Cosmos Theta Upgrade

On March 25, 2022 a formal governance proposal to implement the highly anticipated Theta Upgrade to the Cosmos blockchain was submitted for voting. After just a few days, the 40% quorum was reached with over 99% of voting participants opting in favor of implementation.

While Cosmos SDK v0.45 introduces minor bug fixes and improvements, the big news includes a new governance proposal type for the Gravity DEX to enable migration to its own Cosmos zone, and the latest IBC 3.0.0 which introduces interchain account modules.

Inter-Blockchain Communication (IBC) Protocol Overview

Today there is over $40 billion of TVL in bridging infrastructure. This allows layer 1s that are not connected to one another through something like a Relay chain on Polkadot to communicate. These bridges simply verify transactions being passed back and forth between two ecosystems. Bridges generally lock an underlying token being transferred from chain A into a smart contract on this source chain that then mints a wrapped asset on chain B (the destination chain) to satisfy a certain token standard. However, as recently displayed by the hack of the Ronin bridge, this infrastructure requires trust that the majority of validators securing the bridge remain honest/uncompromised.

In contrast, IBC’s “light client” design requires state verification to be performed in order to confirm a transaction. This is possible because the validity rules of one chain are directly encoded in the IBC client on the other chain, thus enabling a trustless channel for cross chain communication instead of trusting a 3rd party validator set. Not only is this design trustless, but any blockchain will eventually be able to choose to spin up an IBC client and relayer to begin communicating with any other IBC enabled chain. This would enable the communication of blockchains in the Cosmos interchain with Ethereum, Polkadot, etc. For now, IBC only connects Cosmos chains built using their SDK.

In March of 2021, ATOM token holders voted in favor of enabling IBC transfers using the ICS20 token standard on the Cosmos Hub. This officially connected all other IBC enabled chains to the Cosmos Hub, enhancing interoperability between independent blockchains.

IBC consists of two primary layers: the transport layer (also referred to as TAO: transport, authorization, and organization) that provides the infrastructure to establish connections and authenticate data packets between two chains, as well as the *application layer *which defines how the data packets should be structured and interpreted by the two chains involved in a transaction. This is important because IBC defines how data is sent and received across blockchains, but it does not place restrictions on what the data is or how it needs to be structured. This allows for greater diversity and fewer headaches as it relates to upgrades for all IBC enabled chains.