Truly decentralized finance will be beyond siloed blockchains
To be the future lifeline of industries, blockchain technology needs to embrace the old-fashioned quality of interconnectivity.
“Yahoo users will not be able to interact via mail with Google email (Gmail) users,” — If tomorrow’s headlines sounded like this, the earth would come to a halt. This headline shall never see the light for all the right reasons. However, blockchain tech and its favorite son, decentralized finance (DeFi), are heading towards this rabbit hole.
Siloed blockchains with no window for external communication are dominating the nascent space. Interconnectivity is elementary and synonymous with the primitive human quality of being social. From the days of the barter system, transfer and exchange have been the two core practices on which the world has been built.
Networking among blockchains and the need for IBC
Currently, blockchain applications and the DeFi juggernaut are nothing but a balkanized group of solutions failing to realize their true potential. To resolve this concern, blockchain networks need to shake hands with other networks and be open to a sovereign network of interconnected blockchains.
The Inter-Blockchain Communication (IBC) protocol shall facilitate this shaking of hands. It lays the platform that can transfer data across different networks and facilitates the cross-chain transfer of assets and tokens. And since IBC is a blockchain agnostic protocol, it has no native network and offers an unbiased solution to the entire world of blockchain solutions.
Major blockchains, like Bitcoin and Ethereum, are siloed without a transport layer. This limits their capabilities. Imagine Bitcoin being able to power Ethereum-based smart contracts in a permissionless manner. Had this been so, users would have been able to embrace the boundless functionality of Ethereum’s smart contract alongside the world’s popular currency in Bitcoin (BTC).
Also, Ethereum’s scalability concerns are a testament to why siloed blockchains need Inter-Blockchain Communication. By making networks interoperable, transactions can be parallelized to avoid network congestion. Using IBC, Ethereum can validate transactions quickly with fewer gas fees, attracting more people to use the network and its applications.
Moreover, blockchains seeking to be enterprise-level solutions need IBC and interoperability to cater to their clients at scale. By enabling cross-chain transactions, networks like Ethereum and Bitcoin can enjoy institutional adoption. How? To date, these networks work on the probabilistic conduct of transactions, i.e., the finality of blocks. But with IBC, chains and peg-zones can be used to guarantee finality.
With blockchain tech desirous of revamping the working of huge industries like supply chain and healthcare, IBC injects a potion of reliability into the technology and its solutions.
Prior efforts to achieve IBC were unitedly fragmented
Inter-Blockchain Communication and interoperability are not novel concepts in the blockchain world. Efforts to achieve them have been in the talks for years now and there have been multiple projects working towards connecting different blockchain networks. But the projects championing interconnectivity were themselves fragmented as their approaches, designs and use cases differed.
Protocols like Cosmos with its Tendermint core, Polkadot and Chainlink have championed IBC and interoperability in their solutions. The emergence and adoption of these solutions are a giant stride towards an interoperable future.
Blockchain agnostic and omnichain is the way forward
Moving forward, exclusivity will be the biggest enemy of blockchain tech. In times of decentralization and community-first approaches, exclusive networks tread a dangerous path. Protocols must embrace IBC and provide solutions at scale.
Besides integrating IBC, two weapons with which future protocols can equip themselves are blockchain agnostic and omnichain. This would remove the element of exclusivity and open them to limitless utilities across networks. It would also improve the feasibility and reliability for institutions, corporations and maybe even governments to adopt blockchain-based solutions.
The DeFi juggernaut catalyzed the growth of blockchain and crypto space in 2021. Interoperability and IBC are the ones to look out for in the future.