Osmosis is Bringing Cross-Rollup Liquidity to the Celestia Ecosystem

Osmosis is expanding outside of the Cosmos and into the modular blockchain landscape with its upcoming integration with Celestia’s DA layer. As the leading DEX in the Cosmos, Osmosis has acted as a liquidity hub for IBC-connected chains. The integration will serve to bridge liquidity between rollups on Celestia, as well as between these rollups and existing IBC-connected chains. Osmosis also plans to abstract data availability (DA) layer fees for rollups that opt-in to the bridging system, allowing them to pay in whichever token they desire, so long as it is available on the DEX.

The bridging system that Osmosis proposes appears to be trust-minimized, which is only possible between rollups that share a DA layer. Trust-minimized in the context of bridging implies that there is no trusted third party in between participating chains, as well as no trust imposed on the operators of either chain during cross-chain transactions. Presently, IBC-connected chains trust the consensus of the other participating chains as light clients accept and officiate transactions provided to them by each chain. Osmosis, in partnership with Hyperlane, intends to implement a cross-rollup bridging system whereby Osmosis validators will run Celestia light nodes to verify the state transitions of each connected chain, thereby eliminating any trust in either chain’s operators. A fraud-proof system will be implemented to slash Osmosis validators should they attempt to act on invalid state transitions.

Osmosis also intends to implement a fraud-proof system to detect and respond to fraud between mesh secured chains. Osmosis is an initiator of Mesh Security in the Cosmos ecosystem where delegators of Cosmos chains will be able to restake their tokens towards validators on other Cosmos chains in attempts to compound security. This is distinct from Cosmos Interchain Security, where Cosmos Hub validators are required to operate as the validator set of Consumer Chains that do not wish to bootstrap their own validator set.

The Celestia bridging announcement further implies that Osmosis intends to expand its DEX liquidity outside of its existing Cosmos app chain and into the interconnected rollup ecosystem. This effectively makes the project both a DEX and a cross-rollup communication protocol. In the modular world, rollups do not share state by definition, and it will be imperative for bridging protocols to connect them for a seamless liquidity experience. Cross-rollup bridging using state transition proofs represents a security improvement to existing bridging infrastructure as well as a large technical undertaking. Should Osmosis and Hyperlane succeed at developing such a system, it might be the first of its kind to offer trust-minimized bridging in the Celestia rollup ecosystem.