Author: Agustin Cortes | Tint.eth leads partnerships at Composable Finance. Here is my profile on Twitter
Date Posted: Dec. 8th 2023
This temperature check seeks community feedback on the proposal to make Dola, Inverse Finance’s decentralized stablecoin, compatible with the Inter-Blockchain Communication (IBC) protocol. This initiative aims to expand Dola’s utility across multiple blockchain ecosystems, enhancing its accessibility and usability. In specific the new chains would be Cosmos, Polkadot, and Solana
We propose to develop and implement the necessary smart contracts and bridge infrastructure to enable the transfer of Dola between Ethereum (and its Layer 2 extensions) and other IBC-enabled blockchains. This will allow Dola to function seamlessly within a larger cross-chain DeFi ecosystem.
- Increased Utility: By enabling cross-chain transfers, Dola could become a more widely accepted medium of exchange and store of value across various DeFi applications.
- Enhanced Demand: Access to multiple blockchains is likely to increase the demand of Dola, improving overall market health.
- Attract Cross-Chain Users: Expanding Dola to be compatible with the IBC protocol will attract users from various blockchains to Inverse Finance, broadening its user base and enhancing network effects.
To strategically bridge Inverse Finance’s stablecoin, DOLA, to the Cosmos, Polkadot, and Solana ecosystems, we propose utilizing the Inter-Blockchain Communication (IBC) protocol to establish an IBC connection between Ethereum and Cosmos, leveraging existing connections between Cosmos and Polkadot, and developing a dedicated parachain for Solana integration. This comprehensive approach will enable seamless DOLA transfers across these major blockchain ecosystems, significantly expanding its market reach and enhancing liquidity and usability.
- Token Standard Translation Mechanisms: Create mechanisms that can effectively translate ERC token functionalities (like ERC-20 and ERC-721) into corresponding ICS formats, maintaining the integrity and properties of the assets
- Economic Impact: Evaluate the potential economic effects on Dola’s peg and market dynamics.
- Decentralization and Trust Minimization: Strive to maintain decentralization and minimize trust requirements in the interoperability mechanisms, which IBC is current best solution
- Community Discussion: We invite the community to discuss this proposal’s merits and challenges.
- Formal Proposal: Pending positive temperature check results, draft a detailed proposal for community voting.
The migration of moving DOLA through IBC will be facilitated through IBC and Composable Finance. More information on IBC and Composable Finance below.
Detailed IBC Overview
The Inter-Blockchain Communication Protocol (IBC) is a protocol designed to facilitate the authentication and transportation of data between two blockchains. It operates with a minimal set of functions defined in the Interchain Standards (ICS). Importantly, IBC does not limit the network topology or consensus algorithm of the blockchains it connects, making it versatile and adaptable for use with a wide range of blockchains and state machines. The following features highlight key benefits to utilizing IBC:
i) Permissionless and Secure: IBC offers a permissionless way to relay data packets between blockchains, unlike most trusted bridging technologies. The security of IBC relies on the security of the participating chains.
ii) Modularity and Composability: IBC separates the transport layer (TAO) responsible for secure connections and data authentication from the application layer, which defines how data packets are packaged and interpreted. This modularity enables composability and the ability to design applications on top of IBC.
iii) Light Clients and Relayers: IBC relies on light clients and relayers to ensure the validity of cross-chain transactions. Relayers are responsible for scanning the state of participating chains, constructing datagrams, and executing them on the receiving chain. Light clients efficiently verify the relevant state of the counterparty blockchain.
iv) Security: IBC’s security is based on trusting the consensus of the connected chains. It also implements fault isolation mechanisms to limit damage in case of malicious behavior.
Composable was the first company to connect a non Cosmos chain through IBC. This was through a custom mechanism to connect Polkadot and Cosmos. Our goal is to bring IBC everywhere, hence connecting to all chains. Connecting to Ethereum will be a major push in the terms of secure interoperability as we are moving away from centralized solutions and empowering users.
This governance temperature check is a preliminary step to gauge community sentiment and does not constitute a formal vote. Community members are encouraged to participate actively in the discussion.