One Chain to Connect Them All
Out of the total cryptocurrency market cap of $2.01 trillion, Decentralized Finance (DeFi) contributes a staggering $82.07 billion. While these figures are indeed impressive, they hide a lot more than they reveal. The blockchain-cryptocurrency sector has enormous potential and the ability to grow even more. But certain factors hold back their ability to do so.
These factors that hinder the growth of the ecosystem has to do with the isolated niches in which individual blockchains operate. Each blockchain specializes in a particular area and they continue to exist in silos. It was once mentioned in a research paper that, “We would be left with a scattered collection of siloed blockchains, each supported by a weak network of nodes and susceptible to attack, manipulation, and centralization.”
This is why, of late, there have been talks of making blockchains interoperable. Once that happens, data sharing and fund transactions will no longer remain disjointed. The Ethereum blockchain has recently witnessed a number of interoperable features. Most of the DeFi projects are built on Ethereum. But with its scalability issues, skyrocketing transaction fees, and network congestion, many projects are migrating to other blockchains. This has compelled the other chains to create bridges with Ethereum.
Interoperable bridges have somehow mitigated the immediate problem but a deficit still remained. Interoperability was restricted to a two-way movement between the blockchains. What would unleash the full potential of blockchain technology would be a multi-pathway interaction between blockchains. This is only possible through a protocol called Inter-Blockchain Communication.
The Inter-Blockchain Communication (IBC) Protocol
The IBC protocol enables different blockchains to communicate and interact with each other. This means that seamless transfer of funds and data between hitherto siloed blockchains is no longer a distant future. It is a reality and is happening as we breathe and speak. IBC aims to be the ‘internet of blockchains’, creating an interconnected web of chains for various purposes. This can include transferring value, interchanging assets, services and connecting and interoperating with different blockchains.
“Imagine every blockchain right now as a small tribe living on an island in a vast archipelago. So what IBC enables is the discovery of shipbuilding, which allows these tribes to travel among each other...the moment a blockchain flips IBC on, people can start travelling back and forth and participate in cross-island trade of various goods that each island is specialized in creating.”
There can’t be a better analogy than what Zhong described. IBC helps establish what can be called a ‘messaging channel’ between different blockchains. The individual blockchains remain sovereign with their own governance structures and consensus mechanisms. What IBC does is create this channel to ship assets and data from one chain to another chain without interference. By embracing the IBC protocol, the community members of a particular blockchain needn’t surrender their rights and votes. IBS merely provides the opportunity for sovereign blockchains to share and communicate with each other.
Sifchain: How IBC-Enabled Platforms Will Change The Future Of Finance
The only way the blockchain-crypto sector will flourish further is through adopting an Omni-chain approach. This cross-chain communication will open up hitherto unexplored avenues of fund transfers and financial transactions.
Sifchain is the first Omni-chain Decentralized Exchange (DEX) in the sector and built with Cosmos SDK with inherited capabilities from Thorchain. It will facilitate cross-chain economic transactions among the top 20-25 blockchains such as Bitcoin, Ethereum, Binance, Polkadot, EOS, etc. Since most cryptos are traded on these blockchains, Sifchain will have access to a diverse and voluminous collection of tokens.
Sifchain will be using the ‘Peg Zone Model’ by Cosmos to transfer funds from one chain to the other through IBC. Since they have connected to every chain individually, users can easily transfer assets across the chains.
At the moment, Sifchain is connected to Cosmos, Iris, Akash, Sentinel, Osmosis, Regen and soon Crypto.org. It will soon diversify and bring in other blockchains into its fold. Sifchain will enable the import and export of Cosmos-based assets onto Ethereum and vice versa. It will also enable transactions of Ethereum asset classes across all IBC-supported blockchains.
Since Sifchain is built on Cosmos, its efficiency is 100 times more than Ethereum. When it comes to Transaction Processing Systems (TPS) or allotting blocks, Sifchain may be ahead of other DEXs.
Mainstream financial institutions are now ready to work with blockchain technology but siloed blockchains restrict their usage. These institutions will be more comfortable working with an Omni-chain platform with access to diverse networks and asset classes. After all, Omni-chain is the future!
Trustless and permissionless token transfer across blockchains has always been a distant dream for the blockchain sector. IBC has inaugurated a paradigm shift and thrown open the doors to novel ways of doing trade across the world. A multi-chain communication protocol and a truly interoperable ecosystem will go a long way in revolutionizing global finance.
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