The crypto market at the time of writing has tens of thousands crypto projects running on different chains, so making use of different protocols on an individual level becomes a challenge. What is Cosmos crypto platform doing to solve this problem? Learn about their interoperability solution and multi-chain protocol in our guide.
- Cosmos aims to become “the Internet of blockchains”. It intends to onboard different blockchain solutions to the Cosmos-powered decentralized network, in which they can all communicate;
- The central part of Cosmos called Hub uses the Tendermint BFT consensus algorithm to secure all zones (sub-chains). Therefore, to ensure consensus and security of the network, validators stake the native tokens ATOM ;
- The next upgrade for Cosmos, Theta, with liquid staking, cross-chain accounts and NFTs, is expected to arrive in Q1 2022. Moreover, hundreds of zones are in development and will keep introducing more networks and features to the platform.
What is Cosmos?
The idea behind Cosmos is to provide an open source platform for the multitudes of blockchain applications (from simple monetary systems to virtual machines) that will be uniformly secured by a common algorithm. The Cosmos blockchains are called zones, and the central zone, called the Cosmos Hub, is secured with the Tendermint BFT algorithm.
The Tendermint consensus uses voting to propagate blocks, and appoints a round-leader or proposer from a list. Then it puts out a set of transactions for inclusion in the next block, and the rest of validators vote on it.
However, voting on block inclusion is not the only option for validator nodes: they can determine block gas limits, coordinate updates or changes to the constitution of the Cosmos Hub. As a result, each zone allows for a separate governance mechanism and constitution.
The hub and zones communicate with the help of inter-blockchain communication protocol (IBCP or IBC protocol). The Hub keeps track of all tokens in the hubs, and transfers between zones go through it, which eliminates the need to track liquidity in the zones.
Each zone can operate on its own rules or emulate an existing blockchain network, but existing blockchains use different programming languages. To make sure applications connect with the blockchain, Tendermint makes use of application blockchain interface (ABCI).
With ABCI, it is possible to set a boundary between the replication and the state machine (the code that dictates behavior in defined scenarios). For example, if we put Bitcoin on Cosmos, the blockchain would set the canonical order and share data between nodes and ABCI would maintain UTXOs and prevent double-spending.
What is more, the so called bridge zones connect Cosmos network to the existing blockchains and appropriate contracts on the other blockchain.
The governing contract would keep track of all tokens deposited and withdrawn from the bridge. Therefore, whether the bridge zone is working as intended and is accountable for it is up to the validators of that zone.
One of the most used bridges on Cosmos is the bridge to Ethereum called Gravity Bridge. It allows not only native coins of both networks to flow to one another, but also Cosmos and Ethereum tokens.
History and the Team behind Cosmos
The Tendermint consensus was first described in 2014 by Jae Kwon, who would later go on to found Tendermint Inc. Ethan Buchman, the co-founder of Tendermint Inc. assisted with the further development and building of the Tendermint-based blockchain technology.
Interchain Foundation (ICF) unveiled Cosmos in 2016, and it now oversees the development of Tendermint Core, the network and the Cosmos software development kit (SDK). The Cosmos team ran an initial coin offering for ATOM in 2017, to boost the development of these products, and by 2019 the Cosmos Hub hit the mainnet.
What about the ATOM tokens now? Let’s have a look.
What is ATOM?
|Consensus Algorithm||Delegated Proof-of-Stake|
|Transactions per second||4,000 tps|
Despite Cosmos Hub being a multi-asset ledger, one can only do the voting, staking and paying transaction fees with atoms, the native cryptocurrency of the Cosmos Hub. By the way, atoms are trading on exchanges under the ATOM ticker.
ATOM is inflationary, with ⅓ of the total supply going to validator incentives every year. Therefore, the inflation rate fluctuates between 7% and 20%, depending on the amount of ATOM staked.
How do you Use Cosmos (ATOM)?
According to the fundraiser disclosure, atoms are not a store of value or a medium of exchange. Conversely, the coins’ purpose is maintaining the Cosmos network and voting.
In practice, crypto enthusiasts still trade ATOM on cryptocurrency exchanges and use them as an investment tool for Cosmos. After all, one can earn rewards from staking ATOM and then unlock them after a waiting period of 21 days.
Comparison with Similar Projects
The white paper of Cosmos draws comparisons to Stellar. Their consensus algorithm also uses probabilistic finality but is less secure because instead of total consensus it uses quorums.
In addition, Tendermint SDK is the underlying engine of the Terra (LUNA) ecosystem. Their value proposition is similar but applied to a more narrow field of stablecoins instead of separate chains.
Cosmos vs Polkadot
Just like Cosmos is building ‘the Internet of blockchains’, Polkadot’s mission of building a Web3 platform is essentially the same. Same are the principles of parallel processing and securing the platform with a single central chain, too.
A principal difference is that Polkadot parachains have their own state machines and share sets of validators with the Relay chain. Another is that anyone can build a hub, without needing to win a slot in a parachain auction.
Cosmos vs Ethereum
Cosmos was also once considered to be one of the ways to scale Ethereum. The developers worked on Plasma sharding in parallel with the Cosmos SDK and chain.
After all, a Cosmos-Ethereum hub can support the same consensus mechanism and rules that Ethereum has. Practical implementation of this, Ethermint, showed performance of 200 tps (as opposed to the base 15 tps of Ethereum).
What are the Downsides?
The Stellar white paper also mentions Tendermint consensus as prone to centralization by uneven staking reward distribution. The NEAR whitepaper describes a vulnerability that arises from the Cosmos’ architecture: creating an invalid transaction is as easy as copying it from a zone to the Hub.
In addition, the stake requirement can exclude network participants from governance and lead to concentration of power. Short voting periods (21 days) do not help either, as they favor short-term solutions, and a high token dilution rate (7-20%) is a problem, too.
Partnerships and future plans
There are four major upgrades planned for 2022, one for each quarter. The closest one, Theta, is going to include improvements to governance, basic NFT functionality, interchain accounts and liquid staking.
Further updates are very likely to have features like token issuance, Chain Name Service, Gravity DEX v2 and layered security.
At the moment, there are 262 apps and services at various stages of development in the Cosmos ecosystem according to the official website. It includes and connects to well-known projects like Terra, Binance, THORChain, Crypto.com, KuCoin’s KuChain and OKX’s OKExChain.
Cosmos and ATOM on Twitter
Where to Store ATOM?
The majority of multi-coin wallets support ATOM. For one, we recommend Exodus, because you can stake and exchange ATOM with ChangeHero right in your wallet.
How to Exchange ATOM on ChangeHero?
Now, how do you get ATOM? You don’t have to search all exchanges that offer ATOM pairs for the best rate, because ChangeHero does it for you. All you need to do is:
- Choose the currencies on the home page, amounts and the type of exchange. Provide your wallet address in the next step and check the amounts;
- Send in a single transaction the digital assets you will be exchanging. Fixed Rate transactions have a 15-minute limit;
- And now, relax! We are doing all the work: checking the incoming transaction and doing the exchange as soon as it arrives;
- As soon as we process the exchange, your ATOM are on the way to your wallet. Leave a review with your impressions while you’re at it!
Customer support is available 24/7 in the chat on our website or through the email: [email protected].
The blockchain interoperability problem came as an inevitable result of diverse networks springing up. It is now up to Cosmos to be the platform that wins the race to find the solution to this problem.