What is the core component IBC that realizes the vision of Cosmos?

Original Title: "What You Need to Know About IBC"
Original Source: Akash Chinese Community

Welcome to IBC 101. In this article, we will explore what IBC is, how it works, and why it is important. But first, why should you care about it? IBC is a core component of realizing the vision of Cosmos and supports the notion that the Cosmos network is the "Internet of Blockchains." Like gravity, IBC will help pull economic value into the ever-growing blockchain, namely the Cosmos Hub. So without further ado, let’s dive into the unique properties, functionalities of IBC, and what’s next. Let’s get started.

What is IBC?

IBC stands for Inter-Blockchain Communication. It is developed by contributors like Tendermint, Interchain Foundation, and Agoric Systems as part of the larger Cosmos network ecosystem. IBC, in its simplest form, connects different blockchains. So far, blockchains like Bitcoin, Ethereum, and many others have been running on their own isolated islands, meaning each blockchain is its own deserted island, disconnected from the rest of the world or other blockchains, unable to communicate. It gets quite lonely.

The IBC protocol serves as the medium for blockchain social networking (communicating, exchanging tokens, and information). IBC is somewhat like the role of the TCP protocol for the internet. Before TCP, the internet was a collection of independent computer networks that could not communicate well with each other. Together with IP, TCP/IP standardized how data is sent and routed over computer networks. Today, TCP/IP seamlessly underpins how we consume and enjoy the internet every day. Similarly, IBC standardizes how blockchains communicate. Therefore, Cosmos is often referred to as the "Internet of Blockchains."

How Does IBC Work?

Every blockchain that wants to communicate with each other sends and receives headers to keep track of the validator set. Simply put, they run a lightweight client to track each other's blockchain/ledger. When sending tokens from one blockchain to another, the tokens must first be:

• Staked (held in delegation) to prepare for the transaction (e.g., 100 ATOM);

• A proof must be sent to the receiving blockchain to prove that the tokens have been staked;

• The receiving chain must verify the proof of the 100 staked ATOM tokens;

• If the proof is verified, the 100 ATOM tokens will be frozen/secured on the original chain, while 100 "substitutes" (e.g., tokens) will be created on the new chain.

To be compatible with IBC, a blockchain must have Fast Finality. Bitcoin and Ethereum are proof-of-work systems that do not possess this capability. Each blockchain must maintain its own validator set. By doing so, blockchains maintain better interoperability with applications.

Tip: Fast Finality means that all transactions are quickly packaged and cannot be revoked or altered.

If multiple blockchains want to communicate with each other, scaling this solution becomes quite challenging. The connections can quickly spiral out of control. This is where the Cosmos Hub comes into play. Hubs act as aggregators, allowing individual blockchains to communicate with many other blockchains. This Hub supports the blockchain network or the "Internet of Blockchains."

Why is IBC Important?

IBC is a key element of the Cosmos framework that connects sovereign blockchains. Beyond the obvious ability to exchange tokens and information, it creates tremendous value for the network. When used in conjunction with the Tendermint BFT engine, Cosmos SDK, and other tools, developers can scale blockchains within or outside the Cosmos network with speed, security, and interoperability. This versatility can strongly incentivize new or existing blockchains to build or connect to Cosmos through the IBC protocol, thereby increasing the value of the Cosmos network, as well as its functionality and utility.

Blockchain Integration

In addition to token transfers, IBC also facilitates interaction with IBC data oracles. IBC-compatible blockchains use this protocol to access BandChain.

Tip:

• BandChain is a high-performance blockchain built for data oracles, based on Cosmos's state-of-the-art SDK, allowing efficient, flexible, and scalable data queries protected by cryptographic proofs.

• Band Protocol is a cross-chain data oracle platform that aggregates and connects real-world data and APIs to smart contracts.

BandChain indexes blockchain data from IBC-connected sources. BandChain receives information requests and processes transactions accordingly. Simply put, IBC connects multiple blockchains, enabling cross-chain queries, data, and analytics. To simplify and scale access to BandChain, StarPort was born. StarPort lowers the learning curve for using BandChain and many other aspects of blockchain development.

Customization

To be compatible with IBC, the consensus layer of a blockchain must provide Fast Finality. Proof-of-work (PoW) systems like Bitcoin and Ethereum do not offer Fast Finality. To address this issue, IBC provides "pegs" as intermediaries between blockchains and the Cosmos Hub. Pegs convert PoW systems into systems with Fast Finality that are compatible with IBC. Specifically, Ethereum has its own pegs or bridges, which we will discuss later.

IBC and the broader Cosmos network support and enable the construction and networking of sovereign blockchains. While Ethereum supports a wide range of L2 applications/DApps and DeFi, its services are limited by the EVM (Ethereum Virtual Machine) and the Ethereum protocol. With Cosmos and IBC, DApps and services make decisions and integrate at the L1 layer to maximize efficiency, security, or scalability to meet specific project needs.

Governance

The Cosmos network builds and maintains the IBC protocol. As the native token of the Cosmos network, ATOM allows validators and delegators to stake ATOM to secure the network and earn voting rights on new proposals in return. Changes to the IBC protocol and other aspects of the Cosmos network must be approved by the community before implementation. This gives anyone the opportunity to stake and/or validate, influencing the direction of the project. While running a validator node requires technical capability, delegators can easily participate and are also strongly encouraged to contribute to the governance process.

Business Support

Osmosis is the first decentralized exchange (DEX) and automated market maker (AMM) native to Cosmos. Osmosis facilitates the trading of tokens that support Cosmos IBC, such as ATOM, OSMO, AKT, LUNA, UST, and more. Moreover, it supports AirDrops, Staking, voting, liquidity pools, and analytics.

Tip:

AMM, or automated market maker, is a collection of liquidity pools held by smart contracts. Every user, in addition to professional teams or institutions, can add their tokens to the liquidity pool, becoming a market maker and enjoying commission bonuses from trading. Furthermore, the liquidity pool funds are decentralized, with open-source contract control, and trading data is also transparent on the chain.

Sifchain is an OMNI chain decentralized exchange (DEX) and automated market maker (AMM). The native token of Sifchain is ROWAN. What sets Sifchain apart is its support for token transfers between the top 20 blockchains, connecting IBC, BinanceChain, Bitcoin, EOS, Polkadot, and more. Becoming a liquidity provider on Sifchain can yield substantial APY (annual percentage yield), depending on the trading pair.

Emeris is a new OMNI chain decentralized exchange (DEX) and automated market maker (AMM) developed by the Tendermint Foundation. Its goals include multi-wallet support, access to different DeFi platforms, multi-chain staking, and mobile applications. Emeris features a brand-new Gravity Bridge, which is a great entry point into the Ethereum network, our next topic.