Why the Orbit Bridge integration is bullish for ICON
|RHIZOME WIRE||Dec 18, 2020|
Welcome to this week’s edition of the RHIZOME Wire!
Enter Orbit Bridge
On Wednesday of this week, seemingly out of nowhere, a news story was posted detailing the integration of the Orbit Bridge onto the ICON network:
ICON, one of the world’s largest decentralized networks, today announced an integration with ozys’ Orbit Bridge, allowing Ethereum-based digital assets to be transferred onto the ICON Network. Orbit Bridge is a decentralized Inter-Blockchain Communication (IBC) platform. Its interoperability protocol will help ICON expand its DeFi capabilities by connecting it to other top blockchains and their applications.
This integration brings more value to the ICON Network, specifically its DeFi ecosystem, by bridging assets between different blockchains and bringing more economic activity to the ICON Network. Traders can now take advantage of arbitrage opportunities, and DeFi projects built on ICON can now enable borrowing and lending of assets across different networks and bridges. Ultimately, this all leads to more transactions and more value exchange on the ICON Network.
Prior to this news, I had never heard of Orbit Bridge, but the initial announcement was certainly exciting. A few hours later, ICON and Orbit made their own formal announcements. Here’s a segment from ICON’s announcement:
We are excited to announce that the Ozys P-Rep team is integrating ICON into the Orbit Bridge, a Proof of Authority interoperability protocol based out of South Korea. The Orbit Bridge integration has already been completed on ICON’s test net, with main net integration coming within one month. The Ozys P-Rep team worked quickly and efficiently to integrate ICON into the Orbit Bridge and we look forward to continuing to work together toward the success of both projects.
So we learned that not only did this effort exist, but that it would be ready for deployment within a month!
There was a slight hint something may have been in the works, as Ozys posted an announcement that ICON would be serving as a validator on their network, but nobody seemed to catch this at the time.
We also learned that this project would be bringing the following tokens to the ICON blockchain:
Orbit Chain — ORC
Ethereum — ETH
Tether — USDT
USD Coin — USDC
Wrapped Bitcoin — WBTC
MakerDAO Stablecoin — DAI
Ren Project — REN
Band Protocol — BAND
Ocean Protocol — OCEAN
Chainlink — LINK
OmiseGo — OMG
Universal Market Access — UMA
Loopring — LRC
Reserve — RSR
Aragon — ANT
A good comparison to Orbit is the WBTC token, which, simply put, is Bitcoin in ERC-20 form. Here’s a description from Decryp.to:
WBTC stands for Wrapped Bitcoin and is simply an ERC20 token that represents Bitcoin. One WBTC equals one BTC. BTC can be converted into WBTC and vice-versa. Being an ERC20 token makes the transfer of WBTC faster than normal Bitcoin, but the key advantage of WBTC is its integration into the world of Ethereum wallets, dapps, and smart contracts.
Having access to these tokens on the ICON network is exciting news for obvious reasons (more IRC-2 tokens!), but it’s even more enticing for reasons I’ll go into in a bit.
But wait a second — if this integration is able to bring in tokens from another chain onto the ICON chain, isn’t that interoperability? Isn’t that what ICON is trying to accomplish? Did Ozys beat them to the punch with Orbit?
Here’s a description of how the project actually functions:
One bridge enables the movement of assets between two different blockchains through Locking/Vault, Release/Vault, Minting, and Burning contracts that exist on each blockchain. For example, suppose you send an Ethereum asset, ‘ABC’, to the Klaytn network, the ‘ABC’ asset is first sent to Ethereum’s Locking contract and as soon as verification is complete, it is then passed to the Minting contract of the Klaytn Blockchain. Afterward, a new ‘ABC’ token is issued in Klaytn, corresponding to the assets locked to Ethereum, by a set of validators verifying the Minting contract.
In other words, let’s say you own 100 LINK, and want to transfer it to the ICON network, perhaps to trade it on ICONPOOL for ICX.
You would take your Ethereum-based LINK, and it would essentially be locked into an Ethereum smart contract. Once that happens, the Orbit Bridge smart contract would mint 100 LINK (lets call it orbitLINK) on the ICON blockchain as an IRC-2 token.
You’d then have 100 orbitLINK, which would sit in your ICON wallet, and could be deployed throughout the ICON ecosystem, perhaps to trade, or perhaps to serve as liquidity on a platform such as ICONPOOL or Unifi.
Eventually, you could send that orbitLINK back to ETH. In doing so, the orbitLINK would be burned by the smart contract, and the LINK that was deposited and locked into the vault at the beginning would be unlocked, thus allowing you to once again utilize those 100 LINK on the Ethereum network.
So, as you can see, the way Orbit works is a bit more of a “trick” to achieve interoperability — but a trick that works perfectly for this use case. However, it’s not as elaborate as what ICON has been building with their Blockchain Transmission Protocol (BTP). Here’s an explanation from an article posted this past May, entitled “Blockchain Transmission Protocol (BTP) Explained”:
BTP (Blockchain Transmission Protocol) is a standard that renders heterogeneous blockchains interoperable, including blockchains that entail completely different consensus models and algorithms. Here, we define interoperability as the ability to facilitate value transfer, service invocation, and data exchange. These siloed operating blockchains can securely anchor transactions through a universal standard as a trustless settlement layer.
From an application-level standpoint, a great use case would be token transfers between different blockchains. BTP facilitates such transfer directly through smart contracts, from one chain to another without using a central trading platform, at the protocol level.
Now this is fairly similar to what Orbit is accomplishing. But BTP takes further steps:
Another practical example could be enabling data exchanges between ICONLOOP powered enterprise partners, such as MyID applications.
Registered personal DID (Decentralized ID) data in the MyID application is verified on the public ICON Network, which then allows its owner to exchange messages to a public or private network that is interlinked via BTP, without having to resubmit their DID document and public key to each chain.
Another service on the public ICON network, Broof, which allows issuing and storing verified certificates on the blockchain. BTP can, for example, enable the automation of certificate issuance for a private chain.
Here’s an example of how BTP could function (excerpted from that same article):
Bob logs into a Ride Share app and this app requires verification of Bob’s myID identity information
When Bob logs in, the Ride Share app sends a transaction with Bob’s encrypted identity information to BSH_A on the public chain.
BSH_A sends a service message to BMC_A on the public chain requesting verification of encrypted identity information provided by Bob
BTP Message Relay detects the event and gathers Bob’s encrypted identity information
BMC_B on the private myID chain receives the request to verify Bob’s information
BMV_B on the private myID chain decodes the encrypted information to verify Bob’s identity
BSH_B on the private myID chain replies to BMC_B with the results of Bob’s identity-check
BMC_B communicates these results to the BTP Message Relay
The BTP Message Relay passes the results back to BMC_A
As you can see, this is a lot more complex than simply swapping tokens.
Nonetheless, ICON sees both interoperability tools (BTP and Orbit) operating simultaneously. Again, from ICON’s announcement:
This integration brings more value to the ICON Network, specifically the DeFi ecosystem. As blockchain technology continues to progress, there will be a number of different ways to bridge assets between different networks. For example, we expect to see Orbit Ethereum and BTP Ethereum on ICON 2.0. This brings more economic activity to the ICON Network as traders can take advantage of arbitrage opportunities and ICON DeFi projects can enable borrowing and lending of assets across different networks and across different bridges. Ultimately this all leads to more transactions and more value exchange on the ICON Network. (Bold emphasis is mine)
When I first saw that there may be two bridges between ICON and Ethereum (Orbit and BTP), I thought they might get redundant, or even “compete” against each other. However, the way I see it, it only offers more opportunities and choices for ICONists.
Scott Smiley of ICX Station provided me with a concrete example of what sort of opportunity this might create:
Here are two potential opportunities that could arise:
orbitETH might offer 7% interest
btpETH might offer 10% interest
this leads to more demand for btpETH for the time being. If you have orbitETH, you would want to convert to btpETH to earn more interest.
orbitETH - 600 USD
btpETH - 606 USD
Somebody would send ETH to ICON on the orbit Bridge, then sell it for btpETH, then send the btpETH back to ETH chain and they have earned more ETH for free.
So just what will the Orbit Bridge integration lead to? Here are some possibilities:
ICONists would potentially have direct access to a number of ERC-20/IRC-2 trading pairs through one of the automated market makers being built on ICON such as ICONPOOL or Unifi.
ICONists would be able to utilize ERC-20 tokens within other ICON DApps. For instance, ICONbet developers could build a feature allowing betting not just with ICX, but with LINK or ETH.
ICONists can utilize OMM to either lend or borrow ERC-20 assets on the ICON network.
In general, it provides greater exposure to the ICON project, as ERC-20 token holders now have the ability to interact with the network without necessarily owning any ICX.
And of course there are other potential uses that I may not listed and may not yet have been conceived, but the possibilities this integration creates are numerous.
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