What is Interchain Account?

DeFi’s Development

With the explosion of DeFi from day one to today, never needs interoperability been so clearly emphasized. A financial system with no middlemen was quickly dominated by market makers and whales. Gas fees on Ethereum skyrocketed to over $200 per transaction, and the hundreds of DeFi dApps built on have struggled to achieve throughput and scalability.

With hurdles like these, the DeFi market has seen a plethora of solutions ranging from layer-1 replacements to layer-2 scaling and side-chain solutions. However, all these changes are intended to provide cheaper, faster usability, an improvement that comes with significant decentralization and security trade-offs.

From the start, IBC has been designed around a long-term vision of a multi-chain future, following the highest development standards as a sustainable solution with interoperability as a first principle, session The initial version of IBC allows independent Cosmos chains to connect and transact while retaining their autonomy.

In the 10 months since its launch, 38 chains have joined the #IBCGang, executing over 9.3 million IBC transactions in 30 days. Now, the next version of IBC, Interchain Account, is ready to take Cosmos interoperability to the next level.

What are Interchain Accounts?

Developed by Interchain GmbH, Chainapsis, Informal Systems, and Confio, with Interchain Accounts, IBC-enabled blockchains can do more than connect and transfer tokens. The entire blockchain can control accounts on separate chains. So instead of users simply transferring tokens and tracking them across different blockchains, Interchain Account provides access to all IBC-enabled Cosmos blockchains right from a single Cosmos Hub account.

That means that dApps of the Cosmos ecosystem can access the features of another dApp and perform any action on that platform. For example, users who are on the Sommelier chain can perform transactions on Osmosis (such as a stake, vote, token swap, etc.) and vice versa. This results in a significantly improved user experience and brings much-needed synergy to the Cosmos ecosystem.

In Cosmos, except for the smart contract platform CosmWasm, dApps do not have immediate access to other dApps because each application is essentially a blockchain. Even so, thanks to IBC, Cosmos has become TVL’s No. 2 blockchain ecosystem after Ethereum.

The Interchain Account provides aggregation and interoperability of smart contracts on different blockchains. This will create a boom for DeFi platforms in the Cosmos ecosystem. With aggregation in IBC, innovation in individual applications can be easily deployed without significant upgrades.

Unlike on Ethereum or similar ecosystems, where applications are bound and governed by the layer-1 on which they are built, using IBC as the protocol, blockchains remain in full discretion, while achieving interoperability. In other words, the composability that Interchain Account introduces does not take away the benefits of application-specific blockchains.

Cosmos Hub, Sommelier, and Osmosis will be among the first projects to implement the Interchain Account module on their chain. Cosmos Hub will upgrade the Interchain Account module in the Theta Upgrade in the 1st quarter 1 2022.

Summary

With Interchain Accounts, all the applications and protocols that connect to IBC will attract more users to Cosmos, benefit the entire ecosystem, and make DeFi a more engaging and convenient experience. for everyone, bringing Cosmos closer to mass adoption.

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