Token Transfers Using IBC

The passing of Proposal 41 on the Cosmos Hub marks a momentous milestone in the evolution of the Cosmos ecosystem and the vision to realize the Inter-Blockchain Communication (IBC) protocol as the foundation for interoperability between sovereign blockchains.

Over 1500 Cosmos validators and delegators signalled their support for fungible token transfers to go live on IBC. As of March 29 2021 at 8:45AM UTC, token transfers are enabled for IBC connected blockchains as a parameter change on the Cosmos Hub, which includes access to the ATOM token for blockchains connected over IBC.

Journey to IBC

IBC has been in development since the release of the Cosmos whitepaper authored in 2016 by Cosmos co-founders Jae Kwon and Ethan Buchman. Over the years, the Cosmos project has led the ecosystem in significant ways — from popularizing Proof of Stake governance as a sustainable and democratic alternative to Proof of Work, to a widely lauded incentivized testnet, Game of Stakes, that saw hundreds of validators cut their teeth operating infrastructure for a network that now secures billions of dollars of crypto-assets, while competing for a pool prize of 300,000 ATOMs.

Another incentivized testnet was also launched in 2020 for IBC, dubbed Game of Zones, which stress-tested the IBC module pre-launch and distributed over 100,000 ATOMs in rewards to dozens of validators. Fast forward a couple of years since the launch of the Cosmos Hub and the ecosystem now comprises 200+ chains (and growing!) with over $60 billion in collective market capitalization, while multiple cross chain bridges are being developed for the Cosmos Hub, including Celo-Cosmos and  Ethereum-Cosmos bridges.

It goes without saying that the launch of IBC on the Cosmos Hub on February 18 2021 took a village of ardent believers. This community is composed of world-class engineers, designers, operators and marketers from a cross-section of the Cosmos community, including team members from Iqlusion, Informal Systems, Tendermint, Agoric, Interchain Foundation, and Interchain GmbH. The tenets laid out in the Cosmos whitepaper culminated in Stargate which officially marked the completion of the initial iteration of the Cosmos vision. Future governance proposals and whitepapers will improve upon IBC’s utility, and will ensure that IBC is the industry standard protocol for reliable and secure inter-blockchain communication. Enabling token transfers for IBC connected chains is the first, critical step in that direction.

Looking Forward

On March 17th, the ATOM community voted yes on a signaling proposal to add the Gravity DEX, a decentralized exchange for the interchain, to the Cosmos Hub. As proposed, the Gravity DEX is initially planned as an automated market maker (AMM) exchange that will allow users to trade IBC token pairs and provide liquidity for traders. These tokens would arrive on the Hub through IBC-enabled chains, IBC-wrapped ETH and ERC20 tokens, IBC-wrapped BTC tokens, and as well as future blockchain ecosystems that implement the IBC protocol. Tendermint & B-Harvest is busy preparing the DEX codebase for auditing, as well as setting up plans for an incentivized testnet. We will share more information on the progress of the Gravity DEX in the coming weeks.

Security features for Cosmos that depend on the fungible token transfer standard on IBC are also currently in development. Most notably, this includes an interchain staking design led by Informal Systems and Interchain GmbH. This will allow new blockchains to source their security from the validator set of more mature and highly secure blockchains, such as the Cosmos Hub. Since validators will have the opportunity to opt in to securing smaller chains that come online, we envision this mechanism to be a catalyst for the creation of an active marketplace of security deposits and validation services.

We plan to share more information on the uniquely Cosmos take on ‘shared security’ in the coming months. We intend for this value proposition to be a strong incentive for pre-launch chains to stake their sovereign claim in Cosmos.

Until then, discover which blockchains are already planning to integrate IBC in their roadmaps to unlock incredible features for their community of users!

Adoption of IBC in the Community

“The permissionless transfer of tokens value across chains is a historic moment on the timeline to a valuable internet of blockchains. We will continue to focus on building the Cosmos Hub as the heart of the interchain — enabling trade and connecting politically sovereign chains to create a new paradigm for economic exchange. We have a defined roadmap in place to realize this future, and will continue to develop services for the Cosmos Hub that will create immense value for all the chains that connect to it.” — Peng Zhong, Tendermint CEO

“The Inter-Blockchain Communication Protocol (IBC) enables self-sovereign networks to connect, which will lead to building a strong ecosystem of networks thanks to the flexibility and open nature of IBC. The IBC launch marks the end of “network tribalism”. It also aligns with one of Crypto.org Chain’s goals to build an open ecosystem — one that is welcoming to and supported by innovative projects, including Payment, DeFi and NFT initiatives.” — Crypto.com

“Regen Network will enable IBC functionality shortly after our early April main net launch. We are excited to transform carbon markets and achieve a global carbon accounting system while empowering grassroots action, agency and sovereignty.” — Gregory Landau, Regen Network CEO

Asset transfer on the Cosmos Hub enables the next phase of the interchain: economic collaboration among chains and projects. Where the addition of IBC brought highways, today’s transfer launch brings economic exchange — it puts trucks on those highways. As a result, DeFi applications can leverage the assets and services of other chains, leading to the next phase of economic growth in DeFi.” — Dean Tribble, Agoric CEO

“Through the extensive application of IBC, the cosmos ecosystem can be truly opened up, and different applications based on the cosmos ecosystem can be quickly combined to truly build a complete ecosystem and enrich cosmos products. At the same time, we also hope that HBTC Chain can afford Start to bring BTC, ETH and other non-cosmos-based application chain assets into the cosmos ecosystem, and bring assets to various cosmos applications through IBC.” — HBTC

The launch of IBC opens the era of the internet of blockchains. IRISnet is looking forward to working with Cosmos hub and many other projects in Cosmos for the realization of an open, fair, and safe multi-hub multi-zone interchain system. — Harriet Cao, Iris Co-Founder

With IBC, developers can opt for specialized blockchains that provide superior environments and services to the general smart contracting blockchains that dominate the space today. As a result of Kava’s industry’s first multi-chain bridges we’ve already seen a wave of new capital and usage in Kava’s specialized DeFi environment that has led it to become the most trusted DeFi platform by exchanges and institutions. IBC will further accelerate and cement this trend by enabling more assets, developers, and users to leverage Kava’s superior DeFi platform. — Brian Kerr, Kava Labs CEO

“Interoperability and composability are essential to continued growth for blockchain and crypto, and specifically for sectors like decentralized finance (DeFi). Having been early supporters and adopters of Cosmos and Tendermint, we’ve been incredibly excited about IBC’s potential to enable different blockchain protocols to communicate and transact with each other independently, providing a framework to connect the global economy to the blockchain. The ability for chains to transact and interoperate will transform the industry,” — Greg Osuri, Akash Network CEO

Token Transfer Disclaimer

As of today, a community of blockchain developers, proof-of-stake validators, and protocol users are able to interact with IBC using the fungible token transfer standard (ICS20). This means that users of a set of (2) IBC connected chains will be able to utilise an asset issued on one chain, on the other chain. This gives users seamless and permissionless access to features on chains that are interoperable with the asset issuing chain.

While IBC token transfers will inevitably bring a significant amount of attention to the Cosmos Hub, users should be aware that there is a risk that user funds could be prone to loss or theft. IBC requires trust that chains on both sides of the connections operate within the Tendermint security model. This means that Tendermint full nodes produce agreement under the assumption that at most, ⅓ of the voting power held by validators are malicious. Future improvements to the IBC software will provide additional safeguards. For now, users are encouraged to only transfer a small amount of tokens using IBC.

Previously published here