How Picasso ($PICA) is driving the next story of DeFi with IBC | By MWC | Coins | February 2024
Hello everyone, if you’ve been out of the cryptocurrency loop over the past few months, you may have missed one of Ethereum’s hottest stories: re-staking. In terms of altcoins, Ethereum’s L1 may be the most trusted decentralized network, but one notable limitation is that it is not compatible with Inter-Blockchain Communication (IBC). Other new networks and protocols can now all speak a common language through IBC, but Ethereum can’t (yet) and I guarantee it will continue to struggle until it figures out how to do so.
In today’s article, I will argue why I believe Picasso, not Eigenlayer, can provide the next set of headlining solutions to the next frontier of DeFi. Picasso, which first connected the worlds of Polkdaot, Kusama, and Cosmos, is now bringing countless possibilities to Solana, one of the most decentralized and fastest blockchains.
But before we get into how big of a problem this is, let’s first talk about IBC.
When the idea for IBC and Cosmos was first conceived in 2016, the idea was that Cosmos would become the hub of the “Internet of Blockchains.” IBC allows each protocol to essentially spin up its own app chain that can seamlessly transfer assets to each other without any bridges.
Bridges, which have been notorious targets of hacks over the past few years, have proven to be a serious single point of failure as tokens typically need to be wrapped when moving cross-chain. With IBC-enabled chains, asset transfers do not need to be “bridged” and can instead be transferred natively from one chain to another.
This means that since all IBC chains can speak a common language, there is technically no need to expose transferred assets to vulnerabilities that would be found in a common bridge. If you have ever used blockchain in the Cosmos ecosystem, you have probably already experienced how great IBC is in DEXs like Osmosis and Astroport. The latency of transferring an asset from one chain to another is virtually seamless because each AppChain can read it. , the connected wallet transfers and/or withdraws what is on any other IBC-supported chain.
The downside (as is the case with Ethereum) is that many of the existing legacy blockchains do not support IBC. This means that interpreting each “language” a legacy blockchain can speak and making it consistent with IBC is a big challenge.
One of the first legacy chains to make contact with IBC last year was Polkadot. In Q2 2023, Picasso broke groundbreaking news in that it was the first chain to contact Polkadot through IBC.
Like many other existing blockchains, the only contact Polkadot could make outside of its parachains was through existing bridging. Pablo’s Liquidity Pool, which leverages Polkadot’s liquidity through its native DEX Pablo, now looks like a hybrid between Polkadot parachains. and This is because the Cosmos chain inherently allows token pairs across the chain to be traded natively with each other, technically without the need for a traditional bridge, through IBC-enabled transfers.
Now, a few months later, we are seeing cross-chain liquidity pools not only on Pablo, but also on major Cosmos DEXes like Osmosis and Astroport.
Pushing the envelope even further, Picasso kicked off 2024 in earnest by contacting Solana, one of the most decentralized and fastest blockchains available today.
Picasso + Solana + IBC = numerous benefits
By connecting one of the fastest blockchains through IBC, Picasso can take advantage of many potential benefits, including:
Re-staking: First announced in mid-December 2023, Picasso aims to enable re-staking for $SOL stakers. This will inevitably help Solana (and everything connected to IBC) become more composable and secure. With the launch of MANTIS (Multichain Agnostic Normalized Trust-Minimized Intent Settlement) and the “Mantis Game” last month, we created gamified incentives to entice Solana users to stake $SOL and liquid staking derivatives through other Mantis teams. Yes.
At the end of January, Picasso held a first round with a cap of 50,000 (divided by $SOL, $jitoSOL, $mSOL and $bSOL), which was quickly reached within 24 hours. Round 2 began on February 6 and offered a cap of $150,000 SOL, which was more than 50% filled in 24 hours. Needless to say, the hype is definitely there as there is no end to speculation about Picasso’s re-staking application.
Active Verification of Service (AVS): In the same vein as restaking, perhaps the most lucrative benefit of having a restaking layer on top of Solana is that any protocol or blockchain can run its own decentralized node security. This means that re-staking through Picasso allows developers to spin up a trustless system at a fraction of the cost of bootstrapping something themselves from scratch.
Unlike $ETH on the Ethereum validator network, the overwhelming majority of Solana’s $SOL is staked, and according to the Nakamoto coefficient, Solana has a much higher degree of decentralization, almost 10x.
For developers seeking a higher level of decentralization, using Solana is clearly a much better decentralized alternative to Ethereum.
Data availability: Following the modular thesis, The data availability layer can be built on top of Solana’s re-staking layer itself. This could provide a significant economic incentive for any Solana-based project that needs cheap data extraction, as we saw with Celestia’s usage surge over the past year. . Or at least Solana users now have direct access to everything in IBC, so the Solana protocol now also has a more direct path through data availability layers like Celestia itself.
Cross-chain liquidity: Despite the innovations they can bring to the table, many protocols/blockchains live and die by how much adoption they can gain, i.e. how much liquidity they can attract. In blockchain, liquidity can be easily utilized through IBC. Perhaps the most liquid protocols currently are perpetual DEX platforms. Higher liquidity means that perpDEX can not only offer higher leverage, but simply put, it can accommodate higher trading volumes without the risk of default or margin calls. Alternatively, Solana traders now have the option to move to DYDX, the most active perpDEX, via IBC.
2023 has been a huge year for Picasso, but as composability use cases become more concrete, 2024 could be its biggest year yet. As if having contact with one of the fastest blockchains wasn’t enough, Picasso is currently on the verge of having contact with a blockchain with IBC using Ethereum, which has one of the deepest liquidity. Still on testnet, Picasso could help connect the Solana and Cosmos chains to hundreds of billions of dollars on Ethereum and create a cryptocurrency world where users won’t even know which blockchain they’re transacting on. $SOL — $ATOM You can create a basic transfer from —. $ETH, no existing bridge required.
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