Inter-Blockchain Communication and Teleport
At a base level, the inter blockchain communication protocol (IBC) is a technology which allows for the seamless integration of independent blockchains to create a whole system. This technology allows for the value and message transfer between two different protocols using the IBC system. As an analogy, we can consider the IBC protocol a railway system within a country. Within this country, cities would create value through the creation of goods and services; however, this value would not be accessible to other cities without an effective way to transport it. Therefore, the railway is needed to allow cities to effectively interact with each other. Simply put, IBC is effectively a communication system which allows independent ledgers to transfer data and become a part of a larger network.
Compare this to the previous standard, whereby all functionality is housed on a single blockchain. Take Ethereum for example, its functionality stems from decentralized applications all based on its native network. This requires that all functionalities be present on the blockchain for it to satisfy the user’s needs.
On the contrary, a network invoking the IBC protocol is not bound by these stipulations. Instead, blockchains can become more focused on specific use cases yet still provide the user with a comprehensive experience via the integration of specialized blockchains into a greater network, thereby creating an internet of blockchains.
How Does IBC Work?
When understanding how the IBC protocol works, there are three key components to consider: the system layers, relayers and channels.
Firstly, there are two layers within the IBC protocol: the Transport, Authentication and Ordering (TAO) layer and the application layer. The TAO layer effectively provides the functionality of the IBC protocol as it is used to send data between blockchains via smart contracts. A packet of data would be sent from a TAO module on one blockchain to a receiving module on another blockchain, where it would then be authenticated and processed in the order in which it was sent; hence the name, Transport, Authentication and Ordering layer. The second layer of the IBC protocol is referred to as the application layer and is built upon the TAO layer to allow applications to interact with the data which is sent or received. Through this layer, a variety of cross-chain applications can be built for interchain transfers of both NFTs and cryptocurrencies, the operation of interchain accounts, as well as the operation of oracle data feeds.
Relay algorithms or “Relayers” are also essential in the IBC protocol to send data within the TAO layer due to their off-chain nature. This is because blockchains cannot actually send data to another blockchain because they are unique entities and don’t have direct access to the transport layer; they are only able to record the intent to send data to another blockchain. Relayers fill this void by scanning the state of each chain and watching for these intentions to occur. Following this, relayers construct datagrams, pass them to the TAO module of the other blockchain and execute them as allowed. The off-chain nature of the relayers is what allows the seamless transfer of data because all cross-chain interactions can be transported, validated, and executed without being processed by the sending chain; rather, all cross-chain transfers are executed by the IBC protocol via relayers.
Finally, channels are the route which relayers use to pass data to other blockchains. Channels can be found within connections between blockchains; each connection may have any number of channels. Connections allow channels to operate under common identifiers, which reduces the cost of verification within the protocol. Within a connection, channels are associated to specific smart contracts at each end, allowing the protocol to verify that the data packet being sent to another blockchain originated from a specific smart contract and can be traced back to a blockchain sender. Channels also authenticate transactions by ensuring that a packet of data is executed only once, delivered in the order that the transactions are sent, and the channel ensures that the data packet is sent to the module on the other chain for which it was intended.
The most prominent example of this technology is the Cosmos ecosystem which implements the IBC protocol using an SDK framework, connecting 46 blockchains to date. This protocol is implemented as the Cosmos IBC protocol, which connects blockchains under the Cosmos SDK framework to create an internet of blockchains within their ecosystem. These blockchains range from cross-chain swaps like Osmosis to privacy blockchains like Secret; however, these blockchains are only interoperable with blockchains that are within the Cosmos ecosystem, not external chains such as BTC or ETH without a third party bridge system.
As the technology of cryptocurrencies and blockchains progresses, the landscape is shifting towards interoperability between different blockchains. Currently, the space is dominated by various siloed blockchains, which need to house all functionality on their native blockchains. This means that all swaps, value transfers, and contract invocations can only occur within the one ecosystem. Additionally, if a user would like to transfer funds between different siloed blockchains, they would be required to use a proprietary bridge — a slow and costly process.
IBC solves these problems by allowing blockchains within its scope to communicate with one another and have access to the other chain’s functionality. Using Cosmos as an example, there are different blockchains such as Osmosis and Secret which handle swaps and discrete value transfers respectively. Each of these blockchains is built with a specific intention to fulfill, and by being in the Cosmos ecosystem, the user has access to each of these specified blockchains. This solves a major issue of scalability as blockchains can be created as needed and rely on the functionality of other existing blockchains, allowing the ecosystem to grow as a whole.
The concept of IBC and the realization of how valuable the technology is has clearly gained traction within the blockchain community as the Cosmos ecosystem is logging 3,882,607 transactions per month as of May 2022. This metric is not only encouraging for developers of the technology but for users as well, seeing that it demonstrates how the blockchain industry is shifting towards an internet of blockchains and projects accepting this shift are becoming extremely valuable.
Teleport and XIBC
Looking at the future of IBC and cross-chain interoperability, it is important to highlight projects which have implemented this technology in a meaningful and forward-progressing manner — one of which is Teleport Network.
Teleport Network is an infrastructure for cross-chain interoperability. It consists of an EVM-compatible blockchain built on top of Ethermint (Teleport Chain), a cross-chain messaging protocol (XIBC), an omni-chain wallet (Teleport Wallet) and developer SDKs for cross-chain dApp integration. With this technology, Teleport acts as a relay chain or intermediary chain between any two chains to facilitate cross-chain token and NFT purchases or contract invocations.
A key component of this technology is the network’s natively-developed XIBC protocol — a cross-chain messaging protocol based on IBC for Teleport bridge implementation. IBC is unable to handle blockchains without fast finality; however, XIBC improves this while incorporating the ability to handle blockchains with different structures such as BTC, EVM chains, Cosmos and Polkadot.
Two of the main issues that Teleport aims to solve are the issue of scalability within blockchains as well as the lack of liquidity for cross-chain transfers which currently occur via proprietary bridges.
Firstly, concerning the issue of scalability, there are two factors of Teleport’s technology which allow it to effectively solve this issue:
Varying Methods of Connection:
Teleport takes a different approach to connecting each chain. For EVM chains, Ethereum itself, and Solana, Teleport uses light clients to verify information it receives. When sending information to these chains, Teleport uses TSS to make the transactions as cost-effective as possible.
Looking at other chains such as BTC and chains that do not support smart contracts functionality, Teleport uses the TSS protocol to interact with the blockchain. TSS protocol is also used with Layer 2 solutions as they do not have general blockheads.
Finally, looking at Polkadot and Cosmos, Teleport uses Substrate IBC and Cosmos IBC to connect with each ecosystem respectively.
Because Teleport is able to interact with many different blockchains via a variety of protocols, it is able to adapt to change as it happens and is not bound to a specific technology. This allows Teleport to scale with industry trends and be a leader in cross-chain interoperability, no matter the chain.
Teleport as a Relay Chain:
Each chain can connect to Teleport Chain to serve as a relay chain to communicate with other chains already connected to the network.
For example, without Teleport, if information is to be sent from Avalanche to Cosmos, a proprietary bridge system and framework with enough liquidity to execute that transaction must be established, normally by a third-party application.
However, with Teleport, connections from Avalanche to Teleport and Teleport to Cosmos already exist as a framework which can be built upon. Since the connection is already established, developers can easily implement dApps whereby Teleport Chain and the XIBC protocol will handle cross-chain transactions.
Another key issue in the cryptocurrency industry is the lack of liquidity when transferring value between protocols. As aforementioned, cross-chain transactions generally take place on proprietary bridges, which have lower levels of liquidity and take longer to finalize. However, Teleport solves this issue with its XIBC protocol, whereby Teleport Chain acts as a relay chain between two unique blockchains. As value transfers occur, users effectively add liquidity to a global liquidity pool that all dApps can access, allowing for communal growth of the applications as well as the underlying liquidity pool. As an illustration, reference Figure 1.0, which details the mechanism of a cross-chain swap and how liquidity would be added to a global liquidity pool on the Teleport chain.
The future of blockchain seems to be trending towards IBC technology and the growth of an ecosystem with various blockchains as opposed to the individual growth of various siloed blockchains. Teleport is capitalizing on this growth and is using its revolutionary XIBC protocol to bring access to global liquidity and cross-chain transfers between current IBC protocols while also connecting established siloed blockchains. This provides a growth opportunity by continually propelling the industry’s adoption rate and community growth while also realizing the value of existing chains both monetarily and community-wise, keeping them integrated in this newer technology.