There is a tangible feeling that the gloves are coming off in crypto. When crypto was growing fast and valuations hit peak bubble, it was easy to argue that crypto was such a big transformation that all the early movers could be winners. As crypto winter befell us, the focus turned to survival and on buidling. Crypto took a hit, but the smart money stayed in and the crypto ecosystem is in much better shape to disrupt the global economy. But now some people’s minds are turning to the impending battle of the chains.
In this article, the first of a series of posts, we’d like to argue the opposite point of view. We believe that it’s much too early for crypto infighting. When markets mature, competition will get intense. But we are nowhere near a mature market. Right now, it’s in everyone’s interest to focus on growing crypto into a rich, diverse ecosystem of projects that can thrive together.
Throughout the blog post series, we will work to reclaim the “Internet of Blockchains” (IoB) vision from the many projects that have claimed it as their own. When we speak about IoB, we mean a vision of the decentralized web that is made of tens of thousands, maybe even millions, of interconnected blockchains. This vision may include a range of general-purpose smart contracts platforms, each with their own features that create differentiated value propositions. There may be competing inter-chain protocols that allow value to flow across the IoB, potentially through decentralized hubs that can securely route these flows. Data will be dispersed across a range of private and public repositories. Much of the business logic will sit in application-specific chains.
We want this reclaimed Internet of Blockchains vision to serve as a catalyst for a renewed focus on positive-sum thinking within the wider crypto community. Maybe we can even call it Interoperability Maximalism 😁.
When Chorus One selects a network to support, interoperability is a key requirement. You could say it’s our central investment thesis. The two projects we run validators on today (Cosmos Hub and Loom Network) both reflect this interoperability bias. Both the Cosmos Hub and Loom’s PlasmaChain are two very important pieces in the IoB vision. They are both, in their own ways, interoperability hubs. Loom is a Layer 2 network built on Ethereum, so ETH and ERC20 tokens can be used by apps running on the chain. Loom has also announced interoperability with Cosmos Hub, Tron, and EOS (and we’re guessing there might be more network integrations to come). Cosmos has announced plans to bridge their hub to Bitcoin and Ethereum. They also provide an SDK for developers to build their own application-specific blockchains or “zones” (as they are known in Cosmos terminology). Cosmos are also working on their Inter-Blockchain Communication (IBC) Protocol, which could become the global standard for inter-blockchain value exchange, allowing digital assets to be moved across chains.
So instead of thinking what <insert your favorite blockchain> should be doing to out-compete the rest of the community, why don’t we try to reframe these strategy discussions and try to figure out where each blockchain fits into the Internet of Blockchains? What special value does each chain add? Does it differentiate by providing unique value? Can it identify a niche to fill and then look to build network effects within that niche?
For general-purpose smart contracts platforms, this might mean some form of specialization i.e. identifying key use cases to focus on and adding features that uniquely enable those use cases. What attracted us to Loom, was their decision to focus on features for the gaming industry, by building the essential elements required by the game studios who are lined up to capitalize on the great disruption that crypto brings to their industry. Once a niche is identified, each project can then try to figure out where the network effects are. In gaming, marketplaces for trading in-game assets are the best places to build sustainable competitive advantage.
Other networks we are speaking with are a looking to drive down the cost per transaction on smart contract networks to give them a unique advantage in verticals that require massive transaction volume e.g. micropayments. Others are focusing on developer productivity, through great tooling and new paradigms for code reuse.
Another approach is to build specific protocols. The Cosmos IBC protocol takes a siloed network and makes it more useful by making it interoperable with other networks. When protocols become global standards (think HTTP, TCP/IP) they become irreplaceable. Protocols have very powerful network effects. So Cosmos Hub with IBC has identified its niche. But more importantly, the Cosmos community have a clear strategy on how to succeed in this niche i.e. to make IBC the global standard. In later posts we’ll show how Cosmos SDK, Ethermint, pegged zones etc. all come together to maximize IBC’s chances of success.
So stay tuned. This interplay of differentiation and strategy is at the heart of how we think about interoperability. Over the series of posts, we’ll dig deeper into a range of topics that will hopefully start a wider conversation about how we deliver on the Internet of Blockchains vision.