The internet of blockchain is not just a vision—it is becoming a reality. As we venture into the vast expanse of DeFi, Osmosis, one of the Cosmos ecosystem leaders, is excited to announce its collaboration with Composable Finance, a key player in the DotSama ecosystem. This revolutionary alliance aims to address one of the most significant issues facing DeFi today; siloed liquidity. As previously outlined, the Inter-Blockchain Communication protocol (IBC) unlocks a new realm of connectivity, and this expansion will unlock new opportunities for users and developers alike.
Presently, most blockchain networks operate in isolation leading to the development of bridges that allow token transfers to occur between them. In Cosmos, the Axelar Bridge allows the flow of liquidity across various EMV-enabled ecosystems. These solutions often make trade-offs undermining the decentralized blockchain and distributed ledger technology.
Bridge Routes across Crypto
One core tenet of Osmosis is the firm belief in the principle of decentralization. Centralized and custodial solutions often pose a risk to DeFi. Recognizing the pivotal role that the Inter-blockchain Communication Protocol will play in the future of blockchain innovation, Composable is an ally in expanding the reach of IBC.
IBC is an interoperability protocol allowing communication between two blockchains. It was born in the Cosmos ecosystem, meaning self-sovereign Cosmos-based blockchains can trustlessly communicate via IBC.
Unlike other bridges, IBC is a general-purpose message-passing protocol that can facilitate the bidirectional transfer of any data form, not just tokens. This means you could call a function on Chain A from Chain B and vice versa. For Osmosis, it has been the central piece to the growth we’ve experienced, as it has benefited us by providing the following:
Interoperability: The most apparent benefit of IBC is that it allows different blockchain systems to interoperate, enabling the exchange of data and value between them. For Osmosis, this means creating “cross-chain hubs”, which are networks of interconnected blockchains that can communicate and exchange data seamlessly, creating a smooth user experience.
Increased security: Using cryptographic protocols such as hash locks and time locks. IBC relies on proof-of-stake consensus mechanisms, which ensure the integrity of the transfer of value between blockchain networks. This allows transfers to be securely validated by multiple independent parties rather than relying on a single centralized authority.
Improved scalability: IBC can also enhance scalability, allowing a blockchain to offload some of its workloads onto other, more specialized blockchains. This could alleviate some of the scalability issues that individual blockchains might face while still allowing them to remain secure and decentralized.
Enhanced Privacy: IBC can also improve privacy, as it creates private, off-chain channels for communication and data exchange between different blockchains. As such, IBC does not impose any requirements on the internal operation of ledgers and their consensus algorithms. This allows it to remain flexible and agnostic.
Most importantly, IBC’s trustless design means no third-party intermediaries are introduced in the line of communication. The consensus mechanisms of the two connected blockchains secure the security and reliability of messages passed using IBC, not a trusted intermediary.
While IBC offers powerful benefits, it faces challenges due to its Cosmos-native roots. Initially, it was designed for use between blockchains built using the Cosmos SDK, requiring infrastructure-level changes to enable communication via IBC on pre-existing blockchains. This resulted in friction for developers who wanted to develop across both the Cosmos and Polkadot ecosystems due to the restrictions on the operating languages.
Composable connectivity across ecosystems
Composable Finance aims to resolve this by bridging these challenges with the development of Centauri, a trustless bridging hub extending IBC’s reach to new ecosystems. Through Centauri, IBC support is added to pre-existing blockchains, expanding this vital infrastructure’s horizons and bringing trustless communication to all of DeFi in the foreseeable future.
Implementing and extending IBC across various DeFi ecosystems is a complex task. Differences in blockchain architectures make a 1:1 port of the toolkit impossible. Adjustments are necessary for each ecosystem; thus, the Composable team has focused its efforts on tackling each implementation sequentially. To date, they’ve successfully rolled out Kusama <> Polkadot connections, making this the first implementation of IBC outside the Cosmos.
Centauri will roll out in phases over the next quarter, and with the launch of the Kusama <> Cosmos connection, users are now able to leverage Osmosis liquidity and enjoy the first implementation of trustlessly paired pools between DotSama and Cosmos assets, removing the security risks associated with bridged tokens.
This connection opens the doors for bilateral collaborations. Cosmos native assets, such as ATOM and OSMO, will find their way to Pablo, the first Picasso-powered native DEX. With the completion of each stage, more opportunities and liquidity will become available to DotSama natives and the collaborative ecosystems, respectively.
Once these implementations are finalized, Composable will shift their focus to implementing IBC in new ecosystems, as their roadmap includes implementations to Kusama <> NEAR, Cosmos <> NEAR, as the founder and CEO 0xbrainjar stated during Osmosis’ Updates from the Lab, “The unification of diverse ecosystems via IBC lays the groundwork for realizing our goal: to facilitate the seamless flow of any liquidity, across any chain, anywhere.”
This collaboration signifies the start of a new era where the walls between different blockchain ecosystems come down, enabling seamless, efficient, and secure transactions. Our collaboration with Composable, starting with the connection between Picasso, a Kusama parachain, and Osmosis, a leading Cosmos DEX, is the first step on this exciting journey.
By unifying ecosystems and increasing liquidity, we can offer secure cross-ecosystem services to users of any dApp. This alliance will impact not only the security and efficiency of cross-chain asset transfers but also the user experience in the broader DeFi landscape. It’s an exciting time for blockchain innovation and a testament to the power of collaborative innovation. Together, we can shape a more integrated, secure, and liquid DeFi future.
Composable Finance (“Composable”) is dedicated to improving the accessibility, efficiency, and security of the blockchain industry. The team aims to do this by pioneering innovative Web3 user experiences in a trustless, non-custodial, and decentralized manner. Composable’s technology stack enables and combines key services across different blockchain ecosystems and protocols, such as Ethereum, Polkadot, Kusama, Cosmos, and the NEAR Protocol.
Picasso is Composable’s layer one blockchain acting as an infrastructure layer to pioneer interoperable DeFi solutions, with a native token named $PICA available at the Pablo DEX. Picasso is equipped with a robust set of novel DeFi primitives built as modular pallets, such as their cross-ecosystem IBC transfer protocol, Centauri. These pallets are designed to attract liquidity from the broader DeFi landscape while promoting interoperability between various ecosystems.
Osmosis is the premier cross-chain DeFi hub. As the liquidity center and primary trading venue of Cosmos – the 50+ sovereign Layer 1s connected with the Inter-Blockchain Communication protocol (IBC) – it is the gateway to the interchain.
And with the impending arrival of dYdX to Cosmos, and the forging of IBC connections to Avalanche, Polkadot, NEAR, and even Ethereum, access to appchains is only growing in importance.
With its suite of DAO-gated dApps – including the just-launched Mars lending and credit protocol, as well as upcoming features like Levana perps, Quasar strategy vaults, and the Ion Cosmos ETF – the Osmosis Ecosystem provides UX-optimized DeFi for the cross-chain future.