Introducing the Composable XCVM: building interoperable applications on Composable Parachain with CosmWasm
Interoperability is the ultimate goal for decentralized finance (DeFi) which is increasingly siloed amidst its impressive growth trajectory. When ecosystems existing across different blockchains and layers can communicate and interact with each other, users can extract the best value from DeFi through asset transfers and function calls. Our Founder and CEO at Composable Finance, 0xbrainjar, recently shared his high-level overview of Composable’s XCVM and how it stacks against current solutions in the market. Let us break it down.
Currently, interoperability solutions like LayerZero are attempting to accomplish interoperability in a trusted manner. While solutions like LayerZero are actively working towards enabling interoperability for DeFi, it enables retroactive, not proactive interoperability, which has its limitations. This means smart contracts and the applications they belong to must be deployed natively onto one chain and an intermediate platform must be used to access a bridge to smart contracts and their applications on other chains. While solutions like LayerZero enable the effective transfer of funds between protocols and management of different protocol instance deployments on different chains, they require DeFi developers to select a native chain for application deployment to assume their interoperability features.
In principle, LayerZero acts like the glue that binds different protocol instance deployments together to make them retroactively interoperable.
To summarize, developers must wrap their heads around compatibility with different virtual machines they intend their application to interact with, develop new deployments for their projects on different platforms, and manage bridging between ecosystems. This approach does not enable the orchestration of smart contracts and has no central location of management and deployment. This is where the XCVM comes into the picture — the XCVM makes smart contracts natively interoperable.
The XCVM acts as a singular place developers can write their smart contracts on, to orchestrate functionality across multiple ecosystems. As such, developers can leverage the benefits of several different chains, and not need to create multiple instances or manage bridging.
The XCVM uses the Inter-Blockchain communication standard and the CosmWasm smart contract framework to enable an environment where smart contracts interoperate between several different chains in a trustless and secure manner.
How the XCVM Works
The XCVM facilitates proactive interoperability but how? It is designed as a top-level orchestration layer for deploying protocols that can communicate natively across multiple chains at once. Composable developed the XCVM using CosmWasm, a framework that allows developers to build dApps that permits multi-chain contracts i.e., one dApp, one contract, but multi-chain orchestration. Hence no need to always bother about deploying a full application on another chain and then looking for the best bridging technology for these specific applications on different chains to communicate.
Rather, XCVM developed with CosmWasm allows developers to build once, deploy once and reap cross-ecosystem communication for their dApps. The XCVM can achieve this as it heavily leverages IBC to communicate with other smart contracts external to the dApp environment. Composable’s Routing Layer, also a component of the XCVM acts as an incentivized pathway as it selects the optimal route for desired cross-ecosystem communication and to our transfer availability layer, Mosaic, which then facilitates asset transfers, with settlement being recognized on our parachain.
Through this architecture, interoperability is not an afterthought, but is a native aspect of the environment. As a user deposits funds on to one chain, for example, this information is binded to the IBC at the moment of contract instantiation. As a result, that same user can then withdraw their deposit from a different chain, included in the XCVM smart contract.
We hosted a live Twitter Space discussing the XCVM and answering questions from the community. You can catch up on the recording on our Youtube channel and previous AMAs.
The XCVM is the natural next step in the evolution of DeFi. It will create a new frontier for developers and users to achieve a seamlessly integrated environment that is deeply customizable, and absolutely ecosystem agnostic. The XCVM will build a future for DeFi that aligns with users incentives, and mitigates or removes barriers to its use and possibilities.
For more information about Composable Finance and how it is architecting the unified DeFi landscape of the future, check out our socials: