Chapter II: THORFi — What will the IBC-integration mean for THOR.BTC?
Setting the scene
Not a day goes by without massive announcements being made in the crypto-world, and the inter-blockchain communication (IBC) protocol is no exception. Launched just over a year ago, we’re beginning to see how IBC transforms how data is sent across independently developed blockchains.
Before we take a deep dive into the consequences of the IBC integration for THOR.BTC, let’s get to grips with some of the basics.
The ABCs of IBC, if you will.
What is the IBC protocol?
The most important thing about IBC is that it enables independent blockchains to connect while removing the need for the two chains to communicate directly. Instead, data is sent through a dedicated channel that connects to the chains via smart contracts.
Why not just use a bridge? Well, most bridges are built by third parties and have varying degrees of security, making them vulnerable. On the other hand, the IBC protocol allows data to be sent via a trustless ‘relayer,’ authenticated upon receipt by the destination chain.
Importantly, because IBC is permissionless, anyone can operate a ‘relayer,’ and the participating blockchains do not need to trust whoever is transferring the information between them.
As the Cosmos composability layer, IBC allows sovereign Cosmos chains (technically termed ‘zones’) to inter-operate seamlessly. You could confidently say that IBC is a game-changer.
Despite zones having vastly different applications, validators, and consensus mechanisms, the IBC enables these zones to exchange data and value.
In other words, this integration will allow THOR.BTC to travel freely anywhere in the Cosmos, a.k.a ‘the internet of blockchains.’ Mind-blowing, right?
Just as the Transmission Control Protocol and Internet Protocol (TCP/IP) became the backbone of the internet, you can imagine a future whereby the IBC will be the backbone of the crypto economy, token economy, and Web3.
THORChain is now firmly embedded into this vastly scalable system, and the future possibilities are endless. It follows that derived assets, such as THOR.BTC will be adopted en masse due to their ability to be transferred anywhere.
For a more detailed look at IBC, check out this article by Coinbase.
How much value does the IBC transfer per month?
As you will note in the image (dated 8 May 2022), most of the volume passes through Osmosis. These were the most active zones by IBC transfers in the last 30 days, and the total for the top three zones combined is a staggering $7+ billion.
What is THOR.BTC?
THOR.BTC is a synthetic (synth) token termed a ‘derived asset,’ as the RUNE liquidity fully backs it. To mint THOR.BTC, the equivalent value of RUNE, must be burned. You can check out our article, which delves into the topic.
- The primary purpose of derived assets is to be used for THORSavings, which will result in more RUNE being burned and therefore increasing the value of RUNE.
- The secondary purpose of derived assets is to create a new asset class that isn’t limited. You have THOR.BTC on THORChain, you can burn it and mint an ERC20 THOR.BTC (While paying a fee to the USD vault).
THORChain x IBC — what’s next for THOR.BTC?
Here are two main changes we can expect to see as a result of the integration:
1. THOR.BTC adoption throughout Cosmos
The IBC will enable THOR.BTC to be exported to any zone (chain) connected to the Cosmos Hub. The Cosmos Hub was the first Cosmos blockchain and can be thought of as an intermediary between the different zones.
At the time of writing, there were 46 zones in the Cosmos, and this is just the beginning.
The Cointelegraph recently interviewed Peng Zhong, CEO of Tendermint (the core developer of the Cosmos blockchain), where they discussed cutting-edge advancements in the Cosmos ecosystem:
“Five years from now, I would expect the number [of chains] to be tens of thousands, if not hundreds of thousands of chains linked through IBC.” — Peng Zhong, CEO of Tendermint
As more zones connect to the Cosmos Hub, this will naturally bring more users and liquidity. As THORChain grows within an ever-expanding Cosmos, expect the demand for THOR.BTC to steadily increase.
2. Potential AMM DEX listings
Through conversations with THORChain core developers, we understand their ambition to export THOR.BTC to AMM DEXs throughout the Cosmos ecosystem. For example, this could mean being able to use THOR.BTC on protocols such as Gravity DEX, Osmosis, Sifchain, and Coinswap.
It’s worth noting that, for the time being, THOR.BTC will only be usable on THORChain, as certain milestones need to be met. However, we can look forward to these future developments.
Beyond IBC-enabled chains, the THORChain team plans to integrate with other chains such as Ethereum, which theoretically means THOR.BTC could be exported to the likes of Curve and Uniswap. Therefore, THOR.BTC would establish itself as a cross-chain, permissionless, derived alternative to today's wrapped tokens.
So, wen derived assets?
Derived assets will be available in the coming months on stagenet.
Conclusion
A vast amount of activity is brewing beneath the THORChain surface.
The strength of this IBC integration can’t be overstated. It will enable THOR.BTC is to be utilized creatively by many different protocols.
With all of these developments in the pipeline, it is clear that THORChain is leveraging the power of THOR, the Norse hammer-wielding god of thunder the protocol is named after.
Bring on the thunder.
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