The Cosmos ecosystem is one of the fastest-growing blockchain ecosystems with more than 260 apps and services and over $140 billion of digital assets under management. The primary reason for this rapid growth is the Inter-Blockchain Communication protocol (IBC). IBC allows independent blockchains to connect and flourish, transfer tokens and other data, and enrich their ecosystems through every interaction. In this article, you will learn what IBC is, why IBC is important, and why this interoperability protocol is a game changer for blockchain developers.

What Is IBC?

Launched in April 2021, IBC is the Cosmos standard for blockchain interoperability. The Cosmos ecosystem has a vision of creating the “Internet of Blockchains,” a network of sovereign independent chains that communicate, interact, and exchange assets in a decentralized, trustless environment. One blockchain or multiple blockchains can connect directly and securely by using IBC.

The IBC open-source protocol is designed to transmit messages between independent distributed ledgers, interconnect different blockchains, allow heterogeneous chains to communicate with each other in a trustless manner, and send arbitrary packets of data (including tokens) between blockchains. This communication makes the chains interoperable.

For example, IBC-enabled decentralized exchanges (DEXs), such as Osmosis or the Gravity DEX protocol, let users immediately benefit by allowing smooth token exchanges across multiple chains.

IBC differs from other interoperability protocols as most cross-chain bridges that are created by third parties vary significantly in maturity and security, depending on the protocols they interact with. These differences increase security risks and can result in an inconsistent user experience. With the help of IBC, the data is delivered by using a trustless relayer over a dedicated channel and then authenticated after it reaches the target chain.

Why is IBC such a big deal? In February 2022, less than 10 months after its launch, IBC transfers had already surpassed 11 million.

A World Without IBC

An increase of blockchains with various value propositions, consensus mechanisms, and ideas has occurred since 2009 when the first block was mined on the Bitcoin blockchain. Before IBC, these blockchains existed in closed-ended silos and were unable to communicate with each other. Because traditional blockchains are not interconnected, they are often restricted by scaling issues, very high fees, and prolonged transaction times. The Ethereum network, for example, hit approximately 98% capacity in July 2021.

As decentralized finance (DeFi) applications grow in popularity, the high cost and congestion of the Ethereum network are driving applications to migrate to alternative Layer 1 and Layer 2 solutions such as Solana, Avalanche, or Polygon. However, this exodus to various different Ethereum alternatives leaves the DeFi space heavily fragmented and the interoperability issue remains unresolved.

Being able to transfer tokens and other data frictionlessly and trustlessly between previously unconnected blockchains is vital for the sustainable growth of DeFi and the blockchain industry at large. Traditional blockchains perform various tasks, such as delivering cryptocurrency in the case of Bitcoin and enabling localized application platforms in the case of Ethereum. These blockchains are highly specialized in distinct tasks but remain isolated due to a lack of interoperability. In a world without IBC, a communication mechanism does not exist to allow blockchains to share information trustlessly. Because of this technology gap, the potential user base has been restricted.

IBC Is the Pulse of the Cosmos Ecosystem

How do blockchains get out of their silos? Chain developers enable the IBC interoperability protocol to handle transport across different blockchains. With IBC, communication between different blockchains is happening and it’s happening fast. Today, 42 chains are using IBC. When testnets are included, 174 chains are interconnected and talking to each other.

These rapidly increasing numbers mean that more networks are joining all the time and these networks rely on IBC. IBC transfer activity between different chains is the pulse of the entire Cosmos ecosystem. A massive 350K transactions per day occur with significant traction among Cosmos decentralized applications. And this is just the beginning.