Interchain Jam Highlights: Interchain Service Providers
In today’s Interchain Jam Highlights, we recap the live Interchain Jam X session hosted by the ICF’s Robb Stack. In this edition, we find out how IBC, one of the components of the Interchain Stack, is enabling blockchains to become Interchain Service Providers. We hear from contributors to the Cosmos Hub, Secret Network, and Valence, three projects developing blockchain-to-blockchain solutions to advance the interchain. Let’s dive in!
Getting to Know the Interchain
Secret Network — Decentralized Confidential Computing
Secret Labs is building Secret Network, a confidential computing blockchain based on Cosmos SDK, and the first mainnet chain with privacy-preserving smart contracts. Launched in 2020, Secret Network makes it possible for developers to build apps that are decentralized and permissionless — yet private. Using the Rust programming language and encrypted data, these applications run natively on Secret Network and connect to other blockchains via cross-chain communication protocols like IBC, unlocking powerful new use cases for the interchain and beyond.
Secret Network is using Intel® Software Guard Extensions (SGX), an architecture extension that increases the security of application code and data, to achieve confidentiality of the network state. Over the past few months, the team has been building a confidential computing layer for other blockchains, including EVM chains and Cosmos SDK chains, effectively providing privacy as a service. Secret aims to enable developers on every chain to build applications that protect user data to prepare the industry for real mass adoption.
Why is privacy so important to the interchain? Secret Labs CEO Alex Zaidelson explains that as the industry expands, hundreds of millions more users managing their finances, social interactions, gaming, healthcare needs, and more, generate a lot of data. “You cannot have all people’s lives out in the open. You need to have data protection… DCC (Decentralized Confidential Computing) is necessary and inevitable.”
Cosmos Hub — Interchain Security and Hydro
Informal Systems contributes to the Cosmos Hub and develops tools and processes to improve the quality and experience of software engineering in the interchain. Informal Systems is the lead developer of CometBFT, another component of the Interchain Stack, Interchain Security (Replicated Security), and Interchain Security 2.0 (Partial Set Security (PSS)), solutions to help bootstrap and scale blockchain security across the ecosystem. The team is also developing Hydro, a bidding and governance platform to address the problem of thin liquidity across the interchain, and incubating an open clearing protocol Cycles Money, among many other initiatives.
Launched in 2019, the Cosmos Hub is the first of hundreds and potentially thousands of interconnected blockchains that comprise the interchain. The Hub competes to provide the best possible services to other chains, like Interchain Security and cross-chain liquidity, with the primary goal of helping the interchain grow. Director of Strategy at Informal Systems Thyborg, says:
“We want to give people a place to launch. If you’re a new crypto team and want to launch somewhere, you’re looking at the landscape. You have Solana, you have Celestia, you have the ETH rollups, you have all of that… What the Cosmos Hub wants to provide is the best place to launch a chain where you control your consensus, your validator set, and you can integrate with the IBC ecosystem, which has positive synergies for all.”
Valence — Permissionless Interchain Collaboration
Developed by TimeWave Labs, Valence is a cross-chain protocol using IBC that enables crypto-native organizations, such as chains, dApps, DAOs, and protocols, to enter into programmatic relationships with other crypto-native organizations, enabling blockchain-to-blockchain dealmaking. Co-founder of TimeWave Labs Max Einhorn says, “IBC enables users to send assets between chains and Valence enables them to do this automatically at the protocol level. This means that not only users but any blockchain — for example, the Cosmos Hub — can participate in DeFi.”
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Valence extends the scope of interoperability by enhancing the capabilities of IBC, enabling programmatic economic relationships between crypto-native organizations, which can range from simple token swaps to more advanced interactions, such as adjusting treasury compositions according to market conditions or lending protocol-owned liquidity (POL). Valence works with Cosmos SDK chains, Bitcoin Layer 2s, Ethereum protocols, Solana DAOs, and “degens and regens anywhere.”
What Interchain Services Look Like
Interchain service providers that offer solutions from blockchain to blockchain have been evolving since the launch of IBC in 2021. Interchain Security, now available as Interchain Security 2.0 (or Partial Set Security (PSS)) enables new chains to bootstrap their economies while rewarding Cosmos Hub validators who opt-in to secure consumer chains. Rather than the initial version of Interchain Security, which provided a complete overlap of the validator set of the Cosmos Hub, PSS provides a more scalable and cost-effective approach to securing consumer chains while maintaining decentralization and security.
Other types of interchain services that are emerging include confidential computing that enables developers to build applications that protect user data, programmatic economic relationships between chains that enable liquidity sharing and the more efficient growth of DeFi, and machine-to-machine payments as we saw from Althea Network in the previous edition of Interchain Jam Highlights. As more projects expand upon the capabilities of IBC and more key features are added (such as Interchain Accounts that allow for a chain, a module, or a user to programmatically control an account on another chain), the scope of interchain services will continue to grow.
Confidential Computing
Secret Network’s confidential computing opens up myriad use cases for other chains, from confidential voting to confidential auctions, and confidential cross-chain trading strategies. Secret Network required a general message-passing mechanism to develop confidential computing as a service. The team began using Axelar to connect to external ecosystems, but as a general-purpose bridge, Alex says, “It became quite expensive and relatively slow.” So the team developed its own solution called SecretPath, a lightweight trustless bridge that passes tamper-proof signed messages.
Secret’s Confidential Computing Layer is now live on 20+ blockchain networks for EVM chains to deploy their privacy-preserving smart contracts. SecretPath is in the final stages of development for Cosmos SDK chains to implement. “This is our interchain capability that we will offer to all or most Cosmos SDK chains,” Alex says.
Programmatic Economic Relationships
“If you want to win, you have to figure out how to lean into your strengths… which are IBC, the variety of programming languages, and the popularity of CosmWasm… but we also need to be aware of our weaknesses,” Max explains. While DeFi represents a large part of the interchain, projects need access to better liquidity between trading pairs and greater control over their monetary policies.
“The types of monetary policies I’m referring to are liquidity-sharing deals and being more proactive about what your inflation rate is, where that inflation is going, and using that in such a way that will help you forge alliances, support your token price, and help bootstrap native DeFi ecosystems. These are all things we’re hoping to unlock at TimeWave by building the Valence protocol.” Teamed with PSS, Max believes Valence can help take the interchain “to the next level.”
“Shared security induces demand for shared liquidity… The level of shared liquidity that Valence is enabling is from one protocol to another provides a level of capital efficiency that can be an additional layer on top of DeFi that makes everything more efficient, and really gives the interchain an edge relative to others. This can be a real game-changer.”
Shared Security and Partial Set Security (PSS)
Thyborg explains that version one of Interchain Security was “very heavy” on the Cosmos Hub validators because every validator had to validate the consumer chain, requiring considerable bandwidth and resources. PSS fixes this issue by allowing Cosmos Hub validators to opt in. “So, instead of forcing everyone into this, they can choose, they can volunteer to validate or not. This provides a much more scalable version of this feature for the Cosmos Hub.”
With 180 validators on the Cosmos Hub, Thyborg estimates that each one will likely opt-in to validate around five consumer chains, and each consumer chain will require between 20 to 50 validators. “So, we have a much more scalable product here with slots available for many more chains.” Unlike Replicated Security, PSS requires “just half a demo day for chains to join,” so projects don’t have to allocate too many resources to integrating PSS. Best of all? PSS will soon be permissionless, removing the need for chains to go through lengthy governance proposals, and accelerating PSS adoption.
An Auction Platform for Liquidity Exports
Thin liquidity prevents the interchain from realizing its full potential, translating into volatile asset prices, which reduces users, restricts access to DeFi, and deters new developers from building in the interchain. Rather than choose the Interchain Stack, the thin liquidity issue often drives them to external ecosystems like Ethereum or Solana. While efforts have been made to address this problem by extracting funds from the Cosmos Hub community pool, they have largely been manual and uncoordinated, leading to missed opportunities.
Enter Hydro, an auction platform to export liquidity — in particular, ATOM liquidity — into the interchain to streamline these efforts and democratize access to idle capital in interchain community pools. Thyborg says, “Valence, PSS, and Hydro are three pieces of a broader vision that I think is extremely exciting.” While PSS may be a game-changer for Interchain Security adoption, Thyborg points out that it is no longer unique and competes with other blockchain ecosystem’s similar solutions like Eigenlayer or Symbiotic. “The Cosmos Hub has to keep an edge. We have to keep offering something more than the others.”
The first version of Hydro is already on testnet and will be deployed to mainnet on Neutron in mid-August. ATOM and stATOM holders will be able to lock their tokens into Hydro for an additional APR, which will depend on how many projects participate in Hydro and the number of bids they offer to Hydro lockers. Thyborg enthuses, “This will be another use case for ATOM… the energy around the Cosmos Hub has been very conservative. Hydro is going to provide this excitement in terms of deciding which projects get the liquidity and providing another way for people to get an APR on their ATOMs.”
Wrapping Up
Interchain service providers are solving problems, addressing friction in interchain adoption, and expanding the capabilities of IBC. By building interesting applications and protocols on top of IBC, innovation in the interchain is flourishing. Be sure to keep up with Valence, Secret Network, and Cosmos Hub by following their socials, and don’t miss out on the mainnet releases coming soon. Also, tune into the next Interchain Jam session on Thursday, July 25 at 2 PM UTC with Akash Network, the decentralized cloud computing marketplace.
