What is Inter-Blockchain Communication (IBC)?
Cosmos is an ecosystem of blockchains that can scale and interoperate with each other in a decentralized way. Before Cosmos, blockchains were separate and unable to communicate with each other.
Cosmos solves these problems with a set of open source tools such as Tendermint, the Cosmos SDK and IBC which are designed to let developers build blockchain applications quickly.
- Tendermint BFT packages the networking and consensus layers of a blockchain together and allows developers to entirely focus on application development. As a result, Tendermint saves hundreds of hours of development time.
- Cosmos SDK and other application layer frameworks: Are generalized frameworks that simplify the process of building blockchain applications on top of Tendermint BFT.
- Inter-Blockchain Communication protocol (IBC): The connection between customized blockchains and non-Tendermint chains is achieved through IBC and a special kind of proxy-chain called a Peg-Zone. IBC Connections and Peg-Zones enable separate blockchains to communicate with each other.
Inter Blockchain Communication (IBC) can be thought of as highway systems that connect private blockchains in the Cosmos Network.
IBC is a cross-chain communication protocol that allows different blockchains in the Cosmos Network to send tokens and arbitrary data to each other at a higher level.
IBC allows blockchains to communicate with one another. IBC, the Cosmos ecosystem's backbone, manages transport across multiple sovereign blockchains. This end-to-end, connection-oriented, stateful protocol ensures that communication between heterogeneous blockchains is stable, ordered, and authenticated.
IBC app developers do not need in-depth understanding of the low-level specifics of clients, connections, or proof verification because of the modular design of the IBC protocol. This high-level overview of the IBC protocol is given for app developers to acquire a high-level grasp of the protocol.
Approach to improve scalability & scale of smart contract
Taking Ethereum as an example, there are three basic strategies to improve the scalability and scale of smart contracts at the moment.
The first is to use Rollup technology, which allows transactions in L1 on the sidechain to be wrapped into a single aggregated block that is then published on the original L1 Blockchain. This makes off-chain transaction data available on layer 1 whenever a state transition needs to be validated. Ethereum's Layer 2 extension technology is based on this.
It's like to constructing skyscrapers on Ethereum. They are an useful short and medium term technique to ease congestion pressure, albeit they are not arbitrarily scalable.
The second option is to create a whole new Layer 1 blockchain and use other technologies to achieve increased throughput and scalability.
To get better throughput, Solana & Internet Computer, for example, require each node to be incredibly powerful. This means that the vast majority of ordinary users can no longer perform transactions because they will need to invest a significant amount of money in sufficient computer gear. Persons or organizations with a high level of technological expertise and financial resources. This is, of course, a trade-off because it impacts the blockchain's decentralization.
The third option is to use "interaction protocols" to link many blockchains together. They are similar to constructing a network of highways across the country, connecting a number of provinces in Vietnam and facilitating travel. Cosmos, Polkadot, and Avalanche are examples of notable efforts in the third category.
IBC's significance and promise in the Cosmos ecosystem
The Cosmos Hub provides permissionless asset transfers between different chains and projects on the Cosmos Network, allowing for smooth economic collaboration.
Cosmos Network is currently home to over $130 billion in cryptocurrencies spread across 40 apps and services, including Binance Smart Chain, Terra, Crypto.org, Thorchain, Secret Network, and others. Terra, the world's premier L1 eco-development, is an example of today's leading L1 eco-development.
Example: After Terra connects to IBC, UST may be exchanged back and forth in Cosmos Network's 18 chains (connected IBC), and users can use it in various DeFi apps.
Terra would have to build 18 different bridges, each connected to a similar chain, if they didn't have IBC. The implementation is difficult and time-consuming.
In addition, using Gravity DEX, a hybrid DEX integrating AMM and Orderbook, IBC helps to the building of value for ATOM (Cosmos Hub's native token).
While Gravity will not require certain tokens to offer liquidity, there is a good probability that ATOM, like ETH and AMMs on Ethereum, will become one of the most extensively utilized tokens in Gravity's liquidity pools.
Gravity might become the Cosmos Hub & Cosmos Network's principal liquidity hub, allowing ATOM liquidity providers to earn a portion of the switching charge. Gravity will also result in an increase in on-chain activity, which will result in more transaction fees being collected.
Cosmos Zones will also be able to share the security source from the Cosmos Hub validator with the future Interchain Staking capability. Polkadot's core design is based on shared security, which is not a new concept.
Cosmos' method, on the other hand, is unique in that it wants to adopt an opt-in model, in which Zones can choose whether or not to participate. Cosmos Zones that participate can take advantage of Cosmos Hub's interactive capabilities while remaining self-contained. It will allow ATOM holders to delegate their ATOM to secure many Cosmos Zones at a high level. They get guaranteed Cosmos Zone transaction fees and network inflation benefits in exchange.
Furthermore, the IBC created the foundation for multi-chain contracts. The implications are that data and messages can be sent between contracts, with a logical split between blockchains.