Cosmos- The Internet of Blockchains
- Tanishq Wadhwani
- Jun 13, 2021
- 7 min read
Twitter: The open, scalable, and interconnected economy of the future.
If I ask you what the most important cryptocurrencies are, what would you say? You probably say Bitcoin because of its ability to store and transfer value in a trustless manner. You might mention is Ethereum (ETH) too, because of its role as one of the world computers that will power the new decentralized internet. Maybe you’d even say Chainlink (LINK) because it is the data oracle that gives blockchain applications real-world utility. However, something tells me that you would forget to mention Cosmos (ATOM) a cryptocurrency project that is becoming the backbone for interoperability between all cryptocurrency blockchains. Not only that but some of the largest cryptocurrencies by market cap were built using the Cosmos SDK including BNB and Terra (LUNA).
The Cosmos Network is a decentralized network of independent blockchains. It is an ever-expanding ecosystem of interconnected apps and services, built for a decentralized future. Cosmos apps and services connect using IBC, the Inter-Blockchain Communication protocol. This innovation enables you to freely exchange assets and data across sovereign, decentralized blockchains. ATOM is the cryptocurrency that powers the Cosmos Network. ATOM tokenizes transactions and used for staking on the Cosmos Network.
Cosmos is a decentralized network enabling data exchanges between different blockchains. The project, launched March 2019 via an initial coin offering (ICO) in 2017, says its goal is to create an “internet of blockchains” that resolves both scalability and interoperability issues in blockchains. With the deployment of both Tendermint’s Byzantine fault-tolerant consensus protocol and the Inter-Blockchain Communication (IBC) protocol, blockchains built on top of Cosmos retain their sovereignty while interacting with other blockchains.
What Is Cosmos (ATOM)?
A hub for many blockchains. In a nutshell, Cosmos bills itself as a project that solves some of the “hardest problems” facing the blockchain industry. It aims to offer an antidote to “slow, expensive, unscalable and environmentally harmful” proof-of-work protocols, like those used by Bitcoin, by offering an ecosystem of connected blockchains.
The project’s other goals include making blockchain technology less complex and difficult for developers thanks to a modular framework that demystifies decentralized apps. Last but not least, an Interblockchain Communication protocol makes it easier for blockchain networks to communicate with each other — preventing fragmentation in the industry.
Cosmos’ origins can be dated back to 2014, when Tendermint, a core contributor to the network, was founded. In 2016, a white paper for Cosmos was published — and a token sale was held the following year. ATOM tokens are earned through a hybrid proof-of-stake algorithm, and they help to keep the Cosmos Hub, the project’s flagship blockchain, secure. This cryptocurrency also has a role in the network’s governance.
How does Cosmos work?
Cosmos (ATOM) is a cryptocurrency that powers an ecosystem of blockchains designed to scale and interoperate with each other. The team aims to "create an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way." Cosmos is a proof-of-stake chain. ATOM holders can stake their tokens in order to maintain the network and receive more ATOM as a reward.
The Cosmos network consists of many independent, parallel blockchains, called zones, each powered by classical Byzantine fault-tolerant (BFT) consensus protocols like Tendermint (already used by platforms like ErisDB). Some zones act as hubs with respect to other zones, allowing many zones to interoperate through a shared hub. The architecture is a more general application of the Bitcoin sidechains concept, using classic BFT and Proof-of-Stake algorithms, instead of Proof-of-Work. Cosmos can interoperate with multiple other applications and cryptocurrencies, something other blockchains can’t do well. By creating a new zone, you can plug any blockchain system into the Cosmos hub and pass tokens back and forth between those zones, without the need for an intermediary.
While the Cosmos Hub is a multi-asset distributed ledger, there is a special native token called the atom. Atoms have three use cases: as a spam-prevention mechanism, as staking tokens, and as a voting mechanism in governance.
As a spam prevention mechanism, Atoms are used to pay fees. The fee may be proportional to the amount of computation required by the transaction, similar to Ethereum’s concept of “gas”. Fee distribution is done in-protocol and a protocol specification is described here.
As staking tokens, Atoms can be “bonded” in order to earn block rewards. The economic security of the Cosmos Hub is a function of the amount of Atoms staked. The more Atoms that are collateralized, the more “skin” there is at stake and the higher the cost of attacking the network. Thus, the more Atoms there are bonded, the greater the economic security of the network.
Atom holders may govern the Cosmos Hub by voting on proposals with their staked Atoms.
Who Are the Founders of Cosmos?
The co-founders of Tendermint — the gateway to the Cosmos ecosystem — were Jae Kwon, Zarko Milosevic and Ethan Buchman. Although Kwon is still listed as principal architect, he stepped down as CEO in 2020. He maintains he is still a part of the project but is mainly focusing on other initiatives. He has now been replaced as Tendermint’s CEO by Peng Zhong, and the whole board of directors was given quite a substantial refresh. Their goals include enhancing the experience for developers, creating an enthusiastic community for Cosmos and building educational resources so greater numbers of people are aware of what this network is capable of.
What Makes Cosmos Unique?
A major concern for some in the crypto industry centers on the levels of fragmentation seen in blockchain networks. There are hundreds in existence, but very few of them can communicate with each other. Cosmos aims to turn this on its head by making this possible.
Cosmos is described as “Blockchain 3.0” — and as mentioned earlier, a big goal is ensuring that its infrastructure is straightforward to use. To this end, the Cosmos software development kit focuses on modularity. This allows a network to be easily built using chunks of code that already exist. Long-term, it’s hoped that complex applications will be straightforward to construct as a result.
Scalability is another priority, meaning substantially more transactions can be processed a second than more old-fashioned blockchains like Bitcoin and Ethereum. If blockchains are to ever achieve mainstream adoption, they’ll need to be able to cope with demand as well as existing payment processing companies or websites — or be even better.
How Many Cosmos (ATOM) Coins Are There in Circulation?
ATOM has a very specific total supply — 260,906,513 to be exact. It is worth noting that these cryptocurrencies aren’t mined — instead, they are earned through staking.
Two private sales were held in January 2017, followed by a public sale in April of that year. This raised a total of $16 million, which is the equivalent of about $0.10 per ATOM.
Breaking down the token distribution, about 80% was allocated to investors, while the remaining 20% was split between two companies: All In Bits and the Interchain Foundation.
Cosmos has compared ATOM tokens to the ASICs that are used to mine Bitcoin. As a technical paper written by the Tendermint team explained: “It is a piece of virtualized hardware (economic capital) that you need to obtain in order to participate as a keeper in the network.”
How Is the Cosmos Network Secured?
As mentioned earlier, Cosmos uses a proof-of-stake consensus algorithm. Validator nodes that stake a higher quantity of ATOM tokens are more likely to be chosen to verify transactions and earn rewards. Nodes that are found to be acting dishonestly are penalized — and they can end up losing the tokens that they had at stake.
The interoperability achieved by Cosmos has some extremely interesting use-cases:
DEX: Since Cosmos is linking so many blockchains with each other, it goes without saying that it can easily enable different ecosystems to interact with one another. This a perfect setting for a decentralized exchange.
Cross chain transactions: Similarly, one zone can avail the services of another zone through the Cosmos hub.
Ethereum Scaling: This is one of the more use cases. Any EVM based zone which is connected to the Cosmos hub will be, as per the architecture, powered by the Tendermint consensus system as well. This will enable these zones to scale up faster.
Summary
Cosmos is an ever-expanding ecosystem of interconnected apps and services, built for a decentralized future. Cosmos aims to become an “internet of blockchains” which is going to solve these problems once and for all. Cosmos’s architecture consists of several independent blockchains called “Zones” attached to a central blockchain called “Hub”.
Cosmos aims to create an ecosystem of parallel blockchains that are able to both scale and interoperate together. Cosmos-based blockchains can now incorporate the recently launched Inter-Blockchain Communication (IBC) protocol. This is an industry standard that enables inter-blockchain communication, making Cosmos a strong contender in the field of blockchain interconnectivity.
Cosmos is a platform for streamlining transactions between different blockchains, such as Bitcoin and Ethereum. Dubbed the “Internet of blockchains” by its founders, Cosmos uses a proof of stake blockchain with Byzantine Fault Tolerance. ATOM is the coin that powers it all.
Cosmos solves the interoperability challenge for digital currencies, i.e. the need for two digital currencies to have compatible technologies and protocols in order to interact. Its Inter-Blockchain Communication protocol lets users exchange assets from one blockchain to another. Cosmos also provides tools for developers to easily build their own blockchain applications on the Cosmos network.
ATOM is the blockchain’s native coin and is primarily used to reward validators and for staking. There is no specific limit on the supply of ATOM. The number of tokens created is based on the number of ATOM being staked, which leads to “an annual inflation rate of anywhere between 7% and 20%.”
Conclusion
Cosmos has been on my radar for quite some time. Interoperability is one of the most valuable use cases in cryptocurrency and there aren’t very many projects that get it right. The fact that almost an existing interoperability solution including REN uses some version of the Tendermint consensus mechanism seems like more than a coincidence to me. Lots of Ethereum layer-2 has also employed this robust Proof of Stake consensus pioneered by Cosmos. Proving that it has utility even outside of the context of interoperability. Even exchanges like Binance, Crypto.com, and OKEx are using tools like Tindermint and the Cosmos SDK. Now that the IBC protocol is live it really seems like everything is finally starting to come together for Cosmos. Delays and infighting at the Cardinals HQ seem to have really held the project back from its full potential. This is clearly visible in the lackluster price of the ATOM coin, which I really do believe is poised for a pump.
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