Layer 1 Networks: 2022 Review Part Two

Perhaps the biggest embodiment of cross-chain communication in 2022, both its latent potential and its challenges, was the Cosmos/IBC ecosystem. One of the biggest step changes in functionality for chains in the Cosmos ecosystem came in Q1 2021 with the activation of IBC transfer functionality, which effectively opened the floodgates for liquidity to flow freely between IBC-enabled chains. With the introduction of this feature following the passage of Cosmos Hub proposal 41, the path was paved for the Cosmos ecosystem to move closer than ever before to the vision of interconnected app-chains first laid out in the original Cosmos whitepaper. Within this vision, the Cosmos approach to blockchain scalability can essentially be thought of as a distribution of key blockchain responsibilities, more specifically execution and consensus, to sovereign blockchains connected by a standard cross-chain messaging protocol (i.e., IBC).

A similar version of this approach to scalability has emerged independently outside of the Cosmos ecosystem over the course of 2021-2022, with a host of Ethereum-alternative L1 networks now connected by a variety of cross-chain bridges. Compared to the collection of bridges that currently provide channels for asset transfers between otherwise siloed L1 chains, the Cosmos IBC protocol’s key differentiator is its standardization of cross-chain communication between all IBC-enabled chains. This seemingly minor improvement bears significant practical consequences in terms of security, implementation, and user experience.