diff --git a/app/app.go b/app/app.go
index 1e6d312d2a..90666e85b0 100644
--- a/app/app.go
+++ b/app/app.go
@@ -576,7 +576,7 @@ func (app *App) EndBlocker(ctx sdk.Context, req abci.RequestEndBlock) abci.Respo
 	// NOTE: this is a specific feature for upgrading to v2 as v3 and onward is expected
 	// to be coordinated through the signalling protocol
 	if app.UpgradeKeeper.ShouldUpgrade(req.Height) {
-		app.SetProtocolVersion(v2.Version)
+		app.SetAppVersion(ctx, v2.Version)
 	}
 	return res
 }
@@ -587,9 +587,6 @@ func (app *App) InitChainer(ctx sdk.Context, req abci.RequestInitChain) abci.Res
 	if err := tmjson.Unmarshal(req.AppStateBytes, &genesisState); err != nil {
 		panic(err)
 	}
-	if req.ConsensusParams != nil && req.ConsensusParams.Version != nil {
-		app.SetProtocolVersion(req.ConsensusParams.Version.AppVersion)
-	}
 	return app.mm.InitGenesis(ctx, app.appCodec, genesisState)
 }
 
diff --git a/app/prepare_proposal.go b/app/prepare_proposal.go
index 2240f79371..4ab62bcce5 100644
--- a/app/prepare_proposal.go
+++ b/app/prepare_proposal.go
@@ -62,7 +62,7 @@ func (app *App) PrepareProposal(req abci.RequestPrepareProposal) abci.ResponsePr
 
 	// build the square from the set of valid and prioritised transactions.
 	// The txs returned are the ones used in the square and block
-	dataSquare, txs, err := square.Build(txs, app.GetBaseApp().AppVersion(), app.GovSquareSizeUpperBound(sdkCtx))
+	dataSquare, txs, err := square.Build(txs, app.GetBaseApp().AppVersion(sdkCtx), app.GovSquareSizeUpperBound(sdkCtx))
 	if err != nil {
 		panic(err)
 	}
diff --git a/app/process_proposal.go b/app/process_proposal.go
index ebbbc85345..68f7048058 100644
--- a/app/process_proposal.go
+++ b/app/process_proposal.go
@@ -110,7 +110,7 @@ func (app *App) ProcessProposal(req abci.RequestProcessProposal) (resp abci.Resp
 	}
 
 	// Construct the data square from the block's transactions
-	dataSquare, err := square.Construct(req.BlockData.Txs, app.GetBaseApp().AppVersion(), app.GovSquareSizeUpperBound(sdkCtx))
+	dataSquare, err := square.Construct(req.BlockData.Txs, app.GetBaseApp().AppVersion(sdkCtx), app.GovSquareSizeUpperBound(sdkCtx))
 	if err != nil {
 		logInvalidPropBlockError(app.Logger(), req.Header, "failure to compute data square from transactions:", err)
 		return reject()
diff --git a/app/square_size.go b/app/square_size.go
index f0c3825580..8703f1dea7 100644
--- a/app/square_size.go
+++ b/app/square_size.go
@@ -19,10 +19,6 @@ func (app *App) GovSquareSizeUpperBound(ctx sdk.Context) int {
 	}
 
 	gmax := int(app.BlobKeeper.GovMaxSquareSize(ctx))
-	// perform a secondary check on the max square size.
-	if gmax > appconsts.SquareSizeUpperBound(app.AppVersion()) {
-		gmax = appconsts.SquareSizeUpperBound(app.AppVersion())
-	}
-
-	return gmax
+	hardMax := appconsts.SquareSizeUpperBound(ctx.BlockHeader().Version.App)
+	return min(gmax, hardMax)
 }
diff --git a/app/test/integration_test.go b/app/test/integration_test.go
index 4a2e054e71..775dfff370 100644
--- a/app/test/integration_test.go
+++ b/app/test/integration_test.go
@@ -23,6 +23,7 @@ import (
 	"github.com/celestiaorg/celestia-app/app"
 	"github.com/celestiaorg/celestia-app/app/encoding"
 	"github.com/celestiaorg/celestia-app/pkg/appconsts"
+	v2 "github.com/celestiaorg/celestia-app/pkg/appconsts/v2"
 	"github.com/celestiaorg/celestia-app/pkg/blob"
 	"github.com/celestiaorg/celestia-app/pkg/da"
 	appns "github.com/celestiaorg/celestia-app/pkg/namespace"
@@ -191,10 +192,7 @@ func (s *IntegrationTestSuite) TestMaxBlockSize() {
 				require.LessOrEqual(t, size, uint64(appconsts.DefaultGovMaxSquareSize))
 				require.GreaterOrEqual(t, size, uint64(appconsts.MinSquareSize))
 
-				// assert that the app version is correctly set
-				// FIXME: This should return the latest version but tendermint v0.34.x doesn't copy
-				// over the version when converting from proto so it disappears
-				require.EqualValues(t, 0, blockRes.Block.Header.Version.App)
+				require.EqualValues(t, v2.Version, blockRes.Block.Header.Version.App)
 
 				sizes = append(sizes, size)
 				ExtendBlobTest(t, blockRes.Block)
@@ -329,9 +327,7 @@ func (s *IntegrationTestSuite) TestShareInclusionProof() {
 		blockRes, err := node.Block(context.Background(), &txResp.Height)
 		require.NoError(t, err)
 
-		// FIXME: This should return the latest version but tendermint v0.34.x doesn't copy
-		// over the version when converting from proto so it disappears
-		require.EqualValues(t, 0, blockRes.Block.Header.Version.App)
+		require.EqualValues(t, v2.Version, blockRes.Block.Header.Version.App)
 
 		_, isBlobTx := coretypes.UnmarshalBlobTx(blockRes.Block.Txs[txResp.Index])
 		require.True(t, isBlobTx)
diff --git a/cmd/celestia-appd/cmd/root.go b/cmd/celestia-appd/cmd/root.go
index b0d8c9ab6b..8b55b09e7c 100644
--- a/cmd/celestia-appd/cmd/root.go
+++ b/cmd/celestia-appd/cmd/root.go
@@ -4,7 +4,6 @@ import (
 	"io"
 	"os"
 	"path/filepath"
-	"strconv"
 
 	bscmd "github.com/celestiaorg/celestia-app/x/blobstream/client"
 
@@ -237,20 +236,11 @@ func NewAppServer(logger log.Logger, db dbm.DB, traceStore io.Writer, appOpts se
 		panic(err)
 	}
 
-	var upgradeHeight int64
-	upgradeHeightStr, ok := appOpts.Get(UpgradeHeightFlag).(string)
-	if ok {
-		upgradeHeight, err = strconv.ParseInt(upgradeHeightStr, 10, 64)
-		if err != nil {
-			panic(err)
-		}
-	}
-
 	return app.New(
 		logger, db, traceStore, true,
 		cast.ToUint(appOpts.Get(server.FlagInvCheckPeriod)),
 		encoding.MakeConfig(app.ModuleEncodingRegisters...), // Ideally, we would reuse the one created by NewRootCmd.
-		upgradeHeight,
+		cast.ToInt64(appOpts.Get(UpgradeHeightFlag)),
 		appOpts,
 		baseapp.SetPruning(pruningOpts),
 		baseapp.SetMinGasPrices(cast.ToString(appOpts.Get(server.FlagMinGasPrices))),
diff --git a/go.mod b/go.mod
index 81c1a340b5..3a626efb7c 100644
--- a/go.mod
+++ b/go.mod
@@ -44,7 +44,7 @@ require (
 	github.com/bits-and-blooms/bitset v1.7.0 // indirect
 	github.com/consensys/bavard v0.1.13 // indirect
 	github.com/consensys/gnark-crypto v0.12.1 // indirect
-	github.com/cosmos/ledger-cosmos-go v0.13.2 // indirect
+	github.com/cosmos/ledger-cosmos-go v0.12.4 // indirect
 	github.com/crate-crypto/go-kzg-4844 v0.7.0 // indirect
 	github.com/docker/distribution v2.8.2+incompatible // indirect
 	github.com/docker/go-connections v0.4.0 // indirect
@@ -239,7 +239,7 @@ require (
 )
 
 replace (
-	github.com/cosmos/cosmos-sdk => github.com/celestiaorg/cosmos-sdk v1.18.3-sdk-v0.46.14
+	github.com/cosmos/cosmos-sdk => github.com/celestiaorg/cosmos-sdk v1.20.0-sdk-v0.46.16
 	github.com/gogo/protobuf => github.com/regen-network/protobuf v1.3.3-alpha.regen.1
 	github.com/syndtr/goleveldb => github.com/syndtr/goleveldb v1.0.1-0.20210819022825-2ae1ddf74ef7
 	github.com/tendermint/tendermint => github.com/celestiaorg/celestia-core v1.29.0-tm-v0.34.29
diff --git a/go.sum b/go.sum
index 74b2baa708..a7f3581544 100644
--- a/go.sum
+++ b/go.sum
@@ -322,8 +322,8 @@ github.com/celestiaorg/blobstream-contracts/v3 v3.1.0 h1:h1Y4V3EMQ2mFmNtWt2sIhZI
 github.com/celestiaorg/blobstream-contracts/v3 v3.1.0/go.mod h1:x4DKyfKOSv1ZJM9NwV+Pw01kH2CD7N5zTFclXIVJ6GQ=
 github.com/celestiaorg/celestia-core v1.29.0-tm-v0.34.29 h1:Fd7ymPUzExPGNl2gZw4i5S74arMw+iDHLE78M/cCxl4=
 github.com/celestiaorg/celestia-core v1.29.0-tm-v0.34.29/go.mod h1:xrICN0PBhp3AdTaZ8q4wS5Jvi32V02HNjaC2EsWiEKk=
-github.com/celestiaorg/cosmos-sdk v1.18.3-sdk-v0.46.14 h1:+Te28r5Zp4Vp69f82kcON9/BIF8f1BNXb0go2+achuc=
-github.com/celestiaorg/cosmos-sdk v1.18.3-sdk-v0.46.14/go.mod h1:Og5KKgoBEiQlI6u56lDLG191pfknIdXctFn3COWLQP8=
+github.com/celestiaorg/cosmos-sdk v1.20.0-sdk-v0.46.16 h1:L2j5luXXoEMQLzJkxBixeeEWkgcxnGFm6HnwN3X3L9g=
+github.com/celestiaorg/cosmos-sdk v1.20.0-sdk-v0.46.16/go.mod h1:Tvsc3YnqvflXTYC8xIy/Q07Es95xZ1pZC/imoKogtbg=
 github.com/celestiaorg/knuu v0.10.0 h1:uYO6hVsoCAJ/Q4eV0Pn8CLbbupGAjD56xQc4y2t4lf0=
 github.com/celestiaorg/knuu v0.10.0/go.mod h1:2NjDX29x09hRpaaWaKvi7pw9VjI/SHo+/4HldyEW50g=
 github.com/celestiaorg/merkletree v0.0.0-20210714075610-a84dc3ddbbe4 h1:CJdIpo8n5MFP2MwK0gSRcOVlDlFdQJO1p+FqdxYzmvc=
@@ -420,8 +420,8 @@ github.com/cosmos/iavl v0.19.6 h1:XY78yEeNPrEYyNCKlqr9chrwoeSDJ0bV2VjocTk//OU=
 github.com/cosmos/iavl v0.19.6/go.mod h1:X9PKD3J0iFxdmgNLa7b2LYWdsGd90ToV5cAONApkEPw=
 github.com/cosmos/ibc-go/v6 v6.2.1 h1:NiaDXTRhKwf3n9kELD4VRIe5zby1yk1jBvaz9tXTQ6k=
 github.com/cosmos/ibc-go/v6 v6.2.1/go.mod h1:XLsARy4Y7+GtAqzMcxNdlQf6lx+ti1e8KcMGv5NIK7A=
-github.com/cosmos/ledger-cosmos-go v0.13.2 h1:aY0KZSmUwNKbBm9OvbIjvf7Ozz2YzzpAbgvN2C8x2T0=
-github.com/cosmos/ledger-cosmos-go v0.13.2/go.mod h1:HENcEP+VtahZFw38HZ3+LS3Iv5XV6svsnkk9vdJtLr8=
+github.com/cosmos/ledger-cosmos-go v0.12.4 h1:drvWt+GJP7Aiw550yeb3ON/zsrgW0jgh5saFCr7pDnw=
+github.com/cosmos/ledger-cosmos-go v0.12.4/go.mod h1:fjfVWRf++Xkygt9wzCsjEBdjcf7wiiY35fv3ctT+k4M=
 github.com/cpuguy83/go-md2man v1.0.10 h1:BSKMNlYxDvnunlTymqtgONjNnaRV1sTpcovwwjF22jk=
 github.com/cpuguy83/go-md2man v1.0.10/go.mod h1:SmD6nW6nTyfqj6ABTjUi3V3JVMnlJmwcJI5acqYI6dE=
 github.com/cpuguy83/go-md2man/v2 v2.0.0-20190314233015-f79a8a8ca69d/go.mod h1:maD7wRr/U5Z6m/iR4s+kqSMx2CaBsrgA7czyZG/E6dU=
diff --git a/test/e2e/simple_test.go b/test/e2e/simple_test.go
index 1e7843ab85..2fe606d531 100644
--- a/test/e2e/simple_test.go
+++ b/test/e2e/simple_test.go
@@ -33,6 +33,7 @@ func TestE2ESimple(t *testing.T) {
 		switch {
 		case isSemVer:
 		case latestVersion == "latest":
+		case len(latestVersion) == 7:
 		case len(latestVersion) == 8:
 			// assume this is a git commit hash (we need to trim the last digit to match the docker image tag)
 			latestVersion = latestVersion[:7]
diff --git a/test/e2e/upgrade_test.go b/test/e2e/upgrade_test.go
index 05d5efad34..6194504474 100644
--- a/test/e2e/upgrade_test.go
+++ b/test/e2e/upgrade_test.go
@@ -11,6 +11,7 @@ import (
 
 	"github.com/celestiaorg/celestia-app/app"
 	"github.com/celestiaorg/celestia-app/app/encoding"
+	v1 "github.com/celestiaorg/celestia-app/pkg/appconsts/v1"
 	v2 "github.com/celestiaorg/celestia-app/pkg/appconsts/v2"
 	"github.com/celestiaorg/celestia-app/test/txsim"
 	"github.com/celestiaorg/knuu/pkg/knuu"
@@ -134,6 +135,7 @@ func TestMajorUpgradeToV2(t *testing.T) {
 		switch {
 		case isSemVer:
 		case latestVersion == "latest":
+		case len(latestVersion) == 7:
 		case len(latestVersion) == 8:
 			// assume this is a git commit hash (we need to trim the last digit to match the docker image tag)
 			latestVersion = latestVersion[:7]
@@ -143,7 +145,7 @@ func TestMajorUpgradeToV2(t *testing.T) {
 	}
 
 	numNodes := 4
-	upgradeHeight := int64(10)
+	upgradeHeight := int64(12)
 	ctx, cancel := context.WithCancel(context.Background())
 	defer cancel()
 
@@ -158,7 +160,6 @@ func TestMajorUpgradeToV2(t *testing.T) {
 	require.NoError(t, err)
 
 	for i := 0; i < numNodes; i++ {
-		t.Log("Starting node", "node", i, "version", latestVersion)
 		require.NoError(t, testnet.CreateGenesisNode(latestVersion, 10000000, upgradeHeight))
 	}
 
@@ -168,16 +169,6 @@ func TestMajorUpgradeToV2(t *testing.T) {
 	require.NoError(t, testnet.Setup())
 	require.NoError(t, testnet.Start())
 
-	// assert that the network is initially running on v1
-	for i := 0; i < numNodes; i++ {
-		client, err := testnet.Node(i).Client()
-		require.NoError(t, err)
-		resp, err := client.Header(ctx, nil)
-		require.NoError(t, err)
-		// FIXME: we are not correctly setting the app version at genesis
-		require.Equal(t, uint64(0), resp.Header.Version.App, "version mismatch before upgrade")
-	}
-
 	errCh := make(chan error)
 	encCfg := encoding.MakeConfig(app.ModuleEncodingRegisters...)
 	opts := txsim.DefaultOptions().WithSeed(seed).SuppressLogs()
@@ -187,12 +178,16 @@ func TestMajorUpgradeToV2(t *testing.T) {
 		errCh <- txsim.Run(ctx, testnet.GRPCEndpoints()[0], kr, encCfg, opts, sequences...)
 	}()
 
-	// wait for all nodes to move past the upgrade height
+	// assert that the network is initially running on v1
+	heightBefore := upgradeHeight - 1
 	for i := 0; i < numNodes; i++ {
 		client, err := testnet.Node(i).Client()
 		require.NoError(t, err)
-		require.NoError(t, waitForHeight(ctx, client, upgradeHeight+2, time.Minute))
-		resp, err := client.Header(ctx, nil)
+		require.NoError(t, waitForHeight(ctx, client, upgradeHeight, time.Minute))
+		resp, err := client.Header(ctx, &heightBefore)
+		require.NoError(t, err)
+		require.Equal(t, v1.Version, resp.Header.Version.App, "version mismatch before upgrade")
+		resp, err = client.Header(ctx, &upgradeHeight)
 		require.NoError(t, err)
 		require.Equal(t, v2.Version, resp.Header.Version.App, "version mismatch after upgrade")
 	}
diff --git a/test/util/malicious/out_of_order_prepare.go b/test/util/malicious/out_of_order_prepare.go
index ebc23bc31b..24a6bff664 100644
--- a/test/util/malicious/out_of_order_prepare.go
+++ b/test/util/malicious/out_of_order_prepare.go
@@ -36,7 +36,7 @@ func (a *App) OutOfOrderPrepareProposal(req abci.RequestPrepareProposal) abci.Re
 
 	// build the square from the set of valid and prioritised transactions.
 	// The txs returned are the ones used in the square and block
-	dataSquare, txs, err := Build(txs, a.GetBaseApp().AppVersion(), a.GovSquareSizeUpperBound(sdkCtx), OutOfOrderExport)
+	dataSquare, txs, err := Build(txs, a.GetBaseApp().AppVersion(sdkCtx), a.GovSquareSizeUpperBound(sdkCtx), OutOfOrderExport)
 	if err != nil {
 		panic(err)
 	}
diff --git a/x/blob/ante/max_total_blob_size_ante.go b/x/blob/ante/max_total_blob_size_ante.go
index 7d7c0f4a7c..a94382e425 100644
--- a/x/blob/ante/max_total_blob_size_ante.go
+++ b/x/blob/ante/max_total_blob_size_ante.go
@@ -65,7 +65,7 @@ func (d MaxTotalBlobSizeDecorator) getMaxSquareSize(ctx sdk.Context) int {
 		return int(appconsts.DefaultGovMaxSquareSize)
 	}
 
-	upperBound := appconsts.SquareSizeUpperBound(ctx.ConsensusParams().Version.AppVersion)
+	upperBound := appconsts.SquareSizeUpperBound(ctx.BlockHeader().Version.App)
 	govParam := d.k.GovMaxSquareSize(ctx)
 	return min(upperBound, int(govParam))
 }
diff --git a/x/upgrade/upgrade_test.go b/x/upgrade/upgrade_test.go
index 5cf6b9fe78..cd9c17d2cb 100644
--- a/x/upgrade/upgrade_test.go
+++ b/x/upgrade/upgrade_test.go
@@ -9,6 +9,7 @@ import (
 	"github.com/celestiaorg/celestia-app/app/encoding"
 	"github.com/celestiaorg/celestia-app/test/util"
 	"github.com/cosmos/cosmos-sdk/crypto/keyring"
+	sdk "github.com/cosmos/cosmos-sdk/types"
 	"github.com/stretchr/testify/require"
 	abci "github.com/tendermint/tendermint/abci/types"
 	"github.com/tendermint/tendermint/libs/log"
@@ -21,11 +22,12 @@ func TestUpgradeAppVersion(t *testing.T) {
 
 	testApp.BeginBlock(abci.RequestBeginBlock{Header: tmproto.Header{Height: 2}})
 	// app version should not have changed yet
-	require.EqualValues(t, 1, testApp.AppVersion())
+	require.EqualValues(t, 1, testApp.AppVersion(sdk.Context{}))
 	respEndBlock := testApp.EndBlock(abci.RequestEndBlock{Height: 2})
 	// now the app version changes
+	require.NotNil(t, respEndBlock.ConsensusParamUpdates.Version)
 	require.EqualValues(t, 2, respEndBlock.ConsensusParamUpdates.Version.AppVersion)
-	require.EqualValues(t, 2, testApp.AppVersion())
+	require.EqualValues(t, 2, testApp.AppVersion(sdk.Context{}))
 }
 
 func setupTestApp(t *testing.T, upgradeHeight int64) (*app.App, keyring.Keyring) {
@@ -40,7 +42,8 @@ func setupTestApp(t *testing.T, upgradeHeight int64) (*app.App, keyring.Keyring)
 
 	stateBytes, err := json.MarshalIndent(genesisState, "", " ")
 	require.NoError(t, err)
-	require.EqualValues(t, 0, testApp.GetBaseApp().AppVersion())
+	infoResp := testApp.Info(abci.RequestInfo{})
+	require.EqualValues(t, 0, infoResp.AppVersion)
 
 	cp := app.DefaultConsensusParams()
 	abciParams := &abci.ConsensusParams{
@@ -64,7 +67,8 @@ func setupTestApp(t *testing.T, upgradeHeight int64) (*app.App, keyring.Keyring)
 	)
 
 	// assert that the chain starts with version provided in genesis
-	require.EqualValues(t, app.DefaultConsensusParams().Version.AppVersion, testApp.GetBaseApp().AppVersion())
+	infoResp = testApp.Info(abci.RequestInfo{})
+	require.EqualValues(t, app.DefaultConsensusParams().Version.AppVersion, infoResp.AppVersion)
 
 	_ = testApp.Commit()
 	return testApp, kr