Da Hongfei

Layer-1 networks can no longer afford to operate in isolation. To remain relevant and competitive, these networks must prioritize multichain technology and interoperability. The future of Web3 is interconnected, and any layer-1 that fails to evolve risks obsolescence. The blockchain ecosystem has undergone a profound transformation over the past few years. The introduction of Ethereum’s 2022 merge and the ongoing <a href="https://ethereum.by/fi/eth2/shard-chains/">development</a> of shard chains have set new benchmarks for what layer-1 blockchains can achieve. These innovations have compelled layer-1s to enhance their functionalities to meet the growing demands of the ecosystem.



This competitive pressure is further intensified by the increasing integration of blockchain technology into traditional finance. Recently, the <a href="https://www.morningstar.com/funds/whats-next-spot-ether-etfs">advent</a> of spot ETH ETFs marked a turning point in terms of mainstream acceptance, signaling a broader recognition of blockchain’s potential. Now, as our industry’s technology gains traction in traditional finance, the pressure on layer-1s to offer seamless interoperability across chains is intensifying.



Read more from our opinion section: <a href="https://blockworks.co/news/bitcoin-runes-ordinals-innovation" target="_blank" rel="noreferrer noopener">Don’t fossilize Bitcoin</a>



Networks that fail to prioritize interoperability will struggle with issues like increased network congestion, limited scalability, and degraded performance. This will not only slow down transactions but also diminish the overall user experience, ultimately making these networks less attractive to developers and investors. The demand for greater interoperability is not just a trend; it’s a necessity for survival. But this task is easier said than done.



For layer-1s to thrive, they must embed interoperability into their core architecture. Ethereum’s layer-2 solutions, such as <a href="https://ethereum.org/en/developers/docs/scaling/optimistic-rollups/">Optimistic Rollups</a> and <a href="https://ethereum.org/en/developers/docs/scaling/zk-rollups/">zk-Rollups</a>, illustrate the types of innovations that developers now expect from layer-1s. Zk rollups, in particular, play a crucial role in both scalability and interoperability. By bundling multiple transactions into a single proof, zk rollups significantly reduce the computational load on the main chain, allowing for faster transaction processing and lower fees.



This scalability improvement is critical for layer-1s aiming to handle the increasing demands of decentralized applications. Moreover, zk rollups inherently support cross-chain communication by enabling secure, verifiable transactions between different layer-1s without relying on centralized intermediaries. This capability is essential for fostering a truly interconnected blockchain ecosystem.



As we shift toward a multichain future, the introduction of cross-chain interactions presents new <a href="https://twitter.com/pcaversaccio/status/1813190405556506900?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1813190405556506900%7Ctwgr%5E296f89f403b3346646f47bc026e63bdb012c6f0d%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fcybersecuritynews.com%2Fli-fi-protocol-hack%2F">vulnerabilities</a>, particularly around security and consensus mechanisms. The increased complexity of these interactions can lead to potential attack vectors like replay attacks, where a transaction on one chain could be maliciously duplicated on another. Moreover, the diversity in consensus algorithms across different chains — such as proof-of-stake versus delegated proof-of-stake — can introduce inconsistencies in security guarantees.&nbsp;



To mitigate these risks, layer-1 blockchains must not only implement robust cryptographic measures but also consider adopting standardized protocols for cross-chain communication, such as the Inter-Blockchain Communication (IBC) protocol. These protocols ensure that consensus is maintained across networks, reducing the likelihood of exploits that could undermine the security and integrity of the entire ecosystem.



As transaction fees decrease, the barriers to adoption will diminish, democratizing access to blockchain technology and expanding its potential applications. Additionally, addressing concerns like maximal extractable value (MEV) and censorship will enhance the fairness and security of these networks, fostering greater trust among users. MEV, in particular, poses a significant threat to the integrity of decentralized systems, as it allows validators or miners to manipulate transaction ordering for profit. Tackling this issue requires not just technical solutions but also a commitment to upholding the principles of decentralization and transparency.



The growing involvement of major financial players, such as Abrdn, BlackRock, and DWS, in the digital asset space <a href="https://www.fnlondon.com/articles/how-abrdn-blackrock-and-dws-are-gearing-up-for-a-digital-assets-boom-20240208">signals</a> a continued flow of investment into projects that prioritize interoperability. Traditional asset managers, encouraged by SEC-approved crypto ETFs, will increasingly support solutions that bolster the blockchain economy’s growth and stability.



It is clear that the evolution of layer-1 blockchains into the multi-chain era is not just a possibility — it is an inevitability. As the industry continues to innovate, the importance of interoperability will become ever more apparent. To survive and thrive in this rapidly changing landscape, layer-1 blockchains must fully embrace multichain technology and the interconnected future it promises.



Blockchains that fail to embed interoperability into their core architecture risk becoming obsolete, missing out on the rapidly expanding opportunities in a world that increasingly values seamless integration and collaborative innovation. In a multichain future, only those networks that can adapt will thrive, while others may become relics of a more siloed past.



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ETFs

Isolation is no longer an option for L1 blockchains

Macauley Peterson

A vulnerability in inter-blockchain communication (IBC) protocol that was patched in April reared its bugly head on the Terra blockchain, late Tuesday.



Onchain data <a href="https://x.com/Rarma_/status/1818477986569765308">showed</a> an erroneous minting of 58 million ASTRO tokens — worth about $2.7 million —&nbsp;and about $4.1 million in USDC, USDT and wrapped BTC.



Terra conducted an emergency chain upgrade to prevent the vulnerability from affecting other tokens, according to a <a href="https://x.com/terra_money/status/1818498438759411964">post</a> on X. The current Terra is the fork that arose following the collapse of the <a href="https://blockworks.co/tag/ust">UST</a> stablecoin on what’s now known as the Terra Classic blockchain.



ASTRO is the governance token of Astroport, a decentralized exchange launched in late 2021 on Terra Classic.



The <a href="https://blockworks.co/tag/terra">Terra/Luna</a> implosion in May 2022 forced many projects, including Astroport, to rethink their strategies. Astroport pivoted towards a multichain strategy with its primary hub on <a href="https://blockworks.co/tag/neutron">Neutron</a>, a smart contract blockchain built on the Cosmos SDK.



Swift maneuvers from the Astroport team have reportedly contained the damage from the IBC bug exploit.



Read more: <a href="https://blockworks.co/news/ibc-close-call-with-critical-vulnerability">IBC had a close call with a critical vulnerability</a>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">🚨 ATTENTION 🚨 A short update on the recent events: &#8211; The attackers&#39; <a href="https://twitter.com/search?q=%24ASTRO&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ASTRO</a> on Neutron have been seized and is being held in the Astroport Treasury &#8211; The attackers&#39; Terra address has been blacklisted from making any transactions &#8211; The IBC Hook vulnerability has been patched -…&mdash; Astroport ✦ (@astroport_fi) <a href="https://twitter.com/astroport_fi/status/1818663685704892511?ref_src=twsrc%5Etfw">July 31, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Astroport co-lead Donovan Solms <a href="https://x.com/donovansolms/status/1818755367209246756">commented</a>, “Today was the toughest day&nbsp;[Astroport] has had since the collapse of Terra in &#8217;22. And for a second time, it was due to circumstances outside of our control and our contracts remain unaffected.”



Blockworks requested comments from representatives of Terraform Labs and Neutron.



Terra responded with a <a href="https://x.com/terra_money/status/1819032544274194885">statement</a> that &#8220;a detailed breakdown of events&#8221; would be forthcoming.



It’s not immediately clear how the bug, which was discovered and fixed in April, was able to return.



Zaki Manian, co-founder of Sommelier, reported that a June upgrade “accidentally” reintroduced the vulnerability.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Terra was part of the original vulnerability coordination but they accidentally reverted the patch in the June upgrade <a href="https://t.co/0BHB5kCQwZ">https://t.co/0BHB5kCQwZ</a>&mdash; Zaki ⚛️🍷 (@zmanian) <a href="https://twitter.com/zmanian/status/1818506615001358801?ref_src=twsrc%5Etfw">July 31, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Terra was running on their own fork of IBC software, outside the main Cosmos Github repository, which did not contain the fix, Manian told Blockworks.



Running a private version of IBC puts the onus on the team to be responsible for maintaining it and keeping critical bugs out.



“When you have a team that becomes a skeleton crew, this decision that they made to be on a fork had an enormous cost,” Manian said.



One measure which could have mitigated the risk in this case is the use of IBC rate limits, an idea which has many proponents, particularly on chains with DeFi applications.



“There is very little reason why Terra needed to be able to move $3 million in one day,” Manian said. “A significant fraction of all their [total value locked], so IBC rate limits might have made a big difference.”



Gabriel Shapiro, the general counsel at Delphi Labs, who has closely followed the legal issues facing Terraform Labs (TFL) and its co-founder Do Kwon, <a href="https://x.com/lex_node/status/1818488028916039875">suggested</a> the legal case brought by the SEC against TFL, may have indirectly caused the oversight.



Read more: <a href="https://blockworks.co/news/terraform-agrees-to-pay-proposed-judgment-sec">Terraform agrees to pay nearly $4.5B in proposed judgment with SEC</a>



Delphi Labs co-founder José Macedo claims to have strong evidence of the attacker’s identity.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Have mounting evidence pointing to the identity of the Terra hacker If you&#39;re reading this, come forward to negotiate return of funds in exchange for a bug bounty Otherwise, will be forced to go public with what we have and bring in law enforcement. Don&#39;t ruin your life over…&mdash; José Maria Macedo (@ZeMariaMacedo) <a href="https://twitter.com/ZeMariaMacedo/status/1818644442036732298?ref_src=twsrc%5Etfw">July 31, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The ASTRO token fell by more than -70% following the incident and is currently down about -35% on the day.



Updated July 31, 2024 at 6:09 pm ET with additional context. Updated Aug 1, 2024 at 12:27 pm ET with Terra statement.



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Patched IBC bug strikes Terra chain

Bessie Liu

A recent blog <a href="https://www.asymmetric.re/blog/cosmos-ibc-reentrancy-infinite-mint">post</a> by Asymmetric Research revealed there was a critical vulnerability that affected the inter-blockchain communication (IBC) protocol — a standard that enables interaction among individual cosmos chains.



This vulnerability was found specifically in ibc-go, the Golang high-level programming language implementation of the IBC protocol, and affected CosmWasm-based IBC middleware.&nbsp;



IBC middleware was created to enable the integration of ICS20 with other IBC protocols. Similar to many bridging protocols, the middleware enables packets to be sent from one blockchain to another. These packets are stored as commitments before being properly received and deleted. If they are not received, tokens will be refunded through a timeout functionality.&nbsp;



Read more: <a href="https://blockworks.co/news/picasso-connects-ethereum-to-cosmos-ibc">Picasso connects Ethereum to Cosmos IBC</a>



Asymmetric Research found that the flow between the module deleting the commitment control could be replayed, which meant it was possible to replay the bug and exploit an infinite number of <a href="https://blockworks.co/tag/ibc">IBC</a> tokens.&nbsp;



Multiple chains were vulnerable to the issue, with Osmosis, one of the largest cross-chain DEXs in the <a href="https://blockworks.co/tag/cosmos">Cosmos</a> ecosystem, being the largest chain that could have been affected. However, due to rate limiting on the chain, the damage the bug could have potentially caused was limited.&nbsp;



According to Asymmetric Research, the vulnerability has been privately disclosed to the Cosmos HackerOne bug bounty program, and the issue itself has been resolved without any malicious exploitation.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-hackers-bug-bounties">Helpful hackers net more than $640k in 1 year with crypto bug bounties</a>



“This issue demonstrates how easy it is to break trust assumptions and introduce new vulnerabilities by adding new features and functionality. It is also another example of the importance of defense-in-depth,” Asymmetric Research <a href="https://www.asymmetric.re/blog/cosmos-ibc-reentrancy-infinite-mint">wrote</a> in a blog post.



The research noted specifically that Cosmos teams had strong security measures in place that could have saved them from existential risks. 



“A binary patch was released to fix the underlying IBC timeout reentrancy without breaking consensus. Contributors spent much time and effort assessing the security implications of the mentioned issues,” Asymmetric Research wrote.



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Cosmos

IBC had a close call with a critical vulnerability

Interoperability and staking hub Picasso Network has successfully integrated the Inter-Blockchain Communication (IBC) Protocol with Ethereum.&nbsp;



This means that Ethereum can now transfer assets and data natively with the Cosmos Hub, Polkadot and Kusama via IBC. According to Picasso, more chains will be connected in the near future, including Solana.



Most bridging protocols today use the lock and mint or lock and burn method to transfer across blockchains, which can pose a security risk. Other blockchains introduce trust assumptions by introducing third parties who oversee these transactions. For this reason, native bridging is often considered the most secure way for two separate blockchains to transact with each other.&nbsp;



Read more: <a href="https://blockworks.co/news/rethinking-interoperability-after-string-of-crypto-hacks">Rethinking the crypto bridge after year of hacks</a>



IBC originated in the <a href="https://blockworks.co/tag/cosmos">Cosmos</a> ecosystem and enables native bridging of tokens, messages and accounts. To bring IBC to Ethereum, the Picasso team made changes to IBC and created an IBC stack on Ethereum.&nbsp;



According to Picasso, there are two light clients involved in the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> and IBC connection. These <a href="https://informal.systems/blog/comparing-hyperspace-hermes">relayers</a> are responsible for transferring IBC packets between Ethereum and connected chains.&nbsp;



“As the first team to successfully connect Cosmos to Ethereum via IBC, we have achieved a pioneering breakthrough in crosschain interoperability, fulfilling the biggest milestone of our promise we made in 2021 to bring the highest level of security to bridging,” Henry Love, the executive director of the underlying organizational behind Picasso, Composable Foundation, said in a statement reviewed by Blockworks.&nbsp;



Read more: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



Osmosis, one of the largest decentralized exchanges in the Cosmos ecosystem, will serve as the primary destination for Ethereum assets and liquidity within the Cosmos ecosystem. 



“The shared vision is to allow for a unified and secure crosschain DeFi ecosystem, and connecting Cosmos with Ethereum is both a significant technical milestone and a UX and functionality improvement for users,” Aaron Kong, a growth and strategy contributor at Osmosis, said.



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Picasso connects Ethereum to Cosmos IBC

Native on-chain asset issuance blockchain, Noble, has partnered with Frax Finance to bring decentralized stablecoins FRAX and sFRAX into the Cosmos and IBC ecosystems.



Other Frax Finance tokens, including the Frax Price Index (FPI) and FraxEther (frxETH), are expected to be available at a later date.&nbsp;



FRAX itself is a USD pegged stablecoin, meaning that it is worth 1:1 to the US dollar. Each stablecoin has an 100% collateralization ratio and the stablecoin uses Algorithmic Market Operations (AMO) contracts and non-custodial subprotocols to maintain the peg to the dollar.



Read more: <a href="https://blockworks.co/news/frax-v3-stablecoin-0xresearch">Frax v3 offers ‘all-weather stablecoin,’ founder Kazemian says</a>



sFRAX is a staked version of the FRAX token. In order to receive the token, a user must lock their FRAX with a <a href="https://blockworks.co/tag/staking">staking</a> provider. This will then allow them to earn yield exposure on their <a href="https://blockworks.co/tag/stablecoins">stablecoins</a> that are otherwise sitting idly.&nbsp;



According to DeFiLlama, FRAX is the eighth largest stablecoin based on market capitalization. It currently has a market cap <a href="https://defillama.com/stablecoin/frax">of</a> $388.2 million, lower than popular stablecoins USDC and DAI, which have market caps <a href="https://defillama.com/stablecoins">of</a> $32.116 billion <a href="https://defillama.com/stablecoins">and</a> $4.881 billion, respectively.&nbsp;



Sam Kazemian, the founder of Frax Finance, noted that bringing native FRAX into the <a href="https://blockworks.co/tag/cosmos">Cosmos</a> ecosystem had been a priority for the team for a period of time.



“We look forward to FRAX and sFRAX being available and are excited by the potential of innovative use cases and incentives developed by us and our partners as well as by the broader community of Cosmos appchains and users,” Kazemian said in a press release reviewed by Blockworks.



This process is made possible by Noble, the digital asset issuance chain and the <a href="https://blockworks.co/news/noble-circle-usdc-cross-chain-transfer-protocol-cosmos">native asset issuer of USDC</a> in the Cosmos ecosystem. Through Noble, all major Comos chains that are integrated with IBC — including Osmosis, dYdX, Celestia, Sei, Injective and others — will be able to access FRAX and sFRAX natively.&nbsp;



Read more: <a href="https://blockworks.co/news/noble-solve-cosmos-liquidity">Noble comes out of stealth to solve Cosmos liquidity</a>



“We are excited to partner with Frax Finance in bringing a market leading asset to the wider Cosmos ecosystem,” Noble founder Jelena Djuric said. “FRAX’s integration supports Noble’s vision of bringing liquidity, interoperability and seamless UX and allows Noble to ultimately provide more value to asset issuers and end users.”



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Noble brings FRAX and sFRAX to Cosmos and IBC ecosystem

Polymer, an Ethereum rollup that is hoping to become Ethereum’s interoperability hub, has launched the Polyverse Testnet, becoming the latest team hoping to tackle blockchain interoperability.



The testnet will be launched in three phases dubbed ‘Basecamp,’ ‘Into the Unknown’ and ‘Discovery.’ The first phase, Basecamp, will be live starting today and is designed to incentivize developers to facilitate liquidity onto the testnet from other rollups.&nbsp;



Phase 2, Into the Unknown, will commence the following week, where Polymer will select a handful of decentralized apps to promote to end users, who will also be able to receive rewards. Then the final phase, Discovery, will focus on refining and optimizing incentive mechanisms to drive participation.&nbsp;



<h2 class="wp-block-heading">The blockchain interoperability problem</h2>



Like many cross-chain messaging and bridging protocols today, Polymer was created to solve the issue of blockchain interoperability.



Read more: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



Blockchain ecosystems today remain relatively isolated from one another, meaning they can not communicate or interact with each other — creating terrible user experiences for their customers.&nbsp;



An example of this in Web2 would be being unable to send emails from your Gmail account to an Outlook account.



To address the communication barrier, cross-chain messaging protocols and other interoperability solutions have sprung into life as a means to enable blockchains to safely transfer valuable information to each other.



This type of infrastructure is critical to blockchain scaling, as evidenced by the attention and interest it has received from investors.&nbsp;



Wormhole, one of the largest cross-chain messaging solutions today, <a href="https://blockworks.co/news/cross-chain-protocol-investor-funding">secured $225 million in a private token sale</a>, which saw interest from Brevan Howard, Coinbase Ventures and Multicoin Capital late last year.



Similarly, LayerZero locked in a seven-figure Series B fundraise, where investors from a16z, OKX Ventures and Sequoia Capital <a href="https://blockworks.co/news/layerzero-locks-down-funding">gave the protocol $120 million to expand its operations</a>.



Polymer also recently <a href="https://blockworks.co/news/polymer-labs-raises-23-million">revealed that it acquired $23 million</a> to bring Cosmos SDK’s inter-blockchain communication (IBC) protocol to Ethereum.



Read More: <a href="https://blockworks.co/news/polymer-labs-raises-23-million">Polymer Labs secures $23M to bring IBC to Ethereum</a>



<h2 class="wp-block-heading">Polymer’s approaches to interoperability </h2>



Unlike many interoperability protocols today, Polymer is not designed as a third-party bridge but rather as a layer-2 Ethereum rollup solution that serves a similar purpose to the ‘interoperability hub’ on Cosmos. It aims to provide IBC to Ethereum and connect with other layer-2 solutions.



IBC, unlike many other interoperability solutions today, is not a bridge application but a network standard, Devain Pal Bansal, a product analyst at Polymer Labs, told Blockworks.



“The biggest benefit of introducing it to Ethereum, particularly Ethereum rollups, is that it extends the capabilities of how a rollup settles on Ethereum via the native bridge and extends it cross rollups &#8211; without a third party required to attest to data or its validity by simply using the shared source of truth for all rollups &#8211; Ethereum,’ Bansal said.



Tommy O&#8217;Connell, a senior product manager at Polymer, explained to Blockworks that applications can build their own bridges and control inbound and outbound messages using a layer-1 trust layer. This eliminates the need for an additional trust assumption of a third party.



“This also allows us to be focused on enabling chains to join Polymer’s ecosystem of chains with just a SINGLE connection to the hub, mitigating Polymer being a blocker for growth,” O&#8217;Connell said.



This differs from Wormhole, for example, which relies on a 13 of 19 supermajority to attest to a message before it is produced or sent. It is also different from Axelar, which relies on <a href="https://axelarscan.io/validators">validators</a> for attestations.



It is important to note, however, that Polymer’s minimum viable product (MVP) will be limited to the Base and Optimism at the testnet launch.&nbsp;



Though this is the case, O’Connell notes that there are immediate plans to grow to other OP stack chains and soon after to other chains such as those in the Cosmos ecosystem.



“The primary benefit for OP stack rollups is that we have built an IBC client for OP geth, which enables us to extend the capabilities of native L1&lt;&gt;L2 bridge across rollups. It is particularly appealing because we can unlock other chains built on the OP stack with minimal expansion effort,” O&#8217;Connell said.



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Ethereum

‘​​The Polyverse Testnet’ is live, bringing IBC to Ethereum

Dymension&#8217;s mainnet launch has encountered significant challenges due to consensus issues among its validators.



Chorus One, the ecosystem’s largest validator, has experienced node issues that disrupted its ability to participate effectively in the consensus process. This is particularly concerning given that Chorus One holds 34.8% of the network’s voting power.



In blockchain technology, validators are individuals or groups that lock up tokens and run software that can store and verify data to ensure its accuracy.&nbsp;



Achieving consensus — a mutual agreement among validators on the validity of transactions — is critical to the blockchain’s operation. It safeguards the network against fraudulent activities and ensures that only verified transactions are recorded.



Read More: <a href="https://blockworks.co/news/consensus-mechanisms-guide">The beginner’s guide to consensus mechanisms</a>



To prevent malicious transactions, validators must agree, or reach a “consensus.” Failure to do so may lead to a network shutting down. For a network like Dymension, which seeks to leverage modular blockchain architecture to offer superior performance and customization, maintaining a cohesive and stable group of <a href="https://blockworks.co/tag/validator">validators</a> is essential for its success and reliability.



The majority of blockchains today require 66% of the stake to agree on a topic before it can achieve consensus.



In the case of Dymension, however, the failure of its largest validator meant that regardless of whether or not other validators had operative nodes, the network itself could not reach consensus.



Dymension has not responded to Blockwork’s request for commentary before publication time.



Chorus One <a href="https://twitter.com/ChorusOne/status/1754877315647955440">noted</a> in a post on X that all Dymension validators are currently coordinating to perform a restart. The team stated that it will join the chain as soon as the issue is resolved.&nbsp;



“We are addressing an issue on our side that led to a less than ideal launch experience for the Dymension mainnet ~2 hours ago,” Chorus One wrote.&nbsp;



The team notes that the cause of the issue is still unknown, but likely relates to the network’s node software.&nbsp;



“We followed all the guidelines issued by [the] Dymension team, so this might be some subtle bug in the node software,” the company wrote.&nbsp;



It added that the reason it held over 33% of the network stake is that it had been an early Dymension supporter who had staked a significant amount of its DYM token in the genesis block.&nbsp;



“Other early-stage investors didn’t stake to genesis, which led us to have 34% power in the failed launch,” Chorus One wrote.



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Dymension

Dymension fails to reach consensus because of bad validator set

Polymer Labs, a modular IBC-based networking protocol, has secured a $23 million Series A co-led by Blockchain Capital, Maven 11 and Distributed Global. 



Other investors, including Coinbase Ventures, Placeholder, Digital Currency Group, North Island Ventures and Figment Capital also participated in the round.



Polymer can be described as a modular layer-2 network that employs Cosmos SDK’s IBC protocol, OP stack’s settlement functionality and Eigenlayer’s data availability layer. It is the brainchild of Bo Du and Peter Kim.



After being in the blockchain industry for a few years, the Polymer founders experienced firsthand how difficult it was to build interchain products. In the summer of 2021, they made a decision to drop their side projects and focus on fixing blockchain interoperability.



Read more: <a href="https://blockworks.co/news/cosmos-ecosystem-receives-funding">The Interchain Foundation puts aside $26.4M to grow Cosmos ecosystem</a>



Initially, the team wanted to design their own interoperability protocol — similar to that of many general message-passing protocols that exist today. However, during their research, they came across the Cosmos SDK’s Inter-Blockchain Communication protocol, Du told Blockworks.



IBC is an inter-blockchain communication protocol, as its name suggests. It allows different blockchains in the <a href="https://blockworks.co/tag/cosmos">Cosmos</a> ecosystem to communicate with each other. The protocol is designed to ensure that information can be securely transferred between separate operating chains.&nbsp;



Read More: <a href="https://blockworks.co/news/composable-finance-ibc-polkadot">DeFi users ‘don’t care’ what chain apps are on</a>



“IBC already had years put into its design and architecture, so we <a href="https://xkcd.com/927/">decided</a> to stick with IBC and not invent a whole new standard,” Du said.



Kim added that at the time, IBC was the most decentralized, elegant solution to establish connections and pass messages between chains.



“​​We realized this was something that could be expanded to other chains; basically export the technology to have industry penetration rather than just the Cosmos app chains,” Kim said.&nbsp;



<h2 class="wp-block-heading">So how does it work?</h2>



The team wanted to find ways to make the already established interoperability protocol on Cosmos a mainstream standard in the Ethereum ecosystem.



“It’s not easy to integrate IBC natively into all these different chains, which is why we designed the virtual IBC protocol, which essentially allows chains that don’t natively implement IBC to access IBC execution through Polymer and have Polymer execute IBC on its behalf,” Du said.



Many blockchain interoperability protocols today are focused on the state component of interoperability, which involves aligning the status of the data stored within separate systems, but Du believes this is just one part of the interoperability problem.



Read more: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



Beyond the state layer, two other layers need to be considered. This includes the application layer — that is, the layer responsible for encoding and decoding sent data and the transportation layer (TAO) — which manages the routing of raw data.&nbsp;



“All of IBC’s core logic will live on the transportation layer; this becomes decoupled from the application layer, and Polymer will hold the IBC state on behalf of the connected chain,” Du said.&nbsp;



This means that at the end of the day, the application — which lives on <a href="https://blockworks.co/tag/ethereum">Ethereum</a> — will be able to interact with the IBC network through Polymer smart contracts.&nbsp;



“Polymer will then take the apps intended actions and execute the associated IBC logic and produce a commitment to the IBC state of that chain on Polymer — so essentially, Polymer is maintaining this merkle-ized IBC state on behalf of the connected chain,” he said.&nbsp;



Read more: <a href="https://blockworks.co/news/top-defi-protocols-by-revenue">2023’s top 5 DeFi protocols by revenue</a>



Similar work to decouple state, application and transport layers is being <a href="https://medium.com/layerzero-official/layerzero-the-future-transport-layer-of-ibc-32db19b1f253">explored</a> by the interoperability protocol <a href="https://blockworks.co/tag/layerzero">LayerZero</a>.



IBC has been around for a long period of time. Du notes that its specs cover various considerations ranging from authentication, timeouts and acknowledgment, somethings its competitors may not have.&nbsp;



This means that applications will not have to individually implement these different changes when there are protocol upgrades.



“If you want to design a protocol that is going to last for generations of builders, you need to be able to handle these different edge cases properly,” Du said. “This is a foundational level protocol.”&nbsp;



Investors in Polymer Labs, Yuan Han Li and Joshua Rivera from Blockchain Capital, shared this sentiment.&nbsp;



They note in a press release reviewed by Blockworks that “while numerous arbitrary messaging protocols have emerged to address the cross-chain interoperability, they have all done so by building a new messaging standard, paradoxically causing more fragmentation when a standardized and battle tested way to move data between heterogeneous blockchains already exists.”



Ultimately, the Polymer team is hoping to ensure that IBC becomes a widely adopted interoperability standard that will shape how blockchain applications of the future will communicate. This latest funding round will bring the team closer to launching mainnet.



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Polymer Labs secures $23M to bring IBC to Ethereum

Swiss-based non-profit organization the Interchain Foundation (ICF) has partnered with Bianjie, a blockchain development company, to launch a new NFT standard. Users utilizing the new standard, dubbed ICS-721, will now be able to track and transfer their NFTs across different blockchains.



ICS-721 — an homage to the <a href="https://www.blockworksresearch.com/glossary#erc-721-token" target="_blank" rel="noreferrer noopener">ERC 721</a> NFT standard on Ethereum — is an application layer inter-blockchain communication (IBC) protocol, which means that it enables blockchains to communicate with one another without the need for a bridge.



This new standard can enable NFTs to be integrated into various sectors in Web3. These include gaming, socializing, identity management and many others, Maria Gomez, managing director at the Interchain Foundation told Blockworks.&nbsp;



“The surge in profile picture (PFP) projects highlighted an earlier trend in NFT technology, but this also led to questions about their long-term value and sustainability. As the industry evolves, the focus is expected to shift toward utility and real-world applications,” Gomez said.&nbsp;



Here, Interchain NFTs are expected to hold a distinct advantage, as the standard offers enhanced functionality and possibilities through cross-chain interoperability, she notes.



Harriet Cao, the founder of Bianjie and a prominent technical contributor to Cosmos, told Blockworks that ICS-721 will be initially accessible on all IBC-enabled Ethereum, Substrate, CosmWasm and Cosmos SDK chains. There are plans to expand its availability to additional ecosystems in the future.



<h2 class="wp-block-heading">The Game of NFTs</h2>



A two-phase competition for developers called the Game of NFTs, designed to test out ICS-721, launched earlier in March this year. The name is a continuation of prior Cosmos feature testing efforts, Game of Stakes and <a href="https://goz.cosmosnetwork.dev/" target="_blank" rel="noreferrer noopener">Game of Zones</a>.



The first phase of the competition drew the attention of 198 teams worldwide, Cao said. Each team had to go through <a href="https://github.com/game-of-nfts/gon-testnets#point-system">different tasks and challenges</a> with the ultimate goal of testing the protocol&#8217;s capabilities before its mainnet deployment.&nbsp;



The competition was proposed by Bianjie in partnership with multiple validator and developer teams including those from IRISnet, Stargaze, Juno, Uptick and OmniFlix.&nbsp;



“The Cosmos ecosystem benefits from enhanced growth as it attracts a more diverse range of creators, users, and developers,” Cao said. “This, in turn, fuels creativity and drives innovation, positioning the Cosmos ecosystem as the Interchain of Blockchain for cutting-edge developments in the world of NFTs.”



After completion of Phase 1 of the Game of NFTs, Phase 2 — an interchain hackathon, is now underway.



Teams will have until June 19 to submit their projects for the hackathon and over $300,000 worth of tokens and credits will be awarded to winners.



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An Interoperable NFT Standard Has Landed on Cosmos

<div id="highlights-block_62c6d17f403f5" class="highlights">
 <ul>
 <li>Price oracles are vital for borrowing and lending applications across DeFi</li>
 <li>Cosmos has a broad range of development activity, but this basic piece of infrastructure is currently lacking</li>
 </ul>
 
</div>



Umee, a Cosmos-based borrowing and lending platform, is weeks away from launching the first price oracle service for Cosmos’ inter-blockchain communication (IBC) protocol, the company announced Thursday. The oracle, called Orion, will be provided by Umee blockchain’s validators which run software that will automatically pull pricing data from a set of centralized exchanges, plus decentralized exchange <a href="https://cms.blockworks.co/tag/osmosis/">Osmosis</a>.



For any smart contract to make use of data not running on its own blockchain, it needs to rely on a third-party service — an oracle. Typically used to query price data, the oracle acts as an intermediary between the smart contract and off-chain sources — in the case of Umee’s Orion, initially about a half dozen exchanges such as Coinbase and Binance.



“Cosmos has a lot of DeFi, but there’s not a single oracle that works for IBC tokens,” Umee CEO Brent Xu told Blockworks.



Neither Chainlink — the largest oracle network on Ethereum — nor Band Protocol which, although based on the Cosmos SDK, is focusing on cross-chain use cases, has implemented a price oracle for Cosmos native assets.



Projects that need accurate prices have been finding workarounds, but they aren’t as reliable or trustworthy as a decentralized oracle network, where many participants checking multiple data sources need to reach consensus and are economically penalized if they screw up — a mechanism known as slashing.



A rock-solid price feed is essential for borrowing and lending applications, like the one Umee is preparing to launch, and its platform will be the new oracle’s first “customer.” But the service will be available to others. Shade Protocol — expected to launch later this year — which specialized in privacy-preserving DeFi (decentralized finance) applications built on another Cosmos-based chain, Secret Network, is one likely Orion user, Xu said.



IBC allows chains built on Cosmos to relay information about their own accounts and transactions, collectively known as “state.” But it can also be used to create transactions that modify the state of other Cosmos chains.



Xu explained: “What’s special about our oracle is that every time we take price information, it’s the equivalent of an IBC transaction happening [on] the chain, and what we can do is we can allow these IBC transactions to transact information from the Umee blockchain to any other Cosmos blockchain out there as pricing data.”



Umee’s full validator set will pass the price data along about every 30 seconds. Each validator submits the price independently to prevent collusion and guarantee accuracy, Xu said.



The oracle will go live next month, alongside a major upgrade to the Umee protocol, but has been rigorously tested on a test network already.



“We just pushed the oracle to its limits,” Xu said, noting that the testnet processed 30 million transactions from 120,000 unique addresses — at a rate of up to 50,000 transactions per second. Testnets are designed to find potential bottlenecks or problems before software has to handle real value in a production environment.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“There’s no Cosmos app in history that has undergone this many transactions…we’re pretty proud, we really put the Cosmos infrastructure through its paces.”</blockquote>



That level of throughput may not be needed today, but smart contract applications are still in their nascency across the ecosystem.



“With the development of several new DeFi protocols in Cosmos, the ecosystem is in need of an IBC native price oracle that allows cross chain pricing data to be transferred safely across networks,” Peng Zhong, former CEO of <a href="https://ignite.com/" target="_blank" rel="noreferrer noopener">Ignite</a>, noted in a statement.



Xu pointed to the <a href="https://cms.blockworks.co/cosmos-developer-ignite-sees-mass-exodus-and-layoffs-as-ceo-exits/" target="_blank" rel="noreferrer noopener">recent shakeup at Ignite</a> — formerly Tendermint Inc., home to the original contributors of the Cosmos SDK — as evidence of the ecosystem&#8217;s decentralized development prowess.



“There’s at least like 20 or 30 different teams building out core Cosmos SDK code. And so what’s really unique is that I don’t think there’s one team that completely centrally controls Cosmos development. It’s already so distributed that even if Ignite goes through this weird restructuring, the Cosmos space is going great.”



Blockworks contacted representatives of Chainlink, Band Protocol and Shade Protocol but did not receive a reply by press time.



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Brent Xu

Cosmos-based Umee Lines Up First IBC Price Oracle

Brian Nibley

<div id="highlights-block_61ddc7f9edcd5" class="highlights">
 <ul>
 <li>The launch of the Inter-Blockchain Communication protocol (IBC) in early 2021 shifted attention to implementing shared security, which began testing in the fourth quarter of 2021</li>
 <li>This allows newer, smaller blockchains to “rent” security from more established networks</li>
 </ul>
 
</div>



Proof-of-stake (PoS) networks are secured by validators who stake tokens on the network to validate transactions and produce blocks. The overall security of a PoS network, then, will roughly be in proportion to the total market cap of the token, because the more tokens being staked, the higher the cost of attacking the network.



The market cap of a PoS network is somewhat analogous to the hash rate in a proof-of-work (PoW) network. The higher the hash rate, the more difficulty an attacker would have in trying to take over the network by controlling the majority of its mining power. Similarly, the higher the market cap of tokens on a proof-of-stake network, the more resources it would take for an attacker to control enough tokens for a successful attack.



<h3 class="wp-block-heading">Ways to attack a PoS network</h3>



While a 51% attack requires controlling 51% of the hash rate of a proof-of-work network, proof-of-stake networks can be attacked even if a bad actor controls less than a majority of the network’s resources.



“If you control one-third of a network, you can do censorship attacks, meaning you can prevent certain transactions from being executed… if I control two-thirds of the network, I can control governance and pass a proposal for a malicious upgrade or drain the community pool with a spend proposal. There are various ways that can be leveraged for nefarious means,” says <a href="https://twitter.com/billyrennekamp" target="_blank" rel="noreferrer noopener">Billy Rennekamp</a>, Cosmos Hub Lead at the <a href="https://interchain.io/" target="_blank" rel="noreferrer noopener">Interchain Foundation</a> and member of the Board of Management.



This makes shared security even more important. Part of what makes PoS networks difficult to attack is the cost of acquiring all those tokens. To buy one-third of the Cosmos’ ATOM token would cost about $2.3 billion, let alone the price impact it would have if suddenly someone started buying up that many tokens.



But if your network is just starting out and only has $1 million or $10 million in market cap, a lone whale wouldn’t have much trouble conducting an attack. And it’s not always feasible to wait for wider adoption of a token before building decentralized applications that could necessitate large transactions on a regular basis. That’s where shared security comes in.



<h3 class="wp-block-heading">ShareInterchain security: Cosmos&#8217; take on Shared Security</h3>



What does shared security look like in Cosmos?



“The Cosmos network, Interchain Foundation, Tendermint Inc, the different contributors for the last 4 to 7 years — depending on how you see the start of the project — have always been working on the most valuable use of our time,” says Rennekamp. “So again with PoS, it began just building Tendermint. Then it moved to the Cosmos SDK, making it easy to build application-specific blockchains, and then it shifted to IBC, making it possible to connect these blockchains.”



After the successful launch of the Inter-Blockchain Communication protocol (IBC) in early 2021, attention has shifted to the implementation of interchain security which began testing in the fourth quarter of 2021.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Interchain security is the ability to use one staking token across multiple networks to secure those networks,” says Rennekamp.</blockquote>



This allows newer, smaller blockchains to “rent” security from more established networks. The ability to do this can be helpful when expecting large transactions to occur on a PoS blockchain that doesn’t have much market cap behind it.&nbsp;



For example, if someone wants to send $20 million of tokens through a blockchain secured by just $10 million in value of tokens staked, then the operators of that chain “would be incentivized to steal the tokens if they’re being logical game-theory participants,” explains Joe Dirtay of Cosmos.



ATOM, which <a href="https://www.coingecko.com/en/coins/cosmos" target="_blank" rel="noreferrer noopener">CoinGecko tracks</a> as the 18th &nbsp;largest cryptocurrency with a market cap of around $11.5 billion, is in a good position to provide this kind of security to other networks. “Building a highly secure network means getting a high-value token, in the most straightforward way, although the problem is actually much more nuanced than that,” says Rennekamp.



Thanks to the Cosmos Hub, developers can not only create and connect their own blockchains but also rent the security they need for building bigger and better applications.







<hr class="wp-block-separator"/>



This content is sponsored by Cosmos. To read more Cosmos content, check out <a href="https://cms.blockworks.co/how-the-interchain-sustainability-mission-plans-to-change-the-world-with-ibc/" target="_blank" rel="noreferrer noopener">How the Interchain Sustainability Mission Plans to Change the World with IBC.</a>

Cosmos HUB and the Future of Shared Security

Sam Martin

<div id="highlights-block_617725d07bf3f" class="highlights">
 <ul>
 <li>ATOM is up 36% over the past week despite the broader market sell-off</li>
 <li>The Cosmos network is set to thrive in 2022 with increased developer interest and the Theta upgrade</li>
 </ul>
 
</div>



The Cosmos Network is home to nearly 50 protocols representing $151.8 billion of value.



Electric Capital&#8217;s <a href="https://medium.com/electric-capital/electric-capital-developer-report-2021-f37874efea6d" target="_blank" rel="noreferrer noopener">annual developer report</a> revealed that monthly active developers on Cosmos grew approximately 70% throughout 2021.



The rise of Osmosis, a DEX built on Cosmos, has driven significant traffic to the Cosmos ecosystem while attracting $1.2 billion of total value locked (TVL).



The Theta upgrade, scheduled tentatively for the first quarter of 2022, is another upcoming catalyst for ATOM and the Cosmos ecosystem as a whole.



Cosmos&#8217; token ATOM market dominance is approaching an all-time high, currently hovering near 0.47%.



<h3 class="wp-block-heading">Latest in Macro:</h3>



<ul class="wp-block-list"><li>S&amp;P 500: 4,677, -0.41%</li><li>NASDAQ: 14,935, -0.96%</li><li>Gold: $1,796, +0.26%</li><li>WTI Crude Oil: $78.97, -0.60%</li><li>10-Year Treasury: 1.773%, +0.04%</li></ul>



<h3 class="wp-block-heading">Latest in Crypto:</h3>



<ul class="wp-block-list"><li>BTC: $42,017, -3.00%</li><li>ETH: $3,222, -5.90%</li><li>ETH/BTC: 0.0767, -3.04%</li><li>BTC.D: 40.03%, +0.95%</li></ul>



<h3 class="wp-block-heading">Cosmos overview</h3>



As previously <a href="https://cms.blockworks.co/scrt-osmo-and-atom-rally-as-cosmos-ecosystem-claims-center-stage-markets-wrap/" target="_blank" rel="noreferrer noopener">covered</a> by Blockworks, <a href="https://v1.cosmos.network/intro" target="_blank" rel="noreferrer noopener">Cosmos</a>&nbsp;(ATOM) is an ecosystem of blockchains that can scale and interoperate with each other. Historically, blockchains have been unable to interact with one another and had minimal transaction throughput with different programming languages, making it hard to attract developers to new chains.



The Tie released a <a href="https://research.thetie.io/a-journey-through-the-cosmos-atom/" target="_blank" rel="noreferrer noopener">research article</a> on the Cosmos network in July of 2021 describing the ecosystem&#8217;s vision: &#8220;To make it easy for developers to build blockchains and break the barriers between blockchains by allowing them to transact with each other. This vision is achieved through a set of open source tools such as&nbsp;<a href="https://tendermint.com/core/">Tendermint</a>, the&nbsp;<a href="https://v1.cosmos.network/sdk">Cosmos software development kit (SDK</a>) and inter-blockchain communication (IBC), designed to let people build custom, secure, scalable and interoperable blockchain applications quickly.&#8221;



Cosmos is home to nearly 50 protocols representing $151.8 billion of value. Twenty-eight of these protocols are linked via IBC, a protocol designed for interoperability between arbitrary state machines, according to the project&#8217;s website.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="926" height="718" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png" alt="" class="wp-image-13654" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=926 926w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=331 331w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=337 337w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=282 282w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-11.59.27-AM.png?w=80 80w" sizes="auto, (max-width: 926px) 100vw, 926px" /><figcaption>Source: cosmos.network</figcaption></figure>



<h3 class="wp-block-heading">Developer activity </h3>



Electric Capital&#8217;s <a href="https://medium.com/electric-capital/electric-capital-developer-report-2021-f37874efea6d" target="_blank" rel="noreferrer noopener">annual developer report</a> revealed that monthly active developers grew approximately 70% throughout 2021. The Cosmos network is home to over <a href="https://cosmos.network/ecosystem/tokens/" target="_blank" rel="noreferrer noopener">$151 billion of assets</a>, and the third most active developers in all of crypto, behind only Ethereum and Polkadot.



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg" alt="" class="wp-image-13655" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/full-time-devs-since-launch-1024x576.jpg?w=1920 1920w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Electric Capital</figcaption></figure></div>



<h3 class="wp-block-heading">Osmosis: The DEX of IBC</h3>



Osmosis (<a href="https://www.coingecko.com/en/coins/osmosis" target="_blank" rel="noreferrer noopener">OSMO</a>) is an advanced automated market maker (AMM) protocol that allows developers to build customized AMMs with sovereign liquidity pools. Built using the Cosmos SDK, Osmosis utilizes IBC to enable cross-chain transactions, according to the <a href="https://docs.osmosis.zone/overview/#what-is-osmosis" target="_blank" rel="noreferrer noopener">project&#8217;s website</a>, and has driven significant traffic to the Cosmos ecosystem. 



The protocol aims to extend the use of AMMs within the Cosmos ecosystem beyond traditional token swap-type use cases. &#8220;Through the customizability offered by Osmosis such custom-curve AMMs, dynamic adjustments of swap fees, multi-token liquidity pools, the AMM can offer decentralized formation of token fundraisers, interchain staking, options market, and more for the Cosmos ecosystem,&#8221; reads the <a href="https://docs.osmosis.zone/overview/#what-is-osmosis" target="_blank" rel="noreferrer noopener">project&#8217;s documentation</a>.



The Osmosis DEX has logged 1.22 million IBC transfers over the last 30 days, more than double that of Cosmos itself and nearly 10 times more than Terra, according to data from <a href="https://mapofzones.com/?period=720&amp;testnet=false&amp;tableOrderBy=totalIbcTxs&amp;tableOrderSort=desc" target="_blank" rel="noreferrer noopener">Map of Zones</a>.



Osmosis has grown to $1.2 billion of liquidity and over $100 million in daily trading volume, according to its <a href="https://info.osmosis.zone" target="_blank" rel="noreferrer noopener">stats page</a>. Some of the main drivers for growth are:



<ul class="wp-block-list"><li>Incentivized pools paying out very attractive yields to liquidity providers; the ATOM/OSMO pair currently pays out 102.29% APR according to the <a href="https://app.osmosis.zone/pools" target="_blank" rel="noreferrer noopener">application</a>;</li><li>High staking rewards on the OSMO token, currently yielding 95.1% rewards the popular <a href="https://wallet.keplr.app/#/dashboard" target="_blank" rel="noreferrer noopener">Keplr wallet</a>;</li><li><a href="https://twitter.com/0xkrane/status/1478275712444416000?s=20" target="_blank" rel="noreferrer noopener">Airdrops</a> for LP&#8217;s and stakers of OSMO for up-and-coming projects in the Cosmos ecosystem;</li><li>The upcoming integration of CosmWasm smart contracts and <a href="https://defitimes.io/defi-101/superfluid-staking-simply-explained/" target="_blank" rel="noreferrer noopener">superfluid staking</a></li></ul>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="375" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png" alt="" class="wp-image-13662" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-07-at-12.45.21-PM-1024x375.png?w=1156 1156w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Info.osmosis.zone</figcaption></figure>



<h3 class="wp-block-heading">Theta upgrade</h3>



The Theta upgrade, scheduled tentatively for the first quarter of 2022, is another upcoming catalyst for ATOM and the Cosmos ecosystem as a whole. Highlights of the upcoming upgrade, <a href="https://hub.cosmos.network/main/roadmap/cosmos-hub-roadmap-2.0.html" target="_blank" rel="noreferrer noopener">per the project&#8217;s documentation</a>, include:



<ul class="wp-block-list"><li>Cosmos SDK v0.45<ul><li>Groups module: Enables higher-level multisig permissioned accounts, e.g., weight-based voting policies</li><li>Meta-Transactions: Allows transactions to be submitted by separate accounts that receive tips</li><li>Governance module improvements: Execution of arbitraty transactions instead of just governance proposals and will enables much more expressive governance module</li></ul></li><li>NFT module<ul><li>Enable simple management of NFT identifiers, their owners, and associated data, such as URIs, content, and provenance.</li><li>An extensible base module for extensions including collectibles, custody, provenance, and marketplaces.</li></ul></li><li>Tendermint v0.35 — the Cosmos consensus engine</li><li>Interchain accounts<ul><li>A requirement in order to manage accounts across multiple blockchains.</li><li>Aims to provide locking/unlocking mechanisms across IBC-enabled blockchains.</li><li>Allows custody providers to service any IBC connected blockchain through a common interface on the Hub.</li></ul></li><li>Liquid staking<ul><li>Frees secure and low-risk delegations for use in other parts of the Cosmos ecosystem</li><li>Features include enabling transfer of rewards and voting rights</li></ul></li><li>Other potential upgrades still being discussed such as a Cosmos-to-Ethereum gravity bridge as well as budget and farming modules.</li></ul>



<h3 class="wp-block-heading">ATOM dominance</h3>



ATOM is nearing all-time highs in terms of market dominance over the total cryptocurrency market. It currently accounts for 0.47% of the entire crypto market capitalization, according to data from <a href="https://www.tradingview.com/chart/5GPs0hRQ/?symbol=CRYPTOCAP%3AATOM.D" target="_blank" rel="noreferrer noopener">Trading View</a>.



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="1000" height="683" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png" alt="" class="wp-image-13666" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=1000 1000w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=376 376w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=382 382w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=321 321w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ATOM.D_2022-01-07_14-04-28.png?w=80 80w" sizes="auto, (max-width: 1000px) 100vw, 1000px" /><figcaption>Source: Trading View</figcaption></figure></div>



ATOM was last trading near $41.50, up 36.3% over the past seven days, with a market cap of $11.76 billion, according to data from <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko</a>. 



For more information on what else is coming to Cosmos in 2022, refer to their recent <a href="https://blog.cosmos.network/whats-coming-to-cosmos-in-2022-ce8e48d383ab" target="_blank" rel="noreferrer noopener">blog post</a>.



<h3 class="wp-block-heading">NFTs</h3>



Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="854" height="662" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png" alt="Top Ethereum and Solana projects" class="wp-image-13682" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=854 854w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=332 332w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=337 337w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=283 283w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screenshot-2022-01-08-at-00.20.31.png?w=80 80w" sizes="auto, (max-width: 854px) 100vw, 854px" /></figure>



If you made it this far, thanks for reading! I am looking forward to catching up on Monday.



<hr class="wp-block-separator"/>



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<hr class="wp-block-separator"/>

ATOM Splits From Market as BTC, ETH Bomb: Markets Wrap

<div id="highlights-block_61a61f438532d" class="highlights">
 <ul>
 <li>HackAtom VI is the largest hackathon in Cosmos history, offering developers around the world the chance to compete for their share of prizes equaling $1,285,000 USD paid in ATOMs</li>
 <li>Cosmos’ Inter-blockchain Communication (IBC) has already surpassed 1.5 million transactions</li>
 </ul>
 
</div>



The <a href="https://interchain.io/" target="_blank" rel="noreferrer noopener">Interchain Foundation</a> (ICF), steward of the Cosmos network, believes that open-source, cryptographic, consensus-driven economic networks hold the key to an anti-fragile global economic system and to creating equal opportunities for all. The Cosmos ecosystem is arguably the best-positioned blockchain ecosystem to build the trusted technologies, sovereign networks and financial innovations which are needed to create a prosperous and sustainable future for humanity. The ICF funds, stewards, and advances the Cosmos Ecosystem and are embarking on a bold mission for Cosmos to become the leading blockchain ecosystem for sustainable and regenerative digital finance.



<a href="https://hackatom.org/" target="_blank" rel="noreferrer noopener">HackAtom VI</a> is the largest hackathon in <a href="https://cosmos.network/" target="_blank" rel="noreferrer noopener">Cosmos</a> history, offering developers around the world the chance to compete for their share of prizes equaling $1,285,000 USD paid in ATOMs. One of the categories is the EarthPrize:A challenge for developers to develop responses to the Earth Crisis using anti-fragile digital technologies and data about the state of the world that is verifiable and increases our intelligence.&nbsp;



Earlier this year, Cosmos’ <a href="https://ibcprotocol.org/" target="_blank" rel="noreferrer noopener">Inter-blockchain Communication (IBC) protocol</a> went live. So far, it has already surpassed 1.5 million transactions. Launched last March as part of Cosmos’ <a href="https://stargate.cosmos.network/">Stargate upgrade</a>, IBC has had a transformative impact on the blockchain space. In just seven months, over 22 projects, including <a href="https://www.terra.money/" target="_blank" rel="noreferrer noopener">Terra</a>, and <a href="https://crypto.com/" target="_blank" rel="noreferrer noopener">Crypto.com</a>, <a href="https://scrt.network/" target="_blank" rel="noreferrer noopener">Secret Network</a> have activated IBC with a pipeline of other notable projects, such as <a href="https://thorchain.org/" target="_blank" rel="noreferrer noopener">THORchain</a> and Kava lined up to attach to the protocol.&nbsp;



The potential of enabling many different chains to communicate with each other, sometimes known as the “Internet of blockchains,” has only just begun to be explored.



We spoke with <a href="https://ch.linkedin.com/in/drshaunconway" target="_blank" rel="noreferrer noopener">Dr. Shaun Conway</a>, founder of <a href="https://www.ixo.world/" target="_blank" rel="noreferrer noopener">IXO</a>, the internet of impact, spoke to Blockworks about the goals of the foundation and how they intend to harness the power of the internet of blockchains.



With regard to the exponential growth curve that adoption of IBC appears to be on, Conway noted, “It’s a similar kind of dynamic that we saw in the early days of the internet…first it was ARPAnet, connecting universities, and then it just became more and more exponentially connected.”



IBC allows different blockchains to work together. “For instance, if you’re trading a carbon credit token on the Cosmos chain, you should be able to use that same token on the Ethereum chain,” said Conway.



What are the use cases for this new breakthrough, and how could it change the world?



The Interchain Foundation and Cosmos community have big plans for IBC.



<h3 class="wp-block-heading">Interchain Sustainability Mission</h3>



The Interchain Sustainability mission is part of a plan to help make a positive impact toward climate change. The Interchain Foundation believes that the internet of blockchains can be utilized toward a positive end for the planet and everyone on it.



“The ISM has been branded as the Earth program,” said Conway. “The Interchain Foundation is coming out with its new strategy and its updated brand where on the one hand is the builder’s program, which is building capacity for software protocols, etc, and the other hand is then enabling the use cases and marketplaces and applications that get built using this technology and also to connect to other tech networks or systems.”



What kind of use cases, you may ask? There are some ways in which the IXO is working on using IBC to create verifiable digital identities and community currencies. People could then become incentivized to take actions “in relation to biodiversity or sustainability, [and then] they start to produce changes in the state of the world that can be captured as non-fungible tokens,” said Conway.



This kind of organic idea could be a huge boost to global ecosystems and promises to leverage the power of blockchain in a way many have long hoped for. For a specific example, devise a system of incentives for people to come up with ways to clean up the environment.



As Conway explained, “The one we are most familiar with is carbon tokens. There are projects that result in carbon emission reductions or carbon capture that can generate these carbon tokens. And carbon tokens are based on a new interchain standard that we wrote for NFTs and the related, verifiable data that you can get with one of those tokens.”



The idea is that carbon tokens could become a major incentive for organizations to actively take steps to reduce their carbon footprint or develop new technologies to remove existing carbon dioxide from the atmosphere.



“The program supports a mission. That mission is about creating sustainable prosperity as it relates to social and economic goals as articulated in sustainable development goals and regenerating the planet around climate and biodiversity and related topics,” added Conway.



Dr. Conway hosted an Earth Prize for the hackathon at the Cosmos developer event in Lisbon last month. Learn more about the event here: <a href="https://hackatom.org/" target="_blank" rel="noreferrer noopener">hackatom.org</a>.



<h3 class="wp-block-heading">Tendermint CEO’s Thoughts on IBC</h3>



Peng Zhong, CEO of Tendermint, spoke to Blockworks about the IBC rollout:



“We&#8217;re thrilled to see more and more chains in the Cosmos ecosystem enabling IBC. Since its launch in April, we have now hit 21 chains with IBC enabled, racking up more than 1.5 million transactions in 30 days. This number is growing all the time.”



He added that the possibilities have only just begun to be explored, echoing Conway’s sentiment:



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We&#8217;re still in very early days but already the possibilities of this pioneering cross-chain technology are evident and we expect the use cases to be far-reaching from DeFi to gaming, NFTs to identity management, supply chain, decentralized autonomous organizations, and more.”</blockquote>



Zhong also spoke to how the current problems plaguing chains like Ethereum can be solved in a sustainable way through IBC:&nbsp;



“Take Ethereum as an example, you can see how thousands of decentralized applications (dApps) on a single base layer have to compete for throughput, pay sky-high fees, and subject themselves to the governance rules of the chain they&#8217;re built on. That&#8217;s why we&#8217;re seeing more and more dApps migrate away to Ethereum alternatives but that leaves blockchain ecosystems fragmented.



IBC is all about growing the blockchain space sustainably. Through IBC, blockchains can communicate with each other. Projects can exist as application-specific blockchains rather than dApps on someone else&#8217;s chain. They can self-govern, push upgrades at their own pace, enjoy low fees, high throughput, and environmentally-friendly, Proof-of-Stake (PoS) technology.”

How the Interchain Sustainability Mission Plans to Change the World with IBC

Jacquelyn Melinek

<div id="highlights-block_6179750dcbf5c" class="highlights">
 <ul>
 <li>Osmosis includes a decentralized peer-to-peer exchange (Dex) built on built on Cosmos</li>
 <li>Osmosis ranks first among Cosmos IBC-enabled chains by number of IBC transactions</li>
 </ul>
 
</div>



The Osmosis Foundation closed its first fundraise of $21 million today for its automated market maker Osmosis in a token sale led by Paradigm, the company said.&nbsp;



Other participants in the round include Robot Ventures, Nascent, Ethereal, Figment and Do Kwon, it said. The funding will be used to help the foundation grow its Osmosis protocol.&nbsp;



Osmosis is a decentralized peer-to-peer blockchain project built on the Cosmos ecosystem that features an automated market maker (AMM) — <a href="https://osmosis.zone/" target="_blank" rel="noreferrer noopener">Osmosis Zone</a> — with which users can pool liquidity and trade Inter-Blockchain Communication (IBC) enabled tokens, Sunny Aggarwal, cofounder of Osmosis Labs, said in an interview with Blockworks. 



The project has grown from essentially nothing to $500 million total value locked on its decentralized exchange since launching in June, the foundation said.&nbsp;



“We had this initial bump in liquidity, and we noticed every time there’s an addition of new assets, that was sort of when our liquidity grows,” Aggarwal said. “I think really our goal right now is to help grow the Cosmos ecosystem as a whole and get more projects built on Cosmos and existing ones developed,” he added.&nbsp;



The project was launched because Aggarwal and other developers who were a part of the original Cosmos development team wanted to build out applications on Cosmos’ ecosystem, he said.&nbsp;



“Because IBC is this super permissionless protocol, all of these projects were able to set up IBC with Osmosis on the DEX pretty permissionlessly,” Aggarwal said. “We have over 15 assets and for the vast majority of them, Osmosis is the main liquidity venue,” he added.



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/BpA_FT4TJZbg0OsJ6xp0DiZp68Wt7M6Vh8_0pOH7Yv6EUOyAe84MOI3FbZG-sxVKM2Gvr2nwXsmVfeuRjIKwjy9fTN3ReeGpSeD58XuXTrlnmoqj6VMWKGu4ws9QtMHFYEOQGRBQ" alt=""/><figcaption>Nearly $50 million in volume was traded on Tuesday, October 26; Source: <a href="https://info.osmosis.zone/" target="_blank" rel="noreferrer noopener">info.osmosis.zone</a></figcaption></figure>



An eagerly anticipated addition to the Osmosis DEX that became available for trading this week is Terra’s LUNA, and its USD-pegged stablecoin UST. Terra’s governance <a href="https://cms.blockworks.co/ftx-token-posts-gains-terra-enables-ibc-markets-wrap/" target="_blank" rel="noreferrer noopener">voted to enable IBC</a> on October 21, and incentives in the form of OSMO tokens have already attracted over $10 million in liquidity to the LUNA/OSMO and UST/OSMO pools.



Osmosis also ranks first among Cosmos IBC-enabled chains by number of IBC transactions, comprising over 42% of all IBC transactions made across the entire ecosystem, according to <a href="https://mapofzones.com/?testnet=false&amp;period=24&amp;tableOrderBy=totalIbcTxs&amp;tableOrderSort=desc" target="_blank" rel="noreferrer noopener">data from Map of Zones</a>. 



In the future, the company will have more DeFi innovations, Aggarwal said. “We want to build on top of this and mature the ecosystem,” he added.

Osmosis Closes $21M Token Sale Led by Paradigm

<div id="highlights-block_617725d07bf3f" class="highlights">
 <ul>
 <li>The Cosmos ecosystem helps secure over $130 billion of assets</li>
 <li>SCRT, OSMO and ATOM all rally 15% or more </li>
 </ul>
 
</div>



The Cosmos ecosystem continues to mature and now helps secure over $130 billion of assets. 



Secret Network (SCRT) and Osmosis (OSMO) explode higher due to upgrades and increased usage. 



Non-fungible tokens (NFTs) stall amid Osmosis rally. 



Other notable news includes Indian lawmakers are attempting to make digital assets more accessible to their citizens; Do Kwon explained why he is suing the US Securities and Exchange Commission (SEC), and US regulators are exploring how they could allow banks to hold digital assets. 



<h3 class="wp-block-heading">Latest in Macro:</h3>



<ul class="wp-block-list"><li>S&amp;P 500: 4,574, +.06%</li><li>NASDAQ: 15,235, +.04%</li><li>Gold: $1,793, -.83%</li><li>WTI Crude Oil: $84.44, +.81%</li><li>10-Year Treasury: 1.61%, -.032%</li></ul>



<h3 class="wp-block-heading">Latest in Crypto:</h3>



<ul class="wp-block-list"><li>BTC: $60,786, -3.27%</li><li>ETH: $4,175, -.22%</li><li>ETH/BTC: .0693, +3.67%</li><li>BTC.D: 44.16%, -2.13%</li></ul>



<h2 class="wp-block-heading">Cosmos Ecosystem Takes Center Stage</h2>



<a href="https://v1.cosmos.network/intro" target="_blank" rel="noreferrer noopener">Cosmos</a> (ATOM) is an ecosystem of blockchains that can scale and interoperate with each other. Historically, blockchains have been unable to interact with one another and had minimal transaction throughput with different programming languages making it hard to attract developers to new chains. 



&#8220;The end goal is to create an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way. With Cosmos, blockchains can maintain sovereignty, process transactions quickly and communicate with other blockchains in the ecosystem, making it optimal for a variety of use cases,&#8221; <a href="https://v1.cosmos.network/intro" target="_blank" rel="noreferrer noopener">according</a> to the Cosmos website.



This vision is achieved through a set of open source tools like Tendermint, the Cosmos SDK and IBC designed to let people build custom, secure, scalable and interoperable blockchain applications quickly.



Cosmos secures more than $137 billion of assets and is arguably the most developed ecosystem outside of Ethereum. Despite the success of the project, Cosmos&#8217; native token, <a href="https://coinmarketcap.com/currencies/cosmos/" target="_blank" rel="noreferrer noopener">ATOM</a>, is just the 24th largest cryptocurrency by market capitalization ($9.137 billion). As of reporting, ATOM was trading near $41, up 16.5% over the last 24 hours. 



<h3 class="wp-block-heading">The market awakens</h3>



&#8220;The market is finally beginning to wake up to Cosmos, which is arguably the most developed ecosystem outside of Ethereum. Almost like the Cosmos ecosystem being home to $100BN+ of assets and many of the industry&#8217;s leading blockchains matters,&#8221; wrote Ryan Watkins of Messari. 



The top 10 coins that Cosmos helps secure are:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="976" height="652" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png" alt="" class="wp-image-9921" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=976 976w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=385 385w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=391 391w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=328 328w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-4.40.24-PM.png?w=80 80w" sizes="auto, (max-width: 976px) 100vw, 976px" /><figcaption>Source: cosmos.network</figcaption></figure>



<h2 class="wp-block-heading">Secret Network Explodes</h2>



Secret Network (SCRT) is a protocol that has privacy for smart contracts by default, solving a problem that has long plagued the digital asset industry. This allows developers and users to build and use applications that are both permissionless and privacy-preserving, and ultimately protects users personal information and unlocks hundreds of use cases that previously were not possible.



Arguably the largest upgrade in protocol history, Supernova, is set to go live on Mainnet on November 9, which could be driving the bullish price action seen over the last month (+320.19%).



<h3 class="wp-block-heading">Supernova highlights</h3>



<ul class="wp-block-list"><li>Inter-blockchain communication (IBC) integration, which will connect Secret Network with all blockchains in the Cosmos ecosystem.</li><li>Additional modules that should greatly simplify network upgrades and workflows for companies that want to integrate Secret Network seamlessly in consumer-oriented applications.</li><li>New Secret applications launching on mainnet, new partners and collaborators, and millions of new possibilities for users and developers.</li></ul>



Guy Zyskind, the founder and CEO of Enigma — one of the core development teams behind Secret Network <a href="https://scrt.network/blog/supernova-explosive-vision-future-secret-network" target="_blank" rel="noreferrer noopener">wrote</a>, &#8220;Supernova introduces our IBC integration,&nbsp;finally connecting Secret Network with blockchains across the Cosmos ecosystem (in addition to our bridges to Ethereum, BSC, Monero, Terra, Polkadot, and more!). IBC allows SCRT to be used in cross-chain Cosmos applications (such as Osmosis &amp; Gravity DEX) and provides our privacy features to the entire Cosmos ecosystem.&nbsp;This further cements our position as the data privacy hub for the decentralized web&nbsp;and unlocks our next phases of growth and adoption.&#8221;



<h3 class="wp-block-heading">Osmosis Rallies</h3>



Osmosis (<a href="https://coinmarketcap.com/currencies/osmosis/" target="_blank" rel="noreferrer noopener">OSMO</a>), the leading automated market maker (AMM) in the cosmos ecosystem, has rallied over 23% in the last 24 hours. Liquidity and trading volume have raced higher today, as seen in the image below. Having launched on June 19, 2021, the growth has been very impressive.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="369" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png" alt="" class="wp-image-9924" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.38.41-PM-1024x369.png?w=1199 1199w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: info.osmosis.zone</figcaption></figure>



The total number of transfers via IBC relayers far outpaces any other project in the Cosmos ecosystem. The seven-day volume of transfers can be seen below:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="896" height="373" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png" alt="" class="wp-image-9925" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=896 896w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.46.21-PM.png?w=80 80w" sizes="auto, (max-width: 896px) 100vw, 896px" /><figcaption>Source: mapofzones.com</figcaption></figure>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found in the photos below:



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="337" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png" alt="" class="wp-image-9926" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.49.58-PM-1024x337.png?w=1225 1225w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="288" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png" alt="" class="wp-image-9927" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-26-at-5.50.15-PM-1024x288.png?w=1230 1230w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<h3 class="wp-block-heading">Notable News</h3>



<ul class="wp-block-list"><li>Metamask will be improving support for ledger wallet owners, <a href="https://twitter.com/MetaMask/status/1453089090908262404?s=20" target="_blank" rel="noreferrer noopener">according</a> to their Twitter. </li><li>Lawmakers in India are pushing to reform cryptocurrency laws to make them more accessible to their citizens, <a href="https://twitter.com/IndiaToday/status/1453046045995409413?s=20" target="_blank" rel="noreferrer noopener">according</a> to India Today. </li><li>Do Kwon, founder of Terra Form Labs, expained why he is suing the SEC, <a href="https://news.yahoo.com/crypto-founder-do-kwon-explains-why-hes-suing-the-sec-195945610.html" target="_blank" rel="noreferrer noopener">per</a> Yahoo. </li><li>US regulators are exploring how they could allow banks to hold digital assets, <a href="https://www.reuters.com/business/finance/us-regulators-exploring-how-banks-could-hold-crypto-assets-fdic-chairman-2021-10-26/" target="_blank" rel="noreferrer noopener">according</a> to Reuters.</li><li>Valkyrie filed for a leveraged BTC ETF, <a href="https://twitter.com/EricBalchunas/status/1453026808073531394?s=20" target="_blank" rel="noreferrer noopener">according</a> to Eric Balchunas</li></ul>



If you made it this far, thanks for reading! Looking forward to catching up tomorrow.



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can&#8217;t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



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ATOM

SCRT, OSMO and ATOM Rally as Cosmos Ecosystem Claims Center Stage: Markets Wrap

<div id="highlights-block_6154982a80c71" class="highlights">
 <ul>
 <li>Terra’s inter-blockchain communication (IBC) integration is expected to increase the adoption of its stablecoin, TerraUSD (UST), throughout the Cosmos ecosystem</li>
 <li>Upgrades include increased transaction speed and rewards for stakers, adjustments to burning mechanisms, and a bridge for UST between Terra and Solana</li>
 </ul>
 
</div>



The Terra network has undergone a successful upgrade today, known as Columbus-5, a significant milestone in the protocol’s history. The upgrade to Terra will introduce a number of changes, chief among them, the adoption of inter-blockchain communication (<a href="https://ibcprotocol.org" target="_blank" rel="noreferrer noopener">IBC</a>) which will connect Terra-based assets to the Cosmos ecosystem.



IBC will also create a bridge between the Cosmos ecosystem and the Terra, Solana ($SOL) and Polkadot ($DOT) blockchains. Ethereum will be added to that list soon. Overall, about 250 decentralized applications (dApps) will potentially be added to the ecosystem.



The ability for Terra’s stablecoin, TerraUSD ($UST), to move freely between IBC-connected blockchains is expected to drive demand by fuelling economic activity in DeFi for those that currently lack a USD-pegged stablecoin. For instance, the Cosmos hub, which connects about a dozen blockchains through IBC, currently does not have a USD-pegged stablecoin available for use in its applications, although a stablecoin pegged to the euro <a href="https://medium.com/e-money-com/announcing-e-moneys-eeur-as-the-first-stablecoin-to-be-listed-on-osmosis-amm-decentralised-98f4df0e8fc3" target="_blank" rel="noreferrer noopener">recently debuted</a>.



Columbus-5 also takes advantage of prior upgrades to Cosmos dubbed <a href="https://stargate.cosmos.network/" target="_blank" rel="noreferrer noopener">Stargate</a> which, in addition to IBC, included improvements to performance — promising efficiency gains of 10x to 100x — and developer tools, such as wider support for programming languages.



<h3 class="wp-block-heading">Banking on UST</h3>



Terra’s $UST is known as an algorithmic stablecoin that uses a process referred to as seigniorage, which means that to mint (create and put into circulation) new units of $UST, the equivalent dollar amount of Terra’s native token, $LUNA, must be burned (removed from circulation).



However, the system works both ways. If demand for $UST begins to decline, then $LUNA will be minted while $UST is burned, which theoretically allows it to keep its value stable at around $1.



As demand for $UST increases, it begins to trade at a premium and arbitrageurs purchase $LUNA on an exchange and burn it for $UST to capture that spread and bring the peg back down to $1.



On the other hand, as demand for $UST declines and trades at a discount, arbitrageurs can redeem their $UST for $LUNA in order to return the peg back to $1.



There are many new projects set to launch on Terra post Columbus-5, with names like Ozone, <a href="https://twitter.com/orion_money" target="_blank" rel="noreferrer noopener">Orion Money,</a> <a href="https://twitter.com/mars_protocol" target="_blank" rel="noreferrer noopener">Mars Protocol</a>, <a href="https://twitter.com/nebula_protocol" target="_blank" rel="noreferrer noopener">Nebula Protocol</a>, <a href="https://twitter.com/Levana_protocol" target="_blank" rel="noreferrer noopener">Levana Protocol</a>, <a href="https://twitter.com/alice_finance" target="_blank" rel="noreferrer noopener">Alice</a> and <a href="https://twitter.com/astroport_fi" target="_blank" rel="noreferrer noopener">Astroport</a>. This will presumably increase demand for $UST (which in turn deflates the $LUNA supply) as these projects seek to bootstrap liquidity by distributing their own reward tokens.&nbsp;



<h3 class="wp-block-heading">Feeling the burn</h3>



Prior to Columbus-5, a large portion of burned $LUNA would be rerouted to a community pool and the remainder would be burned. After Columbus-5, the community pool portion will be entirely burned as well, thus reducing the total supply.



Terra’s <a href="https://tendermint.com/" target="_blank" rel="noreferrer noopener">Tendermint</a>-based proof-of-stake consensus mechanism requires that transactions are processed by a set of 130 validators (later this number will rise to 300). Holders of $LUNA can opt to delegate their tokens to one or more validators of their choosing, helping to secure the network and, in the process, earning a reward. Columbus-5 will increase those incentives.



Swap fees generated from the Terra Station wallet — Terra’s equivalent to the popular Metamask app and browser extension — which contains a built-in decentralized exchange, will now be distributed to stakers as well, rather than being burned.



Members of the Terra community (known as LUNAtics) are hoping this will lead to more of the supply becoming locked in the protocol — a 28-day unbonding period is imposed before delegators can withdraw their stake.



<h3 class="wp-block-heading">Not your regulator’s stablecoin</h3>



TerraUSD, as an algorithmic stablecoin, isn’t backed by anything. Its stability is a function of the&nbsp; supply, demand and arbitrage. These types of stablecoins are experimental and highly controversial. If any of these stability factors cease to exist, the value of $UST and $LUNA could quickly deteriorate.



Earlier this year, during the May 19 to May 23 crash, $UST survived a crisis when the price of $LUNA fell by 75% over the space of three days and the stablecoin briefly lost its peg. Since then, the protocol has added more stability mechanisms, while the variance of $UST from a dollar overall has declined.



<figure class="wp-block-image"><img decoding="async" src="https://lh6.googleusercontent.com/54ZrJ1DtTBskH0qeAsfwlka6XqXgolFXjl-VYueG-LZN-xuT_7eRmtBCzkN_EYbL3roG-Vv8R855CVCsCkpz6AOF8GC2MvXrMSfFlotzYjyA9Fln9gk8LkB_XRirVBDk8hFjdZ71=s0" alt=""/><figcaption>Source: <a href="https://app.flipsidecrypto.com/dashboard/terra-stablecoin-peg-variance-RwdHUa" target="_blank" rel="noreferrer noopener">Flipside Crypto</a></figcaption></figure>



Another risk is potential regulation. Gary Gensler, Chairman of the SEC, recently <a href="https://cms.blockworks.co/secs-gensler-stablecoins-are-poker-chips/" target="_blank" rel="noreferrer noopener">said</a> that “These stablecoins are acting almost like poker chips at the casino right now.” The pending regulatory action surrounding stablecoins, particularly algorithmic stablecoins, is unknown.



The Federal Reserve has also been keeping a close eye on the stablecoin market. It has become abundantly clear regulators want investors to tread carefully.



At time of publication, $LUNA has a market cap of roughly $14 billion and $UST has a market cap of roughly $2.7 billion, according to <a href="https://www.coingecko.com/en/coins/terra-luna" target="_blank" rel="noreferrer noopener">CoinGecko</a>, making them the 12th and 57th largest cryptocurrencies respectively. 



This story was updated on September 30, 2021, at 7:07 AM ET.

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