• Beyond siloed blockchains, truly decentralized finance will exist

  • Blockchain technology must embrace the old-fashioned quality of interconnectivity if it is to be the future lifeline of industries.

    “Yahoo users will be unable to communicate with Google email (Gmail) users via mail,” — The world would come to a halt if tomorrow’s headlines sounded like this. For all the right reasons, this headline will never see the light of day. However, blockchain technology and its favorite offspring, decentralized finance (DeFi), are on their way down this rabbit hole.

    The nascent space is dominated by siloed blockchains with no window for external communication. Interconnectivity is fundamental, and it is synonymous with the primal human quality of sociality. Transfer and exchange have been the two pillars upon which the world has been built since the days of the barter system.

    The importance of blockchain networking and the need for IBC

    Currently, blockchain applications and the DeFi juggernaut are nothing more than a disjointed collection of solutions that are failing to realize their full potential. To address this concern, blockchain networks must join forces with other networks and be open to a sovereign network of interconnected blockchains.

    This handshake will be made easier by the Inter-Blockchain Communication (IBC) protocol. It establishes a platform for data transfer across networks and facilitates the cross-chain transfer of assets and tokens. Furthermore, because IBC is a blockchain-agnostic protocol, it has no native network and provides an unbiased solution to the entire world of blockchain solutions.

    Without a transport layer, major blockchains such as Bitcoin and Ethereum are isolated. This restricts their abilities. Consider Bitcoin being able to power Ethereum-based smart contracts without requiring permission. Users would have been able to enjoy the limitless functionality of Ethereum’s smart contract alongside the world’s most popular currency, Bitcoin, if this had been the case (BTC).

    Furthermore, Ethereum’s scalability issues demonstrate why siloed blockchains require Inter-Blockchain Communication. Transactions can be parallelized to avoid network congestion by making networks interoperable. Using IBC, Ethereum can validate transactions faster and with fewer gas fees, attracting more users to the network and its applications.

    Furthermore, blockchains aspiring to be enterprise-level solutions require IBC and interoperability in order to serve their clients at scale. Networks such as Ethereum and Bitcoin can gain institutional adoption by enabling cross-chain transactions. How? Currently, these networks are based on the probabilistic conduct of transactions, i.e. the finality of blocks. However, with IBC, chains and peg-zones can be used to ensure finality.

    With blockchain technology eager to transform the workings of massive industries such as supply chain and healthcare, IBC injects a dose of trustworthiness into the technology and its solutions.

    Previous efforts to achieve IBC were disjointed and fragmented.

    Inter-Blockchain communication and interoperability are not new ideas in the blockchain world. Efforts to achieve them have been discussed for years, and numerous projects have been launched to connect various blockchain networks. However, the projects championing interconnectivity were themselves fragmented due to differences in approaches, designs, and use cases.

    Protocols such as Cosmos, with its Tendermint core, Polkadot, and Chainlink have advocated for IBC and interoperability in their solutions. The emergence and adoption of these solutions represents a significant step toward a more interoperable future.

    The future is blockchain agnostic and omnichain.

    Exclusivity will be the biggest enemy of blockchain technology in the future. Exclusive networks are a dangerous path to take in an age of decentralization and community-first approaches. Protocols must embrace IBC and provide scalable solutions.

    Aside from incorporating IBC, future protocols can arm themselves with two weapons: blockchain agnostic and omnichain. This would eliminate the element of exclusivity and open them up to an infinite number of utilities across networks. It would also increase the feasibility and dependability of blockchain-based solutions for institutions, corporations, and possibly even governments.

    In 2021, the DeFi juggernaut catalyzed the growth of the blockchain and crypto space. Interoperability and IBC are the buzzwords of the future.

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