Sirwin
Sirwin

How E̶i̶g̶e̶n̶l̶a̶y̶e̶r̶ Picasso ($PICA) will drive DeFi’s next narrative via IBC


Hey folks, if you’ve been out of the crypto-loop for the past few months, you may have missed out on one of Ethereum’s hottest narratives — re-staking. In terms of altcoins, Ethereum’s L1 may be the most trusted decentralized network out there, however one of its glaring limitations is that it’s not Inter-Blockchain Communication (IBC)-compatible. As other newer networks and protocols can now all speak a common language via IBC, Ethereum can’t (yet) and I’m going to make a bet that it will continue to be hamstrung until it figures out how to do so.

In today’s article, I’m going to make an argument for why I believe that Picasso, not Eigenlayer, may provide the next set of headlining solutions to DeFi’s next frontier. Picasso, who was the first to connect the worlds of Polkdaot, Kusama, and Cosmos, is now offering countless possibilities to one of the most decentralized and fastest blockchains out there — Solana.

But before getting into how a big deal this might be, first let’s talk about IBC.

IBC (Inter-Blockchain Communication)

When the ideas behind IBC and Cosmos were first conceived back in 2016, the idea was that Cosmos would be at the hub of an “internet of blockchains.” With IBC, each protocol could essentially spin up their own app-chain that could seamlessly transfer assets from one another without a bridge.

Bridges, which have been notorious targets of hacks over the past few years, have proven to be significant single-points of failure as normally tokens have to be wrapped if they’re going cross-chain. With IBC-enabled chains, transfers of assets avoid the need to be “bridged” and instead can be natively transferred from one chain to the other.

In other words, because all IBC-chains can speak a common language, there’s technically no need for exposing transferred assets to vulnerabilities that they’ll find in a common bridge. And if you’ve ever used blockchains in the Cosmos ecosystem then you’ve probably already experienced how great IBC can be on DEXes like Osmosis and Astroport— the wait times to transfer assets from one chain to another is practically seamless as each appchain can read, transfer, and/or withdraw what the connected wallet has on every other IBC-enabled chain.

The drawback (as is in Ethereum’s case), is that many of the older legacy blockchains are not IBC-enabled, which means that interpreting each “language” that the legacy blockchain can speak and making it coherent for IBC presents a major challenge.

Enter Picasso

One of the legacy chains that gained first contact via-IBC last year was Polkadot. In Q2 of 2023, Picasso made breakout news as it was the first chain to be able to make contact via-IBC with Polkadot:

Like many other legacy blockchains, the only contact Polkadot had been able to make outside its parachains was through conventional bridging. Tapping into Polkadot’s liquidity through their native DEX Pablo, Pablo’s liquidity pools now look like a hybrid between a Polkadot parachain and a Cosmos chain because essentially it is — with IBC-enabled transfers, token pairs across chains can technically be traded natively against one another, without the need of a conventional bridge:

Fast forwarding months later, we now see not only cross-chain liquidity pools on Pablo, but also on major Cosmos DEXes such as Osmosis and Astroport.

Pushing the envelope even further, Picasso has entered 2024 in full steam by now making contact with Solana — one of the most decentralized and fastest blockchains out there.

Picasso + Solana + IBC = Countless benefits

Connecting one of the fastest blockchains out there via IBC allows Picasso to untap many potential benefits, some of which include…

Re-staking: Announced first in mid-December 2023, Picasso aims to enable re-staking for $SOL stakers, a move that will inevitably help Solana (and everything IBC-connected) become more composable and more secure. This past month with their launch of MANTIS (Multichain Agnostic Normalized Trust-minimized Intent Settlement) and “Mantis games” they created gamified incentives to attract Solana users to start staking their $SOL and liquid staking derivatives through different Mantis teams.

In late January, Picasso opened up Round 1, which had a cap of 50k (divided between $SOL, $jitoSOL, $mSOL, and $bSOL) that was quickly reached in under 24 hours. Round 2 was launched on February 6th, offering a cap of 150k $SOL, a cap that was more than 50% filled in another 24 hours. Needless to say, the hype is certainly there as the speculations for Picasso’s re-staking applications are endless.

Actively Validate Services (AVS): In the same vein as re-staking, perhaps the most lucrative benefit to having a re-staking layer on top of Solana is for the ability for any protocol or blockchain to spin up its own decentralized security of nodes. In other words, re-staking with Picasso can allow developers to spin up a trustless system at a fraction of the cost than it would to bootstrap something on their own from the ground up.

Unlike $ETH in Ethereum’s validator network, the overwhelming majority of $SOL in Solana is staked, and according to its Nakamoto coefficient, Solana has a much more higher level of decentralization, by nearly a factor of 10:

For developers looking for higher levels of decentralization, using Solana is clearly a much better decentralized alternative compared to its Ethereum counterpart.

Data-Availability: Following the modular thesis, a data availability layer could be built on top of Solana’s re-staking layer itself, which as we’ve seen the usage of Celestia balloon over the past year, could offer significant economic incentives for any Solana-based project that’s in need of cheap data extraction. Or at the very least, now that Solana users have direct access to everything IBC, Solana protocols now also have a more direct route with data availability layers like Celestia itself.

Cross-chain Liquidity: Despite the innovations they may be bringing to the table, many protocols/blockchains live and die by how much they're able to gain adoption, or in other words, how much liquidity they're able to draw in. By accessing liquidity across major blockchains, liquidity can be tapped into easily via IBC. Perhaps the protocols that currently the deepest liquidity are perpetual DEX platforms. Higher liquidity means that perpDEXes are able to offer not only higher leverage, but simply put they can accommodate larger volumes of trades without as much risk towards defaults or margin calls. Alternatively, Solana traders now have the option of going via IBC to the most active perpDEX out there — DYDX.

Picasso’s next chapter

2023 was an extremely big year for Picasso, but arguably once its composability-use cases get more fleshed out, 2024 might be the biggest yet. As if making contact with one of the fastest blockchains wasn’t enough, Picasso is currently on the verge of also making IBC contact with the blockchain with one of the deepest liquidities — Ethereum. Still in testnet, Picasso could help connect Solana and Cosmos chains to Ethereum’s 100s of billions of dollars and truly make a crypto-world where users may not even know what blockchain they’re transacting on, creating native transfers from $SOL — $ATOM — $ETH, without the need for conventional bridges.

As always thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!

Disclaimer: This is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!

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Messin' With Cryptos
Messin' With Cryptos

I've made a ton of mistakes along the way in the world of Defi and cryptocurrency. Hopefully by taking some of the lessons learned and cues i've went through, you'll be a bit more success


Messin' around with Crypto's
Messin' around with Crypto's

Follow me on twitter! @CryptosWith https://twitter.com/CryptosWith

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