Avalanche Joins Cosmos Via IBC, Is This Super Bullish For DeFi?

Avalanche, a high throughput blockchain using the Snow Protocol for consensus, is joining Cosmos, according to the latest Interchain Foundation (ICF) update on October 31. Interchain Foundation, the non-profit organization that stewards the Cosmos ecosystem, revealed that the Landslide Network, a platform bridging IBC-enabled platform to Avalanche, is developing a light client on Avalanche.

This client will link the scalable layer with the Cosmos Hub and other compatible blockchains, including Kava and the BNB Chain. The Cosmos Hub is key to the ecosystem since it allows other blockchains to connect and communicate seamlessly via the IBC.

Avalanche Joins Cosmos, Will DeFi Benefit?

Landslide launched the incentivized testnet on November 1, marking the first concrete steps for Inter-Blockchain Communication (IBC) to connect with Avalanche. The goal, the ICF said, will be to boost decentralized finance (DeFi) activities between the two ecosystems, allowing assets to flow freely.

Technically, Avalanche isn’t compatible with the IBC and Cosmos because the two networks, though popular, use different consensus algorithms. For instance, Avalanche uses the Snow Protocol, while Cosmos and other Cosmos-enabled blockchains rely on the Tendermint consensus mechanism. As such, connecting them without customization or a bridge is complex.

This connection is what Landslide, roping with the assistance of Cosmos development teams, plans to resolve. Once resolved, more opportunities could be opened up for developers and protocols of the two networks since while lagging behind Ethereum, they are relatively active, with total value locked (TVL) by its DeFi apps running into hundreds of millions of dollars.

Central to what Landslide is building is the IBC, which allows protocols to communicate and transfer data securely. The solution is built on the Cosmos Software Developer Kit (SDK). It is inherently designed to be secure, efficient, and scalable.

DeFi Remains Suppressed, ATOM And AVAX Prices Firm

While the goal is to revive and possibly improve DeFi liquidity, activity remains relatively depressed. Over the past 18 months, TLV has contracted below the $50 billion level as activity remains concentrated on Ethereum, the world’s largest smart contract platform. 

According to DeFiLlama data on November 1, the total TVL is around $42 billion, of which Ethereum protocols manage over $22 billion. Avalanche dapps control over $539 million, while those in the Cosmos Hub is less than $1 million.

AVAX and ATOM prices are steady when writing, up from Q3 2023 lows and technically bullish. However, like Bitcoin (BTC) and Ethereum (ETH), the upside momentum is waning, and prices might pull back in the coming sessions.