The long-awaited vision of the Cosmos blockchain has now been realized, as holders of the ATOM token have voted through inter-blockchain communication (IBC), enabling assets to transfer easily between blockchains.
The final vote to enable the feature was 112 million to 75, overwhelmingly in support of activation.
In the simplest terms, IBC enables messages to travel between blockchains that have implemented the standard. The most obvious use case in crypto is sending messages to transfer tokens off one chain and onto another.
“At its core, IBC is a method of securely exchanging data between two independent (sovereign) blockchains. This means that any two blockchains that support IBC can send communication back and forth in a permissionless manner,” Zarko Milosevic, chief scientist at the blockchain consultancy Informal Systems, told CoinDesk by email.
This development has the potential to open up opportunities in the decentralized finance (DeFi) sector, where a product on an application-specific blockchain could use an asset from a completely different chain.
For example, ATOM is the governance token for Cosmos, the blockchain built to enable IBC. “Previously, ATOM was relegated to the Cosmos Hub with regard to its utility as a governance token. It is now transferable and interoperable with all blockchains that support IBC,” Milosevic said.
Pent-up demand
One place ATOM may go: the Terra blockchain, which runs a DeFi savings account called Anchor. Terra could plug in to IBC and make ATOM one of the tokens its underlying money market will loan.
IBC was built into the Stargate upgrade enabled by the Cosmos ecosystem in February. ATOM holders, however, opted to let Stargate run a bit longer and do further testing before enabling IBC. The vote put IBC into effect on Cosmos.
There was no delay between the vote and the feature going live. “Since it is a parameter change, it does not require for the chain to be halted,” Milosevic explained.
The activation of IBC is not enough for all blockchains to work in conjunction with each other, though. IBC is a protocol that other blockchains can use, but they must upgrade to the IBC standard.
That is theoretically possible for any blockchain to do, but those built on Tendermint, the consensus model native to the Cosmos ecosystem, are likely to be the first to adopt the standard. Some of the blockchains that are built on Tendermint include Kava, Agoric, Akash, Foam and Crypto.com.
“It’s like dropping a crystal into a supersaturated solution: The pent-up need for interconnection between chains will be unleashed,” Dean Tribble, the CEO at Agoric, told CoinDesk through a spokesperson. “Some of the most interesting connections will be between chains that we have never heard of, accomplishing things not currently feasible.”
Agoric is a secure smart contracts platform. It’s not yet running in the wild, but its developers have tried IBC in tests.
Open-source cloud services provider Akash and crypto-trading app Crypto.com both told CoinDesk that each is technically ready to join IBC and should do so in a matter of weeks, pending approval by their respective token holders.
Mix and match
Cosmos’ funding came from a 2017 initial coin offering that raised $17 million to support a cross-blockchain future. Its war chest appreciated dramatically thanks to deft treasury management. The project had a variety of leadership changes through a rocky 2020, but carried on.
The website Cosmos-Cap estimates the combined market capitalization for the ecosystem’s blockchains at over $60 billion, led by Binance Coin, Terra, Crypto.com and Cosmos itself.
“Since IBC is modular by design, it can be easily extended to support more chains outside of the Tendermint ecosystem. For example, the modules needed to open IBC connections to the Polkadot and Kusama networks and other substrate based networks are under development,” Milosevic wrote.
Similarly, the venture fund Multicoin Capital recently released a report on one blockchain in the Cosmos ecosystem, Thorchain, a cross-chain decentralized exchange, in the same mold as DeFi staple Uniswap. Multicoin’s Tushar Jain wrote in an email to CoinDesk about Cosmos’ latest upgrade:
“It is a huge deal. Through things like IBC and Thorchain’s bridge to non-Cosmos protocols and other bridges like Solana’s wormhole bridge, we will see the cross-chain future come to life,” Jain said.
Disclosure: Brady Dale has a very small holding of ATOM tokens.