When I got into crypto, I succumbed to the competition between blockchain ecosystems, believing that one had to be “better” than others. Since then, I realized that the future of cryptocurrencies brings with it a variety of platforms that will excel at different things. With the Inter-Blockchain Communication (IBC) ProtocolI’ve left behind the days of thinking that chains have to compete and embrace a connected chain future. Let me explain.
Solana, Polkadot, etc., what do they have in common? They are individual state machines, each trying to achieve something only one has done before: create a robust and sustainable ecosystem of developers, investors, and most importantly, users.
So far, Ethereum shows no signs of slowing down. Since starting the summer of 2020 with an 8% share of the total crypto market, Ether (ETH) has since captured almost 20% of the market and has remained there.
There’s a reason the first sentence of many pitches for layer 1 solutions includes the term “Ethereum Killer”. He is the Moby Dick of cryptocurrencies: the king of liquidity. And so, many projects take on the challenge of improving Ethereum, in order to “build it better”. Unfortunately, the former is often a “bridge”. Bridges have exposed users to many risks and have given rise to a host of problems. However, most people are blissfully unaware that they are exposed to vulnerabilities during the linking process and for as long as linked assets are maintained. Most also don’t know they have nothing but an IOU.
The original token that represents everything they bought is on their original chain. Meanwhile, they are negotiating the equivalent of a sheet of paper.
Obviously, there are exceptions to the rule. At most, good bridges can decrease risks, but the bottom line remains the same. Bridges range from centralized to “semi-centralized”, and there’s one thing they can never do: move an asset to a new chain. Why? Because the two individual networks that the blockchain assets connect between have absolutely no way to communicate with each other. They speak different languages because most chains were never designed to communicate with each other.
The existence of bridges is a symptom of an “me against you” mentality, where chains try to obtain liquidity from others.
The four most expensive decentralized finance the hacks in 2022 were all bridge exploits: Ronin, the BNB Smart Chain bridge, Wormhole, and Nomad. Combined, users lost more than $2 billion. That’s about the same amount that users lost as a result of the FTX crash.
So what if we shift the mentality from “me vs. you” to “us vs. centralization”? What if we could come together and decide on communication standards?
While this may not sound radical to some, it is first for cryptocurrencies. This new system has a name: the Inter-Blockchain Communication Protocol, or IBC.
IBC is a standard for sending messages and interacting between different blockchains at the protocol level. It is the product of years of work on the idea that different blockchains should retain their sovereignty.
Allowing users to flow freely between various blockchains creates greater capital efficiency and faster innovation. In a way, it reflects a pure capitalist system in which money finds its way to the preferred destination more easily, safely and quickly. You can compare it to the Schengen area in philosophy.
While IBC is currently a product that only exists in Cosmos, teams like Composable Finance and PolymerDAO are working to bring it to Kusama, Polkadot, Near, and more in the future.
Is IBC perfect? Of course, no. He is only one year old. But its existence is priceless because it shows what the future of cryptocurrencies could look like. With IBC, it is possible to go beyond the ecosystem wars to create a seamless, interoperable network of different solutions to meet a shared challenge: building a permissionless, custodial-free future for all.
IBC is a glimpse into the future of blockchain where ecosystems complement each other and allow users to test “competitors” without friction so that users can decide which products they want to use without restrictions.
We can go beyond fighting on the playground to trying to destroy each other’s sand castles. Instead, let’s use our shovels to build safe paths together.
Valentin Pletnev is co-founder and CEO of Quasar Finance. At 23 years old, he has had experience in a variety of blockchain and emerging technology-focused fields. He was accepted to Draper University in 2018.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.