Tokyo, May 31, 2024 — — Progmat, Inc. (“Progmat”) and Datachain, Inc. (“Datachain”) are pleased to announce their collaboration aimed at providing and maximizing the assets under management (AUM) of stablecoins issued using Progmat’s stablecoin issuance and management platform, “Progmat Coin.” Specifically, in addition to the existing multi-chain/cross-chain deployments, Progmat and Datachain will jointly promote the development of stablecoin contracts and business development in the global market.

The development of smart contracts related to standard stablecoin features has already been completed, and successful stablecoin transfers across multiple blockchains in the testnet environment have been achieved. Moving forward, both companies will strengthen their collaboration to standardize stablecoin issued using “Progmat Coin” on a global scale, including the creation of international use cases.

1. Background

As of May 2024, the global stablecoin market has exceeded $160 billion. In addition to their use in blockchain-based services, various use cases, such as enhancing convenience in retail and corporate payments, are being explored.

Currently, a significant portion of the market is dominated by USDC, issued by Circle in the United States, and USDT, issued by Tether in Hong Kong. Tether’s net profit for the first quarter of 2024 reached $4.5 billion, highlighting the considerable attention this sector is receiving.

However, existing stablecoins face numerous challenges, including regulatory compliance and price instability. There is a growing demand for safe and secure stablecoins that are compliant with regulations and issued by internationally trusted financial institutions. In Japan, stablecoins were defined in the revised Payment Services Act, which came into effect in June 2023, and preparations for issuing stablecoins compliant with this legislation are underway.

Progmat, in collaboration with trust banks and other stablecoin issuers, is leading the development of the stablecoin issuance and management platform “Progmat Coin.” Once intermediaries handling stablecoins complete the necessary license registrations, it will be possible to issue and circulate stablecoins using this platform. Each stablecoin can be issued in major fiat currencies such as JPY, USD, and EUR, with an eye on global market expansion.

2. Details of this Initiative

The purpose of this initiative is to maximize the AUM of stablecoins issued using Progmat Coin by collaborating with Datachain. Specifically, Progmat and Datachain will work together to advance the following two key areas critical to liquidity in the stablecoin business.

Regarding smart contract development, the standard functions for stablecoin registration, issuance, and transfer have already been completed. Successful execution of stablecoin transfers between different blockchains has been confirmed in the testnet environments of multiple public chains (Ethereum and BNB Chain).

The transfer transactions utilize the Burn-Mint method, which involves burning (destroying) stablecoins on one blockchain and minting (issuing) the same amount of stablecoins on another blockchain. This method offers superior capital efficiency and user convenience compared to traditional methods. As of now, apart from Circle’s USDC, no other stablecoin has implemented this method, making the Progmat Coin platform the only one capable of achieving Burn-Mint cross-chain transfers from Day 1 (system release date) (as of May 2024, according to our research).

Each stablecoin issued using the Progmat Coin platform implements the above method using the Inter Blockchain Communication (IBC) protocol *1, developed with contributions from Datachain. This enables the provision of a safer, more versatile, and capital-efficient cross-chain stablecoin transfer function.

The blockchains supported using IBC will be expanded sequentially, considering transaction costs, transaction speeds, and the size of related ecosystems, to meet the needs of stablecoin users.

3. Future Plans

Progmat and Datachain, in collaboration with trust banks and other stablecoin issuers, plan to issue stablecoins using the “Progmat Coin” platform within 2024. Following this, they aim to maximize AUM by developing additional features and engaging in discussions with various domestic and international financial institutions and stablecoin-using enterprises.

Announcements regarding individual initiatives will be made as preparations are completed.

*1) IBC: A standard specification to ensure interoperability between blockchains. Abbreviation of Inter-Blockchain Communication.

About Datachain

Datachain is a blockchain startup founded in 2018 that specializes in blockchain interoperability. Its core products include YUI, a Hyperledger Lab that enables interoperability between multiple heterogeneous blockchains via IBC, and LCP, a proxy for light client verification using TEEs. Datachain is also working on an IBC-enabled cross-chain bridge in partnership with TOKI and are involved in several projects with enterprises, focusing on cross-chain technology. For more information about Datachain, please visit https://www.datachain.jp/.

About Progmat

Progmat is a startup company building digital asset infrastructures that can transform the financial system. With a mission of “Connecting the society with the programmable network and digitizing every value,” Progmat delivers the issuance and administration platform for tokenized securities, stablecoins, and utility tokens, while pursuing partnerships to expand global use of digital assets. Progmat, as an independent firm backed by several key institutions in national financial markets, also leads digital assets ecosystem across multiple industries by running the Digital Asset Co-Creation Consortium, which has over 200 member firms. For more information, visit https://progmat.co.jp/en/

We’re thrilled to announce that Datachain has secured funding from MUFG.

Through this round of funding, we will further enhance our cooperation with MUFG. Our collective focus is on the commercialization of initiatives that utilize stablecoins, security tokens (digital securities), and cross-chain technology.

According to a joint report by BCG and ADDX, the digital assets market could reach an estimated $16.1 trillion by 2030 in a conservative scenario, and possibly up to $68 trillion in the best-case scenario. The markets for stablecoins and cryptocurrencies are also predicted to grow, suggesting a further expansion in the overall digital asset market size.

Datachain is building infrastructure to manage digital assets dispersed across various blockchains in the expanding digital asset market. We’re doing this with the help of various partner companies, including MUFG.

Past Initiatives

Datachain is proficient in cross-chain technology, an essential field in a world where digital securities, such as stablecoins and security tokens, operate across multiple blockchains. This area of technology is highly acclaimed globally. As evidence of our expertise, we have twice received grants from the Interchain Foundation for implementing IBC-Solidity.

We’ve been collaborating with a variety of companies, both locally and internationally, conducting demonstrations and joint research. Specifically, with MUFG, our recent investor, we’ve launched projects using stablecoins. These are expected to be issued and circulated by “Progmat Coin,” a stablecoin management platform led by the same company.

Highlights from Our Initiatives:

• Datachain Teams Up with Mitsubishi UFJ Trust and Banking to Realize Cross-chain Settlements with…
• TOKI and MUFG Unite to Bring Japanese Trust Bank-backed Stablecoins to Public Blockchains

Future Plans

We’re working to support the issuance and circulation of stablecoins on public blockchains such as Ethereum. This effort, made in collaboration with TOKI, which offers a cross-chain bridge, and MUFG, is aimed at commercialization by 2024 Q2.

Additionally, we’re targeting the realization of “cross-chain settlements of digital securities using stablecoins” within 2024. This project, which we are pushing forward with MUFG, will involve deepening our ties with relevant securities firms and other entities.

Datachain is contemplating further fundraising from firms that align with our business objectives. This approach, among other initiatives, will help drive the growth of our business.

Follow us for more updates!

• Twitter: @datachain_en
• Website: https://www.datachain.jp/
• GitHub: https://github.com/datachainlab

Datachain has been working towards the commercialization of cross-chain settlement using digital securities and stablecoins since the partnership with Mitsubishi UFJ Trust Bank was announced in September 2022. We are thrilled to announce that we have successfully completed the first step towards commercialization, which was the technical verification phase!

In this article, we’ll discuss the background and details of our technical verification, the scenario in our demo video, and our future prospects. Stay tuned to learn more!

Background

Mitsubishi UFJ Trust and Banking Corporation has developed a digital securities platform called “Progmat” and plans to transfer it to an independent company called “Progmat Inc. (tentative)” in September 2023. As of 2022, the platform has already exceeded 40 billion yen in assets under management (AuM) related to digital securities in Japan.

Additionally, various stablecoins using the “Progmat Coin” stablecoin issuance and management platform will be able to be issued and circulated once licensed operators complete their registration after the revised Payment Services Act is enforced in 2023.

Amid the hype surrounding digital securities and stablecoins, cross-chain settlement (DVP settlement) of digital securities and stablecoins on different blockchains is currently being focused on.

As far as we know, cross-chain settlement of digital securities using a stablecoin that complies with regulations would be the world’s first if achieved!

To make this happen, Progmat is using IBC as the communication protocol between blockchains. This is a huge step for the IBC ecosystem as well because it means stablecoins and RWA (Real World Assets) in Japan will come to the Interchain via IBC.

In addition, in this technical verification, R3’s leading distributed application platform Corda is adopted as one of the blockchain infrastructures, and we are also collaborating with R3, the global enterprise distributed technology and services firm. R3 has realized the importance of interoperability between Corda and Ethereum/EVM-compatible blockchains and is backing it as a critical feature to come.

As interoperability is expected to become increasingly important in R3’s projects with major financial institutions around the world, Datachain’s initiative also plays a key role as a litmus test to the possibilities of interoperability.

Why IBC? Why Datachain?

So why did Progmat choose IBC as the communication protocol between blockchains?

In 2022, Progmat was looking for a solution that met the following criteria for their project:

• Trust-minimized (without a TTP)
• Able to handle various use cases including securities settlement and NFT settlement
• Does not require building a new network (minimizes construction and management costs and privacy issues)

After careful consideration, they determined that IBC was a viable interoperability method for enterprise use cases that met the above requirements. This is a crucial step in connecting Progmat with the world of public blockchains.

Datachain is one of the top contributors to IBC and has high expertise in this area, having been awarded two grants from the Interchain Foundation. This is why they partnered with Datachain.

Datachain Receives Grant from Interchain Foundation to Enhance IBC-Solidity for Production Use

In addition, Progmat needed the open-source software (OSS) developed by Datachain, such as Cross Framework, which enables atomic swaps between different blockchains, and LCP, which brings scalability to IBC while fulfuliing their criterias, to achieve their goal of cross-chain settlement.

Overall, the decision to choose IBC was based on careful consideration of various factors, and the partnership with Datachain brings the necessary expertise to make this initiative a success.

Technical Details

In this technical verification, we have successfully achieved the simultaneous transfer of tokens on both Corda, a blockchain layer of the stablecoin management platform “Progmat Coin,” and GoQuorum, a blockchain platform that handles digital securities other than Progmat, by interconnecting the two blockchain platforms.

As a cross-chain initiative using Progmat Coin, there are both DVP settlements of stablecoins and digital securities, as well as PVP settlements between stablecoins or between stablecoins and regional digital currencies. However, this case concerns the former DVP settlement effort.

We have mainly verified the following two points:

• High scalability and trust-minimized cross-blockchain verification.
• Simultaneous transfer of tokens on different blockchain platforms.

For the first point, we used the IBC protocol (e.g., IBC-Solidity and Corda-IBC), and LCP, which enables efficient and scalable cross-chain interoperability without losing the degree of security.

• GitHub - hyperledger-labs/yui-ibc-solidity: IBC in Solidity
• GitHub - hyperledger-labs/yui-corda-ibc: IBC implementation in Corda
• GitHub - datachainlab/lcp: A proxy for light client verification executed in TEE.

(You can learn more about LCP from here.)

For the second point, we used the Cross Framework, a framework that allows for cross-chain transactions, to execute simultaneous transfers of digital assets and stablecoins on different blockchain platforms.

GitHub - datachainlab/cross: A framework empowers the development of smart contracts that support cross-chain transactions.

Testing Scenario and Demo Video

The normal scenario involves a DvP (Delivery versus Payment) where Alice, the digital security buyer, transfers a stablecoin to Bob, the digital security seller, for payment. In turn, Bob transfers the digital security to Alice. The stablecoin amount is set at 1000 USD and the number of digital securities is set at 10.

The various screens in the demo video show the following:

• Upper screen: the scenario script
• Lower left screen: logs of packet detection by the relayer
• Lower right screen: logs of verification by the LCP node

In addition, the text in the demo video is color-coded as follows:

• Gray: commands
• White: logs of the script
• Blue: highlighted logs of the script
• Green: results of executing commands.

The actors involved in this scenario are listed in the following table. ST represents Security Token while SC represents Stablecoin.

The demo video showcases a series of actions as follows:

1. Grant tokens on Corda to Alice from SCAdmin.
2. Grant tokens on GoQuorum to Bob from STAdmin.
3. Bob approves the token to Cross.
4. Display the balance before executing the scenario.
5. Alice creates a ContractTx on Corda.
6. Bob creates a ContractTx on GoQuorum.
7. Alice creates and submits an InitiateTx to start the transaction.
8. Bob signs and submits the transaction (ExtSignTx).
9. The STAdmin signs and submits the transaction (ExtSignTx).
10. Validator executes the Cross-tx.
11. Relayer detects and relays the packet.
12. Display the balance after executing the scenario.

If interested, we can consider making the demo code available upon request. For those who would like it, please contact us at the following email address:

• Email: progmat_post@tr.mufg.jp

Comment from Mitsubishi UFJ Trust and Banking

Tatsuya Saito, the Vice President of Product at Mitsubishi UFJ Trust and Banking Corporation and Incoming Founder CEO of Progmat

“At Progmat, we believe that IBC and LCP are essential technologies to satisfy the messaging layer requirements for blockchain interoperability when handling Real World Assets (RWA) such as security tokens, stablecoins, and utility tokens (NFT) across multiple chains. We aim to lead the trend of tokenizing RWA globally and collaborate with Datachain to create initiatives that represent this movement, including the commercialization of cross-chain settlements for digital securities using stablecoins, which is planned for 2024.”

Comment from R3

Todd McDonald, Chief Strategy Officer & Co-Founder at R3

“Building a critical infrastructure that will enable users to connect Corda-based apps with Enterprise Ethereum apps and bridging these networks in a regulatory-compliant way is top of mind at R3. We are excited to see what the future holds with Datachain’s work on efficient and scalable cross-chain interoperability, as it can act as an additional guide in our mission of enabling an open, trusted, and enduring digital economy.”

Final Thought

We are beyond excited to announce that the technical verification has shown that Corda and GoQuorum can enable the simultaneous transfer of stablecoins and digital assets on each blockchain with high scalability and trustless structure.

As mentioned earlier, stablecoins using Progmat Coin will be issued through a trust-based scheme once licensed intermediaries complete their registration after the revised Payment Services Act is enforced in 2023. Cross-chain settlements using stablecoins that comply with regulations will be a cutting-edge global initiative for digital securities on the blockchain!

Thanks to the collaboration of Progmat, R3, securities companies, and others, we were able to create this pioneering use case. As Datachain, we are over the moon to have been a part of this initiative and we can’t wait to spread the word to the blockchain community worldwide.

Make sure to stay tuned for future developments toward commercialization in 2024. It’s going to be epic.

Twitter | GitHub | Website

Datachain has received a grant from the Interchain Foundation, an organization dedicated to fostering the growth of the Interchain ecosystem, a highly popular blockchain network built upon the Interchain stack, and connected by the trust-minimized Inter-Blockchain Communication (IBC) protocol.

This is the second time the team will receive a grant from the Interchain Foundation. This follows their initial selection in October 2021, which was the first of its kind in Japan. The fact that Datachain has been selected for a second grant is a testament to the high quality of work and value that the team is providing to the Interchain community.

With this grant, Datachain will work on improving the functionality of “IBC-Solidity,” the Solidity implementation of the IBC protocol, which connects some of the most highly used blockchains in the world.

Datachain’s effort will enable high security with minimal trust assumptions on Ethereum, EVM-compatible blockchains, and Enterprise Ethereum (Hyperledger Besu, GoQuorum) via interoperability with IBC. This project will be a significant step towards enhancing the overall safety and trustworthiness of interoperability among Ethereum-based blockchains, one of the most popular blockchain ecosystems in the world.

Cosmos - Internet of Blockchains ⚛️ on Twitter: "1/ 2023 is the year that #IBC will expand to new blockchains, including #Ethereum@datachain_en, an @interchain_io granted team, is working on IBC-Solidity.The Solidity implementation of IBC aims to connect Ethereum to #Cosmos ⚛️ pic.twitter.com/tPVD6lnl6v / Twitter"

1/ 2023 is the year that #IBC will expand to new blockchains, including #Ethereum@datachain_en, an @interchain_io granted team, is working on IBC-Solidity.The Solidity implementation of IBC aims to connect Ethereum to #Cosmos ⚛️ pic.twitter.com/tPVD6lnl6v

Past Efforts

Since its initial grant in October 2021, Datachain has been committed to advancing interoperability by promoting the adoption of the IBC protocol. As a crucial element of this effort, the team has been focused on intensive research and development to enhance IBC-Solidity implementation. Through this work, Datachain is contributing to the overall growth and success of the Interchain network, while also driving innovation in the field of decentralized technologies.

The YUI project, granted to the Hyperledger Foundation, is aimed at making IBC available on blockchains other than those that use Tendermint or CometBFT (the consensus algorithms at the heart of the Cosmos ecosystem). This effort includes developing modules that support various ledgers such as Hyperledger Fabric, Corda, Hyperledger Besu, and the Solidity implementation of IBC known as “IBC-Solidity.”

• GitHub - hyperledger-labs/yui-docs
• GitHub - hyperledger-labs/yui-ibc-solidity: IBC in Solidity

This development is progressing in collaboration with the IBC community and core teams. These efforts are expected to contribute significantly to secure and reliable interoperability between various blockchains.

Grant Scope

Datachain utilizes the funding from the Interchain Foundation to develop the following feature enhancements and improvements with the aim of production-level utilization of IBC-Solidity:

Main enhancements:

• Enable BEEFY/GRANDPA light client support (ICS-02 client specs and review of implementation)
  https://github.com/hyperledger-labs/yui-ibc-solidity/pull/115
• Re-architecture for gas efficiency and readability
  https://github.com/hyperledger-labs/yui-ibc-solidity/pull/130
  The following table is a summary of the results of gas cost reduction.

Other enhancements:

• Support for generic verification function (ICS-02)
  https://github.com/hyperledger-labs/yui-ibc-solidity/pull/126
• Compliant to commitment path (ICS-23)
  https://github.com/hyperledger-labs/yui-ibc-solidity/pull/126
• Relax on contract size limitation for ICS-04
  https://github.com/hyperledger-labs/yui-ibc-solidity/pull/150
• ICS-02: Add verifyNonMembership support:
  https://github.com/hyperledger-labs/yui-ibc-solidity/pull/148

The BEEFY/GRANDPA Light Client support was carried out in collaboration with the Composable Finance team. Composable Finance is dedicated to improving the accessibility, quality, transparency, efficiency, and security of cross-ecosystem DeFi. Their technology stack is being developed to enable and combine key services across different DeFi ecosystems and protocols. Composable’s work aims to connect ecosystems that are currently siloed by utilizing and expanding IBC outside of Cosmos to Polkadot, Kusama, NEAR, Ethereum, and beyond.

Use Cases

By using IBC-Solidity, it is possible to facilitate the transfer of messages, tokens, and data across various blockchains via IBC, including Ethereum, EVM-compatible blockchains, and Enterprise Ethereum (Hyperledger Besu, GoQuorum).

An instance demonstrating the practical application of IBC-Solidity is the ongoing verification of interoperability between GoQuorum and Corda using this technology, as seen in the case of Progmat Coin promoted by the Mitsubishi UFJ Trust and Banking Corporation, which was announced in September 2022.

Datachain Teams Up with Mitsubishi UFJ Trust and Banking to Realize Cross-chain Settlements with…

In addition, the IBC-Solidity can also be extended to connect public blockchains, such as Ethereum and Cosmos, and between public and enterprise blockchains, such as Ethereum and Corda.

Future Work

Datachain plans to collaborate with partner companies in Japan and abroad to launch services in production environments using IBC-Solidity and other technologies like LCP, which was announced last year.

LCP — A Proxy for Light Client Verification to Realize Trust-minimized and Gas-efficient…

IBC-Solidity is compatible with EVM-compatible chains like BSC, Polygon, and Avalanche, and can be utilized in cross-chain bridges connecting these public chains.

Moreover, an audit is planned in the future to ensure its use in production environments.

About Interchain Foundation

The Interchain Foundation (ICF) is a Swiss non-profit organization dedicated to advancing new technologies and applications, particularly in the realm of open and decentralized software architectures. Their primary objective is to promote and develop the Interchain, a vast network of autonomous blockchains and associated communities united by a shared technology called the Interchain Stack. It exists primarily to support and encourage the free, open-source software that it stewards and the communities that use it.

Stewarding The Cosmos Ecosystem - Interchain Foundation

Twitter | GitHub | Website

Datachain, Inc. (headquartered in Minato-ku, Tokyo; Tetsushi Hisata, President; hereinafter “Datachain”), Mitsubishi UFJ Trust and Banking Corporation (headquartered in Chiyoda-ku, Tokyo; Iwao Nagashima, President; hereinafter “Mitsubishi UFJ Trust and Banking”) and SORAMITSU Co., Ltd. (headquartered in Shibuya-ku, Tokyo; Kazumasa Miyazawa, President & CEO; hereinafter referred to as “SORAMITSU”) launched a technical alliance on March 28 to realize smooth mutual transfer and exchange between a wide variety of stablecoins to be issued in Japan.

In this initiative, we will conduct proof of concept using various stablecoins issued using the stablecoin issuance and management platform “Progmat Coin” led by Mitsubishi UFJ Trust and Banking, and regional digital currencies by regional banks which are being considered using open source blockchain platform Hyperledger Iroha that Soramitsu contributes to development. For interconnection between different blockchains, we plan to use YUI, IBC, LCP, etc., which are contributed by Datachain.

In 2022, Japan led the world’s developed nations in passing a revision of the Payment Services Act defining a stablecoin as an “Electronic means of payment.” The bill is scheduled to go into effect in 2023, creating excitement in what could be called the “first year of stablecoin.”

In light of such trends, this initiative aims to realize the mutual transfer of different digital money (PVP settlement) on a heterogeneous blockchain infrastructure using stablecoins issued using Progmat Coin, a stablecoin issuance and management platform led by Mitsubishi UFJ Trust and Banking Corporation, and local digital currencies issued using Hyperledger Iroha that SORAMITSU contributes to development.

This will enable smooth mutual transfers and exchanges among the various stablecoins and local digital currencies planned to be issued by various banks and other institutions in the future, aiming to improve efficiency and reduce fees for interbank, business, and personal remittances. In the future, we will also consider cross-border remittance efficiency and fee reductions through mutual transfers and exchanges with overseas CBDCs, etc.

Progmat Coin, a stablecoin issuance and management platform led by Mitsubishi UFJ Trust and Banking Corporation, uses Corda as a distributed ledger for transfer records, in compliance with the new legislation that will begin in 2023, through a trust scheme. We plan to issue both “Permissioned stablecoins” and “Permissionless stablecoins” using so-called public blockchains such as Ethereum.

SORAMITSU has contributed to the development of Hyperledger Iroha, an open-source blockchain platform led by The Linux Foundation, and Hyperledger Iroha has been used as a platform for issuing CBDC and local digital currencies in Japan and overseas, including the official launch of the Central Bank Digital Currency “Bakong” in the Kingdom of Cambodia and CBDC proof of concept called “DLAK/Digital Lao Keep” in Lao PDR. SORAMITSU is also working with the Asian Development Bank (Philippines) and other organizations to connect different blockchains and conduct proof of concept for international securities settlement.

In order to achieve mutual transfer of multiple stablecoins / digital money on different blockchains such as Corda and Hyperledger Iroha, technology is needed to interconnect both blockchains and execute transactions on both blockchains simultaneously.

To facilitate the interconnection of multiple blockchains, it is planned to use blockchain interoperability projects led by Datachain such as “YUI,” as well as messaging protocol “IBC” adopted by YUI and middleware “LCP” that enables interoperability with excellent scalability in addition to security.

• GitHub - hyperledger-labs/yui-docs
• Inter-Blockchain Communication
• LCP — A Proxy for Light Client Verification to Realize Trust-minimized and Gas-efficient…

Stablecoins are expected to minimize friction in the settlement of securities and other digital assets and NFTs, as well as to be used for international remittances and micropayments, thereby improving the convenience of various payment scenarios.

By connecting different blockchains in a secure and practical way, we will maximize the potential of stablecoins and build the world’s most advanced use cases to create a financial infrastructure that will be used globally.

Twitter | GitHub| Website

As some of you might not know, IBC (Inter-Blockchain Communication) is not limited to just blockchains built with Cosmos SDK; IBC is a blockchain-agnostic interoperability protocol, and it can be used with a wide range of blockchains worldwide.

IBC offers a unique and powerful framework for trust-minimized interoperability. And the impressive growth since its genesis is a testament to its security, composability, and extensibility.

Since IBC was originally developed within Cosmos, the majority of blockchains currently connected with IBC are Cosmos appchains. However, we are about to enter a world where many more blockchain ecosystems are connected with IBC, as a secure, fault-tolerant, universal interoperability protocol.

In fact, engineering work to expand the Interchain is well underway — with IBC connectivity being developed for Hyperledger Fabric, Hyperledger Besu, Corda, Near Protocol, Polkadot and Kusama chains.

This post covers these recent implementations and efforts to expand the use of IBC, the challenges we are facing and the potential solutions to those challenges.

How to make IBC available outside of Cosmos appchains

IBC provides a permissionless way for relaying data packets between blockchains to enable interoperability among them.

Unlike trusted bridging technologies, which require users to trust the third-party developers and/or operators of bridges, IBC operates as a trustless protocol — leveraging the security of the two chains it is connecting, with no third-party reliance, as it doesn’t depend on an intermediary to verify the validity of cross-chain transactions. That’s why IBC is recognized as one of the most secure ways of blockchain interoperability.

Unfortunately, the IBC protocol right now is a little complicated to expand to non-Cosmos appchains. To put it shortly, it requires two components below to make it possible to communicate via IBC between blockchains.

1. Core IBC implementations in the specific languages

IBC was initially written in Golang (ibc-go) as a Cosmos SDK module. The ibc-go makes it possible for blockchains built with Cosmos SDK to communicate with each other, but can’t make it for other blockchains, especially those which require implementing contracts and modules in other languages such as Solidity, Rust, etc. Those blockchains require IBC implementation in the respective languages.

2. Light client implementations to verify the consensus state of the blockchain

The verification of the other blockchain’s consensus state is provided by the light client in IBC. The light client can track and efficiently verify the state of the counterparty blockchain. As you might have already noticed, we need light clients for each consensus algorithm to verify the consensus of each blockchain. ICS (Interchain Standards) defines Tendermint Client, which allows us to verify the correctness of the Tendermint-based blockchains, but it is required to implement various light clients to support a variety of consensus algorithms each blockchain has.

IBC Core Logic

First, in terms of the IBC core logic, in addition to ibc-go, there are IBC implementations in other languages: the IBC implementation in Solidity (IBC-Solidity) and the IBC implementation in Rust (ibc-rs).

IBC-Solidity (IBC Implementation in Solidity)

IBC-Solidity is the IBC implementation in Solidity. With funding from Interchain Foundation, Datachain has been working on the implementation to enable trustless interoperability between the Cosmos-SDK blockchains and EVM blockchains. Datachain has contributed the code to Hyperledger Foundation as one of the primary software in a project called “YUI.” IBC-Solidity allows communication with EVM-based blockchains, including Ethereum, through IBC.

GitHub - hyperledger-labs/yui-ibc-solidity: IBC in Solidity

ibc-rs (IBC Implementation in Rust)

ibc-rs is the IBC implementation in Rust, mainly contributed by the Informal Systems team and the Composable Finance team. There is an increasing number of blockchains written in Rust, but for now, most use cases using ibc-rs are about connecting the Interchain and the DodSama ecosystem. For example, Centauri, contributed by the Composable Finance team, is a trustless bridging hub powered by IBC. Centauri initially started to connect the Picasso parachain and the Cosmos appchains, and they unveiled a demo of the cross-chain swap between those blockchains at Cosmoverse 2022. Also, they are in the process of expanding its ecosystem to Near. Brainjar, the Founder and CEO of Composable Finance, said that the first use case for Centauri will be the first trustless Kusama <> Polkadot bridge.

GitHub - cosmos/ibc-rs: Rust implementation of the Inter-Blockchain Communication (IBC) protocol.

IBC Light Clients

As you can see on ibcprotocol.dev/lightclients/, there are various light clients for blockchains or consensus algorithms. I will show you below the major Light Client implementations, ecosystem by ecosystem.

Ethereum / EVM

As for Ethereum and EVM, tendermint-sol, which enables Tendermint consensus verification on EVM-based blockchains although it’s experimental, and ibc-harmony-client, which enables Harmony verification on Cosmos SDK-based blockchains, have been implemented. You can see a demo code to communicate between Cosmos appchainsand Harmony using IBC here. In addition, after the Merge, as Ethereum is now a PoS blockchain, the design of a light client for Ethereum is undergoing. The light client for Ethereum based on the IBC’s security model will be released not too far ahead. However, as some of you might know, the verification cost on Ethereum and EVM blockchains is one of the most significant problems connecting to those blockchains through IBC, so we need to fix the problem to realize it in the mainnet.

DotSama (Polkadot and Kusama) Ecosystem

With the ibc-rs implementation, bridges between the DotSama (Polkadot and Kusama) ecosystem and Cosmos appchains using IBC are also in progress. For example, Composable Finance is implementing BEEFY light client and GRANDPA light client, which enable verification of parachains in the Cosmos blockchains. The Composable Finance team has also implemented Pallet IBC, a module allowing IBC in Substrate-based blockchains. For the same purpose, Octopus Network is implementing Substrate IBC Pallet as well.

Enterprise (Consortium) Blockchains

As I previously explained in the post on the Cosmos Blog, IBC is also beneficial in the enterprise space because of its trust-minimized way of interoperability. For now, there are light clients for Hyperledger Fabric, Hyperledger Besu (IBFT 2.0 consensus) and Corda, which account for a large percentage of blockchains used in the enterprise space. Datachain is a core contributor to those light clients and teamed up with Mitsubishi UFJ Trust and Bank, one of the largest banks in Japan, to realize interoperability between Quorum and Corda using IBC.

• Why Cosmos IBC Takes an Essential Role in the Enterprise Space
• Datachain Teams Up with Mitsubishi UFJ Trust and Banking to Realize Cross-chain Settlements with…

Challenges IBC is facing and efforts to solve them

As described above, there are increasing numbers of IBC and light client implementations that could expand IBC to other networks. On the other hand, there are also some challenges that we need to solve to expand the IBC ecosystem: They are “verification cost” and “extensibility.”

The verification cost depends on the consensus algorithm for each blockchain and the availability of support for the cryptographic primitives required for verification. For example, when you attempt to connect Tendermint-based blockchains to EVM-based chains in which the Ed25519 pre-compiles are unavailable using IBC, the high execution cost (gas cost) is often a considerable problem. Especially for Ethereum, the gas cost would be impractically high.

The extensibility problem is, as explained previously, that it takes so much time to expand its network because it is required to implement various light clients on each chain to support a variety of consensus algorithms each counterparty blockchain has. It would be acceptable to connect just two blockchains; the number of light clients you need to implement is just two. It must be a massive problem if you want to connect more and more blockchains with each other; In this case, you need to implement hundreds of light clients.

However, there are ongoing projects and research work that will solve this high verification cost problem in IBC. LCP (Light Client Proxy) is one of the examples to solve this problem. LCP is a proxy middleware for light client verification. It adopts a “Proxy Method” that performs light client verification on behalf of a verifying chain and verifies its validity on the verifying chain. Someone feels it would add trust to the proxy system, but this is achieved by TEE (Trusted Execution Environment) to perform Light Client verification in the enclave, so it’s still a trust-minimized way of interoperability. The initial implementation of LCP uses Intel SGX, one of the most representative and tested TEEs.

LCP — A Proxy for Light Client Verification to Realize Trust-minimized and Gas-efficient…

Also, there is one more remarkable work to solve the problem: ZK-IBC. The central concept of ZK-IBC is that it constructs a zk-proof of Ed25519 signature validity and verifies the proof on EVM chains to reduce the verification cost. Both Electron Labs and Polymer Labs are working on ZK-IBC. It’s still in the PoC phase, and there are some practical issues, such as proving cost and the trade-off between verification cost and latency, but it will possibly be a breakthrough in the future.

Final thoughts

As seen in this post, there are lots of efforts and research that try to extend IBC to various blockchain ecosystems. According to Map of Zones, over 50 Cosmos appchains are connected by IBC as of November 2022 — an exponential growth since IBC was launched less than two years ago.

The Interchain will grow exponentially still when it becomes possible to communicate using IBC with EVM chains and the Dotsama ecosystem.

While verification costs and extensibility are challenging when applying IBC to some blockchains, they are now being solved through multiple efforts, such as LCP and ZK-IBC. Let’s move forward to create a world of interconnected blockchains by extending the Interchain.

Twitter: https://twitter.com/datachain_en
E-mail: contact[at]datachain.jp

Twitter | GitHub| Website

Expanding the Interchain — taking IBC beyond Cosmos appchains was originally published in The Interchain Foundation on Medium, where people are continuing the conversation by highlighting and responding to this story.

Datachain has launched a technology partnership with Mitsubishi UFJ Trust and Banking Corporation to realize cross-chain settlement of digital securities using Progmat Coin, a stablecoin platform. Based on the discussions in the Cross-Chain RTGS Subcommittee of the Funds Settlement Working Group, we will conduct technical validation to realize DVP settlement of digital securities on different blockchain platforms using stablecoins issued on Progmat Coin.

The DVP settlement of digital securities using fiat currency-backed stablecoins is a novel and advanced initiative worldwide. DVP settlement on Progmat is scheduled for commercialization in 2023, and cross-chain settlement between different blockchains, which we are working on in this initiative, will reach commercialization by 2024.

Our Efforts

In April 2022, Datachain and Mitsubishi UFJ Trust and Banking joined the Cross-Chain RTGS subcommittee belonging to the Funds Settlement Working Group established to provide the Progmat Coin, a stablecoin platform.

The subcommittee focused on how to realize secure, efficient, and extensible settlement using stablecoins issued on Progmat Coin for digital assets such as digital securities on various blockchain platforms, including public chains. After six months of study, we have decided that the main proposal is to utilize the following technologies:

• IBC (a communication protocol with a proven track record of interoperability and stable operation in more than 40 blockchains)
• Hyperledger Labs YUI (a set of modules that enable IBC to be used with various blockchains, including enterprise blockchains)
• LCP (a middleware for light client verification that enables trust-minimized interoperability between blockchains with high efficiency and extensibility)

The technical verification of the above schemes will be conducted step-by-step with a view to commercialization in 2024. Below we introduce the first phase of the demonstration.

Outline of the Demonstration

The use case for this demonstration is the cross-chain settlement of digital securities using stablecoins, which will be achieved by interconnecting Corda, the blockchain layer of the Progmat Coin platform, and Quorum, a blockchain platform designed to handle digital securities.

There are two points to be verified. The first point is to confirm whether an extensible and trustless mutual authentication between both blockchains is possible. The technologies used to achieve this are IBC, a communication protocol between blockchains; YUI, which enables IBC to be used on various blockchains; and LCP, a middleware that allows interconnection between blockchains with high efficiency and extensibility in addition to security.

Please click the link below to learn more about YUI and LCP.

• GitHub - hyperledger-labs/yui-docs
• LCP — A Proxy for Light Client Verification to Realize Trust-minimized and Gas-efficient…

(Follow @LCP_network on Twitter to get the latest news about LCP!)

The second point is to verify whether we can transfer tokens on different blockchain platforms simultaneously. To execute DVP settlement with digital assets and stablecoins on different blockchains, we must perform transactions on both blockchains simultaneously and transfer tokens on each blockchain at the same time. To achieve such an atomic token transfer, we use a middleware called Cross Framework.

GitHub - datachainlab/cross: A framework empowers the development of smart contracts that support cross-chain transactions.

Future Initiatives

After finishing this demonstration by March 2023, we will proceed with verification in stages toward the commercialization of this scheme. Specifically, in the next step, we plan to work on verification using the actual verification environment of the Progmat Coin and the digital securities platform. We will also perform validation based on contract notices from PTS (Proprietary Trading System) by the end of 2023. Based on these experiments, we aim to commercialize the system by 2024.

In addition, while this experiment assumes DVP settlement for digital securities as the primary use case, we will consider applying it to the settlement of various digital assets, such as NFTs on the public blockchains.

Comment from Tatsuya Saito, Product Manager, Digital Asset Business Office, Mitsubishi UFJ Trust and Banking

While the discourse on the blockchain is varied, there are three solid facts:

1. Various so-called “Layer 1” blockchain (including distributed ledger technology in general) projects have sprung up in addition to Bitcoin and Ethereum.
2. In Japan alone, the scale of digital securities projects has already exceeded 40 billion yen (of which less than 30 billion yen is related to Progmat).
3. The secondary distribution market for digital securities will be fully launched in 2023, but without “a stable means of settling funds that are completed on the blockchain,” the efficiency of the market will be significantly impaired.

Given these three facts, stablecoins, which can be used to settle large volumes of digital securities regardless of the blockchain platform, are indispensable.

To further expand our perspective, the number of players entering the NFT field continues to grow, but when we consider “Why NFT?” I believe that the premise of NFT is a project on the “Global Market x Permissionless Blockchain.” In NFT transactions on the “global market x permissionless blockchain,” settling in yen or by credit card is a burden for many business operators and project participants.

On the other hand, it is also true that using crypto assets, which are “a means of settling funds completed on the blockchain but whose value is unstable,” also poses challenges, especially for business operators. Therefore, we recognize a strong need for a “stable means of fund settlement completed on the blockchain,” not only in the digital securities market but also in the NFT market.

Fortunately, Japan was the leading country in the world to clarify the legal treatment of the above entities as “electronic payment instruments.” Through this initiative, we hope to demonstrate that this business scheme is not restricted by “differences in blockchain platforms” in terms of technology and prove that the “Progmat Coin” platform can solve a variety of use case issues.

About Datachain

Datachain is a blockchain startup founded in 2018 and has worked on creating value through interoperability for blockchains. Datachain is the core contributor of YUI, a Hyperledger Lab, that enables interoperability between multiple heterogeneous blockchains through the IBC protocol and develops Cross Framework that enables cross-chain transactions. In Addition, Datachain also unveiled LCP, a proxy for light client verification that realizes trust-minimized and gas-efficient cross-chain bridges. Granted by Interchain Foundation and Harmony, and as a member of Hyperledger Foundation and Enterprise Ethereum Alliance, Datachain provides its interoperability solutions to contribute to those communities. For more information about Datachain, please visit https://www.datachain.jp/. Follow Datachain on Twitter.

Twitter(Datachain) | Twitter(LCP) | GitHub | Website

We’re delighted to announce that Datachain will participate in Cosmoverse as a panelist of the Cross-chain briding session with the Confio(CosmWasm) team, the Halborn team and the Composable Finance team.

Cosmoverse | Medellín Sep 26-28 🇨🇴 on Twitter: "✅ 3:10PM - @TorBair ✅ 3:30PM - @adrian_brink ✅ Bridging Cosmwasm Panel - @HalbornSecurity, Ethan Frey, @0xkaiserkarel, @datachain_en ✅ 4:20PM - COFFEE BREAK✅ 4:40PM - @shan3v / Twitter"

✅ 3:10PM - @TorBair ✅ 3:30PM - @adrian_brink ✅ Bridging Cosmwasm Panel - @HalbornSecurity, Ethan Frey, @0xkaiserkarel, @datachain_en ✅ 4:20PM - COFFEE BREAK✅ 4:40PM - @shan3v

Datachain has worked on solving blockchain interoperability challenges. We are the core contributor of Hyperledger Labs YUI, which enables trustless cross-chain interoperability between multiple heterogeneous blockchains with the IBC protocol. With funding from the Interchain Foundation, we implemented IBC-Solidity (the IBC implementation in Solidity), the best-known module in YUI.

• GitHub - hyperledger-labs/yui-docs
• GitHub - hyperledger-labs/yui-ibc-solidity: IBC in Solidity

In addition, we have unveiled a new middleware called LCP, which brings extensibility and cost-efficiency to IBC by its proxy architecture using TEE (Intel SGX). LCP will help implement trust-minimized and cost-efficient cross-chain bridges using IBC.

LCP — A Proxy for Light Client Verification to Realize Trust-minimized and Gas-efficient…

We are excited to be part of this Cosmos/IBC ecosystem and want to create the interchain world with you all. Please feel free to contact us and have a quick talk in Medellin!

Twitter: https://twitter.com/datachain_en
E-mail: contact[at]datachain.jp

Twitter | GitHub| Website

Datachain has been building a bridge between Cosmos (Tendermint-based blockchain) and Harmony since the January 2022 announcement. Today, we’re pleased to announce that Datachain successfully completed building a bridge between Cosmos and Harmony on the local testnet. Since we use the IBC Protocol as a communication protocol, the bridge operates as trustless interoperability between IBC-enabled blockchains and Harmony.

The bridge will enable interoperability between Cosmos and Harmony ecosystems, generating higher utility across both chains, leading to community expansion and new cross-chain use cases.

Datachain on Twitter: "We're delighted to announce that we successfully completed building a bridge between @Cosmos and @harmonyprotocol on the local testnet🚀We will continue to work on building a bridge to enable trustless token transfers between both chains in the mainnet. https://t.co/v5rravszvS / Twitter"

We're delighted to announce that we successfully completed building a bridge between @Cosmos and @harmonyprotocol on the local testnet🚀We will continue to work on building a bridge to enable trustless token transfers between both chains in the mainnet. https://t.co/v5rravszvS

Grant Results

Through this partnership, Datachain built not only light clients and modules but also a sample application to transfer tokens between Harmony and Cosmos. You can see our sample application code and the light client implementations from the links below.

Sample application to transfer an HRC-20 token on Harmony to the Cosmos blockchain as an ICS-20 token

GitHub - datachainlab/harmony-cosmos-bridge-demo

Harmony light client implementation

GitHub - datachainlab/ibc-harmony-client: Harmony Light Client for IBC

(Check out the grant details on this forum post)

Next Step

Datachain and Harmony will continue to work on building a bridge that enables trustless token transfers between Harmony and Cosmos in the mainnet environment.

As you might know, the high execution cost (gas cost) in the verification process is often a problem, especially for EVM chains such as Harmony. To overcome the gas cost challenge and enable secure and efficient interoperability, we are discussing adopting LCP, a proxy middleware for light client verification that realizes trust-minimized and gas-efficient cross-chain bridges. LCP will solve the gas cost issue by executing light client verification in the Enclave using TEE and enables low-cost verification of a target chain.

Learn more and follow the latest updates about LCP from the link below:

• https://medium.com/lcp-network/lcp-a-proxy-for-light-client-verification-to-realize-trust-minimized-and-gas-efficient-f7d5868e4b0
• https://twitter.com/LCP_network

Comment from Ganesha Upadhyaya, Research Engineer at Harmony

Congratulations to Datachain team for completing this first grant to enable inter-operability between Harmony and Cosmos chains. The completion of this grant was key to fully explore the inter-operability between a sharded blockchain (Harmony) with a multi-chain ecosystem (Cosmos). This exploration resulted in the invention of a novel technology called LCP(Light Client Proxy) which could become the future’s widely adopted inter-operability technology. The next grant will focus on productionizing this inter-operability technology to enable seamless asset transfers between these two ecosystem. We hope to continue working with the Datachain team to connect Harmony to other blockchain ecosystems.
by @gupadhyaya

Stay tuned for more updates!

• https://twitter.com/datachain_en
• https://twitter.com/harmonyprotocol

What are Cosmos and IBC?

Cosmos is now one of the largest interoperability ecosystems in the world, and IBC is the communication protocol developed by Cosmos and Interchain Foundation, which enables various chains to be interconnected. After the release of IBC in April 2021, it has made huge progress. According to the Map of zones, there are 47 active chains and over 2.5 million IBC transfers in 30 days.

What is Harmony?

Harmony is one of the latest EVM-compatible blockchain platforms. Harmony’s mainnet runs Ethereum applications with 2-second transaction finality and 1,000 times lower fees, as well as secure bridges to Ethereum and other chains. There is an increasing number of applications built on Harmony, such as DeFi Kingdom, Tranquil.finance, Mars Colony, Unite Finance, Rocket Monsters, Enders Gate and Hundred Finance. You can see more on Harmony Universe and Defi Llama.

What is Datachain?

Datachain is a blockchain startup founded in 2018 and has worked on creating value through interoperability for blockchains. Datachain is the core contributor of YUI, a Hyperledger Lab, that enables interoperability between multiple heterogeneous blockchains through the IBC protocol and develops Cross Framework that enables cross-chain transactions. In Addition, Datachain also unveiled LCP, a proxy for light client verification that realizes trust-minimized and gas-efficient cross-chain bridges. Granted by Interchain Foundation and Harmony, and as a member of Hyperledger Foundation and Enterprise Ethereum Alliance, Datachain provides its interoperability solutions to contribute to those communities. For more information about Datachain, please visit https://www.datachain.jp/. Follow Datachain on Twitter.

Datachain will participate in the Hyperledger Global Forum 2022 as a panelist of the blockchain interoperability sessions and a demo session presenter explaining how to implement YUI, a Hyperledger Lab.

Datachain has worked on solving blockchain interoperability challenges. We are the initial committer of YUI, which enables trustless cross-chain interoperability between multiple heterogeneous blockchains through Cosmos IBC, and also develops Cross Framework that enables cross-chain transactions.

We are excited to be part of these global movements of adopting blockchain technology in various fields such as payments, digital currencies, securities, supply chain, etc. With our expertise in blockchain interoperability technologies, we’re happy to discuss future opportunities and work together to advance the movements.

About our Presentations

Here is the information about the presentations by Datachain.

Demo: Interoperability with Hyperledger Lab YUI

This session covers the basic idea of YUI and how to use YUI to achieve cross-chain transactions (interoperability) between different blockchains. YUI is a lab to achieve trustless interoperability between multiple heterogenous ledgers using Cosmos’ IBC protocol. As YUI supports permissioned blockchains such as Hyperledger Fabric, Hyperledger Besu, Hyperledger Iroha and Corda, enterprise companies such as NTT DATA, JCB and HITACHI have conducted proof-of-concept using YUI. The session will explain how to implement YUI modules to enable interoperability in those use cases above.

• Presenter: Koji Matsujiya, Blockchain Engineer at Datachain
• Date&Time: ​​September 12, 15:30–15:45 (UTC +1)
• URL: https://hgf22.sched.com/event/176nS

Hyperledger Global Forum 2022: Demo: Interoperability with Hyperledger...

Panel Discussion: Blockchain Interoperability with Hyperledger Cactus, Weaver, and YUI

Join this session to take a deeper dive into blockchain interoperability and hear open-collaboration examples of how the three key Hyperledger blockchain interoperability projects are addressing challenges. During the panel discussion, you’ll hear from the project maintainers, Venkatraman Ramakrishna from Hyperledger Labs Weaver, Susumu Toriumi from Hyperledger Labs YUI, Peter Somogyvari and Takuma Takeuchi from Hyperledger Cactus. These maintainers will each discuss progress updates, past and current contributions, and plans to ensure these different blockchain interoperability initiatives can work cohesively, while maintaining standardization and avoiding redundancy.

• Moderator: Tracy Kuhrt, Accenture
• Speakers: Takuma Takeuchi, Fujitsu; Peter Somogyvari; Venkatraman Ramakrishna, IBM; Susumu Toriumi, Datachain
• Date&Time: ​​September 13, 16:30–17:10 (UTC +1)
• URL: https://sched.co/14H5F

Hyperledger Global Forum 2022: Panel Discussion: Blockchain Interoperab...

About Hyperledger Global Forum 2022

Hyperledger Global Forum is the biggest annual gathering of the global Hyperledger community. It is a unique opportunity for contributors, members, service providers and enterprise end users from around the world to meet, align, plan and hack together in person. The event is open to any and all who are involved or interested in using, developing or learning more about Hyperledger’s open source enterprise blockchain technologies. Attendees will hear directly from those who are actively developing and deploying Hyperledger technologies as well as technology and business leaders who are shaping the future of enterprise blockchain. They will also have the chance to talk directly with Hyperledger project maintainers and the Technical Steering Committee, collaborate with other organizations on ideas that will directly impact the future of Hyperledger Foundation, and promote their work among the communities.

Hyperledger Global Forum | Linux Foundation Events

About Datachain

Datachain is a blockchain startup founded in 2018 and has worked on creating value through interoperability for blockchains. Datachain is the initial committer of YUI, a Hyperledger Lab, that enables interoperability between multiple heterogeneous blockchains via Cosmos IBC and develops Cross Framework that enables cross-chain transactions. Granted by Interchain Foundation and Harmony, and as a member of Hyperledger Foundation and Enterprise Ethereum Alliance, Datachain provides its interoperability solutions to contribute to those communities. For more information about Datachain, please visit https://www.datachain.jp/. Follow Datachain on Twitter.

We have just unveiled a new product “LCP,” which is a proxy middleware for light client verification to realize trust-minimized and gas-efficient cross-chain briges. Learn more from the link below:

LCP — A Proxy for Light Client Verification to Realize Trust-minimized and Gas-efficient…

Twitter | Hyperledger Lab YUI | GitHub| Website