The 5 Core Traits of Interblockchain Communication
Why DAPP Service Providers (DSPs) Are At the Forefront of the Interoperability Movement
- Connecting blockchains together is a universally recognized prerequisite to scaling decentralized technologies. Integrated networks maximize the potential of both individual chains and blockchain technology as a whole.
- Interblockchain communication (IBC) is therefore a critical piece of blockchain infrastructure and holds the key to unlocking positive-sum games for all chains.
- DAPP Service Providers (DSPs) are blockchain-agnostic nodes that deliver an IBC solution that is trustless, scalable, incentivized, multi-purpose and permissionless.
From Ethereum to EOSIO, Cosmos to Polkadot, various ecosystems have understood that the limitations of using a single chain will prevent blockchain technology from reaching the masses and are evolving to make interblockchain communication (IBC) a reality.
What these teams have in common is the awareness that fragmented networks confine value within isolated silos, while integrated networks maximize the potential of both individual chains and blockchain technology as a whole. This follows from Metcalfe’s Law, a fundamental principle used to explain how networks behave. First formulated in 1993, Metcalfe’s Law states that the value of a network is proportional to the square of the number of nodes connected to the network. Every additional connection increases the impact of the network exponentially, such that it is very much in the interest of users to accelerate the number of connections made.
With DAPP Network IBC, blockchains link up to instantly create more connections and combine each other’s network effects. Integrated networks are greater than the sum of their parts, making interoperability a win-win situation for everyone.
Another advantage of interoperability is that it allows developers to build a single version of their application or service and deploy it across multiple platforms. Traditionally, they have had to develop different versions of each piece of software for each platform they wished to support. In addition to the initial expense of developing multiple versions, changes to the underlying technologies necessitate constant upgrades to the application’s software. Now, not only can devs support multiple platforms but also seamless, multichain applications can finally emerge, connecting superior components from different platforms.
Building Bridges to Withstand the Test of Time
On an ideological level, interoperability requires a shift from the zero-sum thinking that defines business competition to a ‘win-win’ mindset that looks for synergies between networks, services and applications. Traditionally, competition is the primary dynamic that governs the relationship between companies as they engage in a constant struggle to increase their market share at the expense of their rivals. Interoperability inverts the order between collaboration and competition, incentivizing cooperation between companies and their systems.
Technically, IBC forms a critical piece of decentralized infrastructure and must be built with 5 key characteristics in mind:
- Trustless: No additional trust assumptions are introduced at the base-layer.
- Scalable: An optimal IBC solution will make it seamless for blockchains to open up as many connections as they wish, quickly and efficiently.
- Incentivized: The nodes that transmit data and value across chains must be incentivized in a token that holds real utility value for them.
- Multi-purpose: IBC should facilitate the transfer of data and value across chains as well as contract execution, not just to enable token swaps.
- Permissionless: Anyone should be able to open up a connection between two chains, and users can choose which connections to rely upon.
The DAPP Network is the first middleware to work across multiple chains. At the heart of the DAPP Network are the DAPP Service Providers (DSPs), unique nodes that offer a range of scaling and interoperability services on the network’s marketplace. These nodes serve a critical function as the bridges between blockchains. In order to access the services provided by DSP nodes, users and developers must stake DAPP tokens towards service packages provided by the DSPs. Already in action in the form of LiquidX, DAPP Network IBC is built to withstand the test of time as the leading interoperability solution.
Trustlessness: No additional trust assumptions are introduced at the base-layer
A trivial implementation of IBC could use a single IBC node to relay messages between chains. Say, for example, that we want to swap ETH for EOS. First, we transfer our ETH to a special smart contract on the Ethereum chain, effectively ‘locking up’ those tokens. Once the ETH enters the contract, the IBC node registers that a transaction has happened, finds out the exchange rate between the two tokens, and sends a transfer of EOS to our wallet. The EOS tokens are sent from a similar smart contract to the one where we sent ETH earlier.
If this sounds familiar, that’s because it is similar to what centralized exchanges do.
Whether we want to swap tokens, trigger a smart contract on a different chain or pass across a dataset, using a centralized gateway defeats the entire purpose.
Trustlessness is the beating heart of blockchain technology, without which cryptocurrencies have no added advantages over the legacy systems they seek to transform. This is especially true at the base-layer level, which must remain completely trustless in order for the applications built on top of it to consider themselves decentralized. The second you introduce the need to trust a third-party into the base-layer, you’ve negated the whole point. Not only do individual chains need to operate in a trustless manner, but also any ‘bridge’ that connects between them must do so without introducing additional trust assumptions.
In order to enforce trustlessness, multiple nodes need to be a part of any cross-blockchain interaction. Moreover, these nodes need to be relied upon by the validators on all the connected chains. For example, if EOS BPs were to be the ones facilitating IBC with Wax, Worbli and other sister chains, those chains would have to trust the validity of the data sent by the EOS BPs.
Anytime a chain needs to read data from another chain, that data can be fetched by a group of DSPs and compared on-chain to validate the result before it is read in. It is up to the dApp on either chain to select the number and combination of DSPs to use depending on their use-case. dApps with higher security requirements, such as those dealing with financial services, could choose a large number of reputable DSPs in order to maximize trustlessness. Meanwhile, dApps who wish to trade-off trustlessness for cost-efficiency can do so by selecting a smaller set of DSPs.
Unlike centralized exchanges, no additional trust assumptions are introduced at the base layer, while the trust level at the DAPP Network layer can be tailored to each unique use-case.
Scalable: An optimal IBC solution will make it seamless for blockchains to open up as many connections as they wish quickly and efficiently.
If blockchains would have to create a different bridge for every chain to which they wish to connect, the cost in time and resources would discourage them from opening up more than a select few connections. Each additional connection would require a lengthy process that involves adapting the protocol and maintaining a standard of communication that is understood across chains. While connecting two chains is definitely praiseworthy, the true power of an IBC solution is measured by its ability to scale connections to many different chains with ease.
By serving as a universal middleware that sits on top of multiple chains, the DAPP Network slashes the number of steps required to support multi-connection IBC. Anyone could set up a connection between two compatible chains by running a DSP service that facilitates such a connection. Other developers can then choose which connections meet their criteria and stake DAPP tokens to gain access. Taking the responsibility for opening connections away from the chain itself — and putting it in the hands of a free market of DSPs — has the potential to maximize the number of IBC connections.
Incentivized: The nodes that transmit data and value across chains must be incentivized in a token that holds real utility value for them.
Economic incentives form the bedrock of any decentralized system. Not only should we assume that individuals will do anything to maximize their own financial gain, but also our cryptoeconomic systems should channel that very greed in a way that facilitates the long-term growth of the entire network. Interblockchain communication is no different. The nodes that transmit data and value across chains must be incentivized in a token that holds real utility value for them.
Relying on the tokenomics of base-layer chains to incentivize IBC nodes is insufficient. For example, validators on both EOS and WAX are incentived in their respective tokens based on the number of votes they have received. Supplying any additional services would not increase the number of tokens they receive, giving them little incentive to do extra work. Relaying messages across chains involves additional infrastructure costs that must be taken into account. BPs could decide to allocate additional tokens to IBC nodes, but lengthy governance procedures and varying interests between different stakeholders means that such a process is likely to take time — if it succeeds at all.
On the DAPP Network, DSPs that provide communication services between chains receive a portion of annual DAPP token inflation according to the networks’ unique economic model. In order to access a DSP service, users need to stake DAPP tokens to a service package offered by the DSP. In return, DSPs have the ability to claim a percentage of DAPP token inflation proportional to the amount staked to their packages. These tokens can in turn be used to access DAPP Network services on multiple chains, giving them real value on more than one network. Furthermore, a universal IBC token in the hands all IBC nodes will facilitate frictionless value exchange and cooperation amongst the network.
Multi-purpose: IBC should facilitate the transfer of both data and value across chains, not just enable token swaps.
In many ways, IBC has existed for some time now. As early as 2012, Bitcoin developers have been working to enable cross-chain token swaps that don’t rely on a centralized exchange. Known as atomic swaps, this technology facilitates trustless, peer-to-peer token transfer between chains and has been demonstrated successfully by projects like Decred. Furthermore, decentralized exchanges such as Bancor give traders the ability to exchange tokens across multiple chains without having to trust any intermediaries.
A true IBC solution goes beyond token transfer to allow for rich data sets and smart contract operations to shuttle between chains. With such a solution enabled, chains can facilitate not only atomic swaps, but can also exchange dApp-specific data, NFTs, contract execution instructions and so much more.
The DAPP Network’s comprehensive IBC solution consists of three components:
- LiquidLink’s Oracles allow communication between smart contract chains — data transfer, token transfers, and contract deployment and operation — as well as reading non-smart-contract chains such as Bitcoin and Binance chains.
- LiquidLink’s MultiSig service could be used to allow writing to non-smart contract chains.
- LiquidX enables DAPP Network services — storage, oracles, computation, and so on — to be offered natively on other blockchains, without needing LiquidLink. Services can even be potentially shared across chains without the need for data transfers.
Permissionless: Anyone should be able to open up a connection between two chains, and users can choose which connections to rely upon.
Aside from the scalability concerns listed above, relying on any one party to enable IBC goes against the permissionless nature of blockchains. Entire ecosystems become dependent on a select few entities that are responsible for opening and maintaining IBC connections.
Since the DAPP Network exists as a separate service layer, and is compatible with multiple chains, developers don’t need permission to enable token swaps, data transfers and smart contract execution between chains. Not only could they enable this functionality for themselves, but by deploying a DSP that supports LiquidX or LiquidLink they can also offer IBC as a service to external dev teams.
Get Involved in the Interoperability Movement
Blockchain maximalism is counterproductive. Instead, interoperability is needed in order for blockchains to make a real impact on the internet and global economy. Building the bridges that will facilitate the transfer of data and value across a web of chains is therefore essential. By becoming a DSP on the DAPP Network and offering services like LiquidLink, LiquidX and more, not only can you grow the network effects of whichever chain you choose to support, but you also ensure your place at the forefront of the quest for interoperability.
Trustless, scalable, incentivized, multi-purpose and permissionless.
These words describe one thing — an IBC solution built on the DAPP Network.
Spin up your DSP today and create advantageous connections between chains
