$10M Fund From Cosmos-Based Terra Will Gladly Back DeFi Projects on Ethereum

$10M Fund From Cosmos-Based Terra Will Gladly Back DeFi Projects on Ethereum

The creators of the Tendermint-based Terra suite of stablecoins are opening a fund to foster its tokens’ usage anywhere people are doing decentralized finance (DeFi) – and that primarily means Ethereum.

Announced Thursday, Terraform Labs has launched a $10 million fund, Terraform Capital, to drive integrations of either its dollar-pegged stablecoin, TerraUSD (UST), or its governance token, LUNA, throughout DeFi by covering the cost of security audits. This follows right after a $25 million funding round from many of crypto’s biggest venture capitalists last month.

“Main objective of fund: increase integration of UST on Ethereum’s DeFi stack,” Do Kwon, a co-founder of Terraform Labs, told CoinDesk in an email. “Expected ROI: high – can fund a hundred audits with a few successful integrations.”

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The fund is setting up a slate of security auditors to be ready to move fast and get new offerings out the door with the security assurances early adopters want. Right now they have a few firms on deck to do the work: Sentnl, Quantstamp and Solidified.

“In 2020 alone, over 240 million USD worth of digital assets were lost or stolen as a result of DeFi hacks, but no funds have been compromised in code audited by Quantstamp,” Quantstamp CEO Richard Ma said in a press release.

As noted, Terraform wants to foment use of UST and LUNA, but it’s not worried about which blockchain the project is built on. Though a Tendermint blockchain, this fund is happy to invest anywhere Terraform’s cryptocurrencies can be ported.

“We want this fund to accelerate the amount of building that can happen on Ethereum (and whatever other layer 1s of the builders’ choosing),” Jeffrey Kuan, of Terraform’s business development team, told CoinDesk in an email.

He said security audits are the main cost barrier for these new teams. “We’re hoping that the fund can reduce friction as much as possible for promising teams that are building, with the goal of increasing the GDP of the blockchain ecosystem,” Kuan said.

Whatever-maximalists, take note: This kind of fund is about the fundamentals driving a token battle rather than furthering any of crypto’s tribal fights.

One of the original backers of Terraform Labs, Michael Arrington, founder of Arrington XRP Capital, told CoinDesk in a phone call that it just doesn’t matter to LUNA holders where UST gets used, because the two tokens are inextricably linked.

China’s BSN blockchain network to add permissioned version of Cosmos

China’s Blockchain-Based Service Network (BSN) is split into two, the Chinese version only supports permissioned or enterprise blockchains, and the international network also includes public blockchains. Today the BSN announced that Cosmos, the interoperability focused public blockchain technology, has been adapted to run on the Chinese network.

The work to create an Open Permissioned Blockchain (OPB) was done by Bianjie, the company behind Chinese public blockchain IrisNet, which is a participant in the International BSN. The company also developed the enterprise blockchain version IRITA.

Two of the BSN’s key aims are to enable low-cost adoption of blockchain technologies for SMEs and individuals and enable interoperability between separate private blockchains.

This permissioned version of Cosmos on BSN is referred to as WenChang Chain after the city in Hainan province.

“BSN’s OPB initiative is a major milestone for China’s blockchain development. China had been longing to embrace public chain technologies for years but there wasn’t an effective way to do so because the regulators are not a fan of cryptocurrency,” said Yifan He, Executive Director of BSN and CEO of Red Date Technology.

He’s hoping other public blockchains will adapt and join in 2021.

Yifan He continued, “We are working hard on interoperability across all blockchain ecosystems. BSN’s OPBs will interoperate with traditional permissioned frameworks within the BSN ecosystem and other OPBs outside the system.”

Cosmos is known for its Inter-Blockchain Communication protocol (IBC), which is due to go live on the main public network this month. While it was initially designed to enable tokens to be exchanged between separate blockchains within the Cosmos network, it has since been broadened to include the transfer of data.

Meanwhile, BSN also has a deal with Digital Asset, which has developed a new interoperability protocol DAML Canton, that sits beneath the DAML smart contract language. The aim is to enable workflows across a diverse range of blockchains. The main DAML language works across numerous enterprise blockchains and databases.

In other news, BSN recently announced it will support the Quorum enterprise blockchain, adding to the two currently live ones, China’s FISCO-BCOS and Hyperledger Fabric, and several others already planned. The BSN also laid out a five-year plan to create a universal digital payment network (UDPN) to support multiple countries’ central bank digital currencies.

Cosmos Set to Take Lead in Blockchain Interoperability With February’s Stargate Release

Right now, blockchains communicate via tacked-on solutions (state channels, sidechains, swaps, bridges and so on). With the Stargate update to Cosmos on Feb. 18, the tools for native blockchain interoperability will be live on mainnet.

“This is a long-awaited release for many Cosmos-based projects out there,” Band Protocol’s Kevin Lu told CoinDesk via email. “For us this will enable seamless and simple integrations with any Cosmos-based decentralized application, relaying oracle data in a highly scalable and tamper-proof manner.”

Iqlusion’s Zaki Manian, who leads much of the development for Cosmos, explained that once Stargate goes live, a governance vote will be required to switch on inter-blockchain communication (IBC), which will take two weeks to finalize.

So at the earliest, all systems go for IBC would be early March. That said, Tendermint chains need to upgrade to the Cosmos SDK for this to happen. Manian said this is probably one or two weeks of work for most dev teams and they don’t need to wait for Stargate to kick in to start.

If Tendermint-based chains activate Stargate en masse, this has the potential to be a big moment – not just for Cosmos but in the whole history of crypto.

There have been a lot of standalone bridges between blockchains built so far, but Stargate could mark a new era in composability, where we see one big system that lets lots of different chains trade value and build on each other’s strengths.

Many chains

There are more notable Tendermint-based projects than many may realize.

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A new site called Cosmos-Cap is tracking the market capitalization of projects in the ecosystem, currently valuing all the chains together at just under $13 billion. The native token of Cosmos, ATOM, is currently trading around $8, with a market cap of $1.9 billion on its own.

While not on that list, the payments and remittances blockchain Celo has also taken steps to connect with Stargate.

THORChain, which enables assets to be swapped across chains (sort of like Uniswap), told CoinDesk, “THORChain is Stargate-ready, but more work needs to be done to make it IBC-ready, that is in the works currently.”

Other teams are also busy.

“The current plan for Band Protocol’s Stargate connection is to have testnet by Q1 and mainnet by Q2 for Stargate support,” Lu wrote, enabling the team time to be very confident in its implementation.

Do Kwon, a co-founder of Terraform Labs, which runs the Terra chain, confirmed it would upgrade but not until Stargate has had some time in the wild. “The earliest we would move to upgrade is May,” he wrote in an email.

Spokespeople for Celo and Oasis confirmed the teams are working toward IBC implementation, but without giving a timeline.

Binance, whose BNB coin represents the most value in the ecosystem, sent CoinDesk the following statement: “We will not be able to join the Stargate timeline to support the IBC. The Binance Chain community will discuss when and how to support this initiative.”

THORChain also emphasized that, like many big upgrades, Stargate will add other benefits for Tendermint-based blockchains, such as faster throughput and implementation of Google’s protocol buffers standard (which should also be good for interoperability).

Close followers of the project may have heard Stargate would launch on Jan. 28, but the date was pushed back. Manian told CoinDesk this decision was driven by a bug that was found and fixed. It was useful anyway because the exchanges still were not ready for the update.

Since 2019, the Cosmos project has been as volatile as cryptocurrency generally.

While in late 2019 CoinDesk noted the financial health of the project thanks to conservative treasury management, by early 2020 it appeared to be falling apart from a personnel standpoint. By the summer, however, it seemed Cosmos had weathered its internal storms.

Going forward, every time a blockchain clicks into IBC it is likely to put pressure on other Tendermint projects to get their upgrades done. With even a few interoperating, composability should start kicking in and FOMO will drive stragglers to get in fast.