future potential of blockchain technology. The themes are as follows: Theme 1 - Market Structure and Dominant Players The common misconception that is usually associated with blockchain technology is that it is only for cryptocurrency. But some fail to understand its broader potential where it is also used for data storage and for decentralized applications that are not typically associated with finance. The introduction of Bitcoin solved two major problems - double-spending and Byzantine Generals. Bitcoin is identified as the first generation of blockchains, followed by Ethereum which is identified as the second generation blockchain, which introduced smart contracts.

Ethereum, at present, is the most used blockchain due to its user-friendly tools and services. However, scalability issues and high mining costs (ASIC miners) are also mentioned as issues in using ETH. There is also a shift of users towards Solana from Ethereum since the former offers lower transaction fees compared to Ethereum. Theme 2 - Network Effects and Competition Network effects have the potential to create closed ecosystems within dominant blockchains, stifling competition from new entrants. While all prominent blockchains are open source, private blockchains like IBM's Hyperledger exist. Theme 3 - Challenges in Interoperability Unlike email with its SMTP protocol, blockchains lack a common language.

To achieve interoperability between blockchains, lack of standardization acts as a technical barrier due to the differences in programming languages, protocols, and frameworks of different blockchains. Interoperability could be prone to security issues as any vulnerabilities in one blockchain could potentially affect others if it is not carefully designed and implemented.

Blockchains use different consensus mechanisms like PoW or PoS to validate transactions.. To facilitate communication between these different blockchains, Bridges and Oracle come into play. Bridges allow the transfer of assets between blockchains, while Oracles act as gateways to external data, enabling interaction with the outside world. However, both solutions have limitations associated with risks. Bridges often rely on centralized components therefore it contradicts the decentralized nature of blockchains. Whereas, the oracles depend on the accuracy and reliability of external data sources, thereby introducing potential risks. The Cosmos Network uses IBC as an open protocol designed for interoperability. Theme 4 - Interoperability’s Future There is a need for standardization to achieve seamless interoperability between blockchains.

Interoperability solutions like bridges and oracles are relevant right now to resolve the issue of blockchain trilemma where achieving optimal security, scalability, and decentralization simultaneously is difficult.

SURVEY ANALYSIS AND INTERPRETATION

Table 4.1: Blockchain Technology Awareness Particulars No of Respondents Percentage

Figure 4.1: Interference: It is inferred from the chart 4.1 that 71.3% of the respondents are aware of the term ‘blockchain technology’, and 28.7% of the respondents are not aware of the term blockchain technology. 4.2: What is your understanding of blockchain technology? (Descriptive Answer) A majority of 38% of respondents have a basic understanding of blockchain technology. The

answers were commonly linked to concepts like "transparent information sharing," "a digital ledger system," or "data storage with security." Some mentioned its use in business networks. 22% of respondents associated blockchain technology with cryptocurrencies. Around 15% of the respondents acknowledged a limited understanding or admitted it was their first time hearing about blockchain technology. 10% of the participants provided detailed explanations, out of which few mentioned applications beyond cryptocurrency. 15% of the respondents were unsure of the term blockchain technology.

Table 4.3: Blockchain Technology Awareness Particulars No of Respondents Percentage Yes 74.7% No 25.3% Total Figure 4.3: Interference: It is inferred from table 4.3 that 74.7% of the respondents think that there are other other applications of blockchain technologies that are not necessarily associated with cryptocurrencies, while 25.3% of the respondents associate blockchain technology only with cryptocurrencies.

Table 4.4 Effectiveness of Blockchain Technology Area No of Respondents Percentage Medical Records 50.6% Data Security 79.3% Limiting User Adoption 17.2% Total Figure 4.4 Interference: It is inferred from table 4.4 that the majority (79.3%) of participants believe that blockchains could be very effective in the field of data security, whereas 50.6% of the participants chose

Medical records as the area that blockchains could be effective in, and 17.2% of participants responded that it will be effective in limiting user adoption.

4.5 Blockchain Technology and Security

Range No of Respondents Percentage 2.3% 1.1% 2.3% 0% 16.1%

16.1% Total Figure 4.5 Interference: It is inferred from table 4.5 that 28.7% of the respondents from the scale of 1 to 10 chose 8 as the level of how secure blockchain technology is, whereas 16.1% of participants chose level

10. Similarly, another 16.1% of respondents chose level 5. 13.8% of participants chose level 6,

followed by 11.5% of participants who chose level 7. 8% of the participants chose level 9, while 2.3% of participants chose level 3. Similarly, 2.3% of participants chose level 1, whereas only 1.1% chose level 2.

Interoperability Feature Particulars No of Respondents Percentage Yes 58.6% No 41.4% Total Figure 4.6 Interference: It is inferred from table 4.6, the majority (58.6%) of respondents said that it will be beneficial to both the states if they can exchange and share information with each other. Followed closely by 41.4% of respondents who said that it is not beneficial to both the states if they can exchange and share information with each other.

Interoperability between Blockchains Particulars No of Respondents Percentage Yes 46% No 54% Total Figure 4.7 Interference: It is inferred from table 4.7, 54% of respondents, who are of the majority, are not aware of the term “interoperability”, while 46% of respondents are aware of the term “interoperability”.

Benefits of Interoperability Particulars No of Respondents Percentage Very Beneficial 19.5% Beneficial 46% Somewhat Beneficial 31% Not Beneficial 3.4% Total Figure 4.8

Interference: It is inferred from table 4.8, 46% of respondents say that interoperability between blockchains is beneficial, 31% of respondents say that it is somewhat beneficial, while 19.5% of respondents say that is very beneficial. Only 3.4% of respondents say that interoperability between blockchains is not beneficial. Interest in knowing more about blockchain interoperability Particulars No of Respondents Percentage Yes 83.9% No 16.1% Total Figure 4.9

Interference: It is inferred from table 4.9, 83.9% of respondents showed their interest in learning more about blockchain technology and only 16.1% showed their disinterest in learning more about blockchain technology.

CHAPTER V: FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 Summary of findings

The information collected was analyzed and the key findings were gathered. They are listed below: Blockchain Technology Awareness ● More than half of the respondents (71.3%) were aware of the term “blockchain technology” ● Less than half of the respondents (28.7%) were not equipped with the understanding of the term blockchain technology. ● A majority of 38% of respondents have a basic understanding of blockchain

technology since they linked the term to concepts like "transparent information sharing," "a digital ledger system," or "data storage with security." ● Less than half of the respondents (22% )of respondents associated blockchain technology with cryptocurrencies. ● Around 15% of the respondents acknowledged a limited understanding or admitted it was their first time hearing about blockchain technology. ● 10% of the participants provided detailed explanations, out of which few mentioned applications beyond cryptocurrency. ● 15% of the respondents were unsure of the term blockchain technology.

● 74. 7% of the respondents are aware of the fact that the blockchain technology has other features that enable applications, data storage, etc. that are not necessarily associated with cryptocurrencies ● Less than half of the respondents (25. 3%) of the respondents associate blockchain technology only with cryptocurrencies. Effectiveness of blockchain technology ● The majority (79. 3%) of participants believe that blockchain technology could be very effective in the field of data security, thereby emphasizing data security as one of the major advantage of the technology. ● 50. 6% of the participants chose Medical records as the area that blockchain technology could be effective in since the technology is also a decentralized digital ledger system that records and stores data. ● 7. 2% of participants responded that it will be effective in limiting user adoption.

Blockchain Technology and Security ● 28. 7% of the respondents from the scale of 1 to 10 choose 8 as the level of how secure blockchain technology is, therefore majority of the respondents believe that blockchain technology is secure, but not very secure. ● Less than half of the respondents (16. 1%) of participants choose level 10, emphasizing that the blockchain technology is very secure. ● Another 16. 1% of respondents choose level 5, believing blockchain technology to be secure and not secure. ● 13. 8% of participants choose level 6, making blockchain technology to become somewhat secure. ● 11. 5% of participants who choose level 7, believing blockchain technology to be somewhat secure.

● Less than 10% of respondents (7. 8%) of the participants chose level 9, believing that the technology is very secure. ● Less than 5% of the respondents (2. 3%) of participants choose level 3, believing the technology to have less security. ● Another 2. 3% of participants choose level 1, believing blockchain technology to have no security. ● 1. 1% of the respondents choose level 2, believing the technology to be not secure. Interoperability Benefits ● The majority (58. 6%) of respondents believe based on the scenario given that it will be beneficial to both the states if they can exchange and share information with each other. ● Less than half of the respondents (41. 4%) of respondents believe that it is not beneficial to both the states if they can exchange and share information with each other.

Interoperability Between Blockchains ● More than half of the respondents (54%) of respondents, were not equipped with the knowledge of the term “interoperability” ● The other 46% of respondents were aware of the term “interoperability”. Benefits of Interoperability ● Nearly half of the respondents (46%) believe that interoperability between blockchains is beneficial. ● Less than half of the respondents (31% ) of respondents believe that the concept of interoperable blockchains is somewhat beneficial ● Less than 20% of the respondents (19. 5%) believe that interoperability between blockchains is very beneficial as opposed to the other 3. 4% of respondents.

● Only 3.4% of respondents say that interoperability between blockchains is not beneficial. Interest in Interoperability Concept ● The majority of respondents (83.9%) of respondents showed their interest in learning more about blockchain technology ● Less than half of the respondents (16.1%) showed their disinterest in learning more about blockchain technology.

5.2 Suggestions

To promote fair and just competition in the blockchain industry, the following suggestions are emphasized in this regard: ● For the benefit of the entire blockchain ecosystem, it is necessary to develop secure interoperability standards accessible to all users. Self-regulation plays an important role in developing interoperable solutions that comply with anti-competitive principles and promote fair competition and moreover, regulatory frameworks do prevent antitrust practices by setting uniform rules and regulations. Therefore, regulation must be implemented to address the challenges and issues of blockchain technology, where the main objective is to boost innovation and development of various decentralized applications. ● A regulatory framework must also be implemented to prevent dominant blockchains

from forming cartels, where these blockchains create closed ecosystems within themselves, creating barriers to entry to the competitors. This regulation must also encourage the new entrants to contribute to the growth and development of the blockchain technology. ● Support open source interoperable solutions like bridges and oracles, the development of which shall ensure secure and transparent interoperability between blockchains in the blockchain ecosystem. ● Standardization is necessary to ensure seamless communication between blockchains.

Therefore, interoperability frameworks must be established to promote safe and secure data exchange via standardized protocols for the communication. ● In 2019, due to the Covid-19 pandemic, the world has shifted to the digital platform. And since the digital platform is easily accessible and convenient, digitalization might be the future. Therefore, it is essential to develop educational programs and workshops to increase the awareness of blockchain technology.

5.3 Conclusion

The blockchain technology, since its introduction, has been constantly changing the world of technology by transforming businesses and industries, revolutionizing it by bringing the era of efficiency and security in motion through its features and advancements. By fostering a collaborative environment allowing different blockchains to communicate with each other, interoperability between blockchains ensures growth in innovation, efficiency and also paves way for wider adoption of this technology. This research has explored the concept of interoperability, its potential to foster pro and anti-competition within the blockchain ecosystem, and the recommendations for achieving a secure and balanced future.

By implementing the suggested actions, regulators of blockchain industries and users across various sectors can work together to bridge the knowledge gap, enhance interoperability, promote fair competition, and build public trust.

APPENDIX:

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QUESTIONNAIRE

Interview Questionnaire 1

1. Can you share your perspective on the current market structure of prominent

blockchains (Dominant players in the market)?

2. Network effects describe how a platform or service becomes more valuable as the

number of users grows. How might network effects play out in the context of blockchains? Could dominant blockchains use network effects to create a closed ecosystem within themselves that stifle competition from new entrants?

3. How familiar are you with the concept of interoperability between blockchains?

4. Are you aware of the Cosmos Inter-blockchain communication protocol?

5. From a technical standpoint, what do you think are the biggest problems to achieving

interoperability between blockchains? (for example, the security concerns, differences in the consensus mechanisms) Interview Questionnaire 2

1. With interoperability being the new future of blockchain, will there be a risk of

dominance from the side of powerful blockchains?

2. Do you think that the blockchain industry’s market structure would have positive

effects due to evolution of interoperability?

3. Do you think antitrust laws apply to the blockchain technologies along with its

interoperability protocols, including the IBC?

4. What do you think will be the future anti-competitive risks that these protocols will

bring about?

5. To promote fair competition, do you think it is necessary to have legal frameworks to

regulate the interoperability ecosystem? What do you think will be the challenges that

will affect the innovation and enhancement feature of blockchain technology when anticompetitive practices are eliminated from the ecosystem? Interviewee: Mr. Sangeet Muralidhar, Senior Technical Project Manager at Metastart

1. Can you briefly describe your area of expertise within the Blockchain industry?

My core expertise is mostly on the security side of blockchain (cryptography and cryptanalysis) trading and development. I am also the CPO at three companies, acting consultant for google, X, Flipkart, Mercedes Benz, Adidas, Prada. Polygon, Solana, Ethereum, and many other companies.

2. How long have you been working in the blockchain space?

Nine years, from 2015-2024.

3. Can you share your perspective on the current market structure of prominent

blockchains (Dominant players in the market)? At present, the most used blockchain would be Bitcoin. There is a common misconception that blockchains are only used in cryptocurrency. But apart from cryptocurrency, blockchains can also be used for general data storage and any other data basis. The main reason that bitcoin is the predominant blockchain right now is because it solved two main problems of computerization, which is the double spend problem, Byzantine Generals problem (issue for any decentralized form of computation). The other dominant player would be Ethereum, which is famous for its smart contracts, which are small programs existing on blockchains. The blockchain technology can be categorized based on generations, where the first generation blockchain would be bitcoin, and the second generation blockchain would be Ethereum.

Ethereum, at present, is the most used, nearly 70% of blockchain since Ethereum consists of virtual machines like binance, polygon, base, and other 12k ethereum virtual machines.

4. Network effects describe how a platform or service becomes more valuable as the

number of users grows. How might network effects play out in the context of

blockchains? Could dominant blockchains use network effects to create a closed ecosystem within themselves that stifle competition from new entrants? Every single blockchain is open source. But there are few that serve a singular purpose, for example, IBM’s hyperledger is a private blockchain. Ethereum has got the lead on users to come on board because of their tools and services which has made it easy for users. ASIC Miner is used for bitcoin mining and it is very expensive. Whereas, Ethereum provides tools for a much lesser price. That's why people prefer Ethereum to Bitcoin. But at present, the users are transitioning from Ethereum to Solana, as transaction price is much cheaper.

5. How familiar are you with the concept of interoperability between blockchains?

No blockchain is actually connected to the internet and because of that it does not have the ability to communicate with the other blockchains. Therefore, it is not possible to send one bitcoin from Bitcoin blockchain to Ethereum blockchain, since the blockchains work in different languages, protocols, frameworks, and libraries. Bitcoin is written in C and Ethereum is written in Golang, C++, Java, etc. Because of this there is no standardized way for communication across blockchains. This is where interoperability comes in with two solutions - bridges and oracles. Oracle acts as a funnel to the external world. One end is connected to the blockchain and the other end is open to the internet for reading and getting information. For example, if you want to send 100 dollars from Bitcoin blockchain to Ethereum blockchain, you cannot directly send it.

To send it, you need to make a smart contract on the Bitcoin blockchain that blocks the dollars inside the contract. Now with the help of oracle and the bridge it will help communicate to Ethereum.

6. Are you aware of the Cosmos Inter-blockchain communication protocol?

IBC is a protocol that is put in oracles and bridges. It's open. IBC is mainly used in the Cosmos network which is considered as layer zero. Every blockchain either comes under layer zero or layer 1 or layer 2 and they are linear in scale and can only communicate upwards or downwards but they cannot skip a layer. Layer 2 cannot communicate to layer 0, it has to go to layer 1. So in Bitcoin, the Bitcoin network is

layer 1, lightning network is layer 2. Etherum is layer 1 and polygon is layer 2. There is no individual protocol that facilitates layer zero solutions and this is where Cosmos comes into the picture with the help of the IBC protocol.

7. From a technical standpoint, what do you think are the biggest problems to

achieving interoperability between blockchains? (for example, the security concerns, differences in the consensus mechanisms? The biggest problem would be the lack of standardization. For example, Email uses the SMTP protocol. If you are using a mail service that does not use this protocol, then it cannot communicate with another email service. But the blockchain does not have a standardized format like this due to many reasons including, not having proper legal frameworks, not having technically understandable elements across the entire communication channel. Since it is open source, freedom also plays an important role. Cashless transaction system which is an innate feature that every blockchain has. Only the extra features tend to be unfair to the new entrants. For eg, smart contracts and tax function, which works with Ethereum but not with any other blockchain.

There is also the concept of Blockchain trilemma where no blockchain can be completely decentralized and secure. Interoperability comes between scalability and transparency. So you would have to compromise on one to make two very strong, or two to make one very strong. Depends on the number of users. Therefore, reliance is placed on interoperability at present since trilemma is yet to be resolved. Interviewee 2: Ms. Athma Rubavathi, Assistant Professor, SRM School of Law

1. With interoperability being the new future of blockchain, will there be a risk of

dominance from the side of powerful blockchains? It is unsure how to predict the level of dominance that the powerful blockchains have. In my view, there is a 50% chance of dominance maybe, since we live in a world where technology keeps evolving at a faster pace. But if we look at it from another perspective, especially in the aspect of regulation, India does not have a central authority properly regulating this. Even if we implement this regulation, there will be an immense amount of challenges that the regulatory authorities would face, since the

regulation cannot cover every aspect of blockchain technology. It is similar to how we view cyber crime, Zero FIR, etc., where we find it difficult to identify the beginning and the end of an issue. So it is really unsure whether the Government will allow this or not. And even if the Government allows this to be regulated, there shall be risks associated with it.

2. Do you think that the blockchain industry’s market structure would have positive

effects due to evolution of interoperability? Yes, it has positive effects, because it prevents unreasonable delay in transactions, and there are many other useful aspects of it. Contrastingly, the market structure also poses negative effects because of interoperability. For example, consumer education. It is important to note that not every user would be knowledgeable about the technology’s accessibility, as their main motive would be financial gain.

3. Do you think antitrust laws apply to the blockchain technologies along with its

interoperability protocols, including the IBC? Yes it applies. Since interoperability fixes the gap between blockchains, the protocols associated with it must comply with antitrust laws.

4. What do you think will be the potential anti-competitive risks that these protocols

will bring about? Since we don't have any regulation governing blockchain technology. Some countries accept this technology legally and are trying to regulate this, whereas some countries view it skeptically, since cyber platforms are more susceptible to cyber crimes. Therefore, in situations like these, we cannot agree that there would be bonafide competition taking place. Therefore, it can be said that there would be potential anticompetitive risks associated with it.

5. To promote fair competition, do you think it's necessary to have legal frameworks

to regulate the interoperability ecosystem? Yes, it is necessary because blockchain is a digital platform used for digital transactions, data storage, and many other purposes. In India, we do not have laws that regulate

digital transactions, except for the Information Technology Act. But this act only regulates the cyber crimes that are associated with digital transactions, but not the transaction itself. Survey Questionnaire:

1. Are you aware of the term blockchain technology?

● Yes ● No

2. What is your understanding of blockchain technology?

3. Usually blockchain technology is always spoken in connection with cryptocurrencies.

Do you think there are other applications of blockchain technologies that are not necessarily associated with cryptocurrencies? ● Yes ● No

4. If yes, what are the areas that you think blockchains could be effective in?

Medical Records Data Security Limited User Adoption

5. On the scale of 1 to 10, how secure do you think blockchain technology is?

6. Imagine there are two states with their own currencies and financial records. Do you

think it will be beneficial to both the states if they can exchange and share information with each other? ● Yes

● No 7. The scenario given above is exactly how interoperability between blockchain works. Are you aware of the term "interoperability"? ● Yes ● No

8. Now with your understanding of the blockchain technology, do you think it is beneficial

that different blockchains communicate with each other and work together? ● Beneficial ● Somewhat Beneficial ● Very Beneficial ● Not Beneficial 9. Would you be interested to learn more about blockchain technology? ● Yes ● No