Cross-Chain Bridges: A Potential Solution to Standardising Distributed Ledger Technology in Payment Systems

Abstract

Despite standardisation initiatives, the modern financial landscape continues to be characterised by heterogeneous payment systems. This issue persists even with the emergence of distributed ledger technology in the market. Independent groups of developers are producing their own permissioned blockchain solutions without clear directions for standardisation that could be associated to the lack of a clear position from central banks and regulatory organisations regarding these technologies. The unresolved problem of transaction finality in distributed ledgers adds to the difficulty of reconciling separate distributed platforms. One potential solution is the implementation of cross-chain bridges, which can establish connections between platforms and potentially enable seamless experiences for end users and applications. The paper discusses the advantages and issues associated with these bridges.