In the context of blockchains, interoperability refers to a blockchain's ability to freely exchange data with other blockchains. On a given blockchain, for example, every asset owned and every transaction made are documented. With the right interoperability solution, any economic activity that occurs on one blockchain can be represented on another. This means that the economic activity from one chain can spread to another, which is one of the main features of blockchain interoperability solutions.

One of the earliest contributions to the field of blockchain interoperability was the concept of trustless cryptocurrency exchange, achieved through atomic cross-chain swaps, also known as atomic swaps. Users of various cryptocurrencies can exchange assets in a trustless and atomic manner using atomic swaps. Atomic swaps, on the other hand, do not allow a token to be transferred from one blockchain to another in the sense that a specific amount of assets is destroyed on the source blockchain and the same amount is (re)created on the destination blockchain.

Blockchain interoperability refers to the ability of different blockchain networks to communicate, share data, and interact seamlessly. Typically, blockchains operate as isolated systems, making it challenging for assets or information to move across different chains. Interoperability bridges this gap, enabling smooth data and value transfer between networks.

Interoperable blockchains use protocols, cross-chain technologies, or standards like atomic swaps and sidechains to facilitate communication. Solutions like Polkadot, Cosmos, and blockchain bridges aim to connect independent networks, enhancing scalability and efficiency.

This capability is crucial for decentralized applications (dApps), multi-chain transactions, and improved collaboration across blockchain ecosystems. Ultimately, blockchain interoperability enhances user experience, fosters innovation, and accelerates adoption by creating a connected, decentralized digital economy.