Cosmos, a project often described as the Internet of blockchains, connects sovereign blockchains using the Inter-Blockchain Communication (IBC) protocol. The IBC Protocol standardizes communication across disparate blockchains, connecting them via the Cosmos Hub, and making them interoperable. Data and value (tokens) can be transferred from one “zone” (one blockchain) to another (a separate blockchain) in a secure and trustless manner by routing all transfers through the central Cosmos Hub.
The ATOM token underpins the Cosmos Hub which utilizes a Proof-of-Stake (PoS) consensus method. Users stake ATOM* to help secure the network and receive compensation via inflation and transaction fees. Cosmos is attempting to create a decentralized, easy-to-join, interoperable meta-layer for blockchain that improves scalability, security, and liquidity across the blockchain space.
ATOM Strengths
- The Cosmos SDK is a modular framework that simplifies creating secure blockchain applications on top of Tendermint making it extremely easy for developers to onboard onto the Cosmos blockchain.
- With the Inter-Blockchain Communication (IBC) now live, 150+ Tendermint-based blockchains are now interoperable and able to send tokens from/to one another.
- Standout blockchains and dApps with real adoption like Binance Chain, THORchain, Luna, and Kava have integrated with the Cosmos network demonstrating the advantages of interoperability that Cosmos provides.
- Plans to create an opt-in shared security model amongst zones in the network will create even more flexibility, freedom, and incentives to join Cosmos for projects and developers looking to build their own blockchains.
ATOM Weaknesses
- Because the IBC only launched in February 2021, adoption remains quite low. As of Q2 2021, there are only ~40 zones and less than 35,000 monthly active users across the entire IBC. Additionally, even though there are currently 40 zones, 95% of all activity happens in just two zones.
- Cosmos faces serious competition from a number of angles. Polkadot is a direct competitor with considerable brand awareness. Ethereum is far and away the ecosystem leader that may reduce the need for interoperability projects. Finally, bridge projects like Badger and Ren, as well as side chains like Polygon, while not direct competitors, do introduce solutions that could steal market share from Cosmos.
- Regulatory concerns exist around Cosmos due to its ICO whereas the SEC has already commented on competitor blockchain, Ethereum, (twice) saying that they do not believe it fits the definition of a security.
ATOM Links
- Whitepaper
- Website
- Github
- Telegram
- Discord
- Blog
Technology
As previously mentioned in the Use Case section, the Cosmos network is secured with the Tendermint BFT consensus. Tendermint Core Byzantine Fault Tolerance (BFT) is a consensus algorithm designed by the Tendermint team that aims to create a general-purpose consensus layer on which developer-specific applications can be built atop. Tendermint Core’s primary function is to ensure all transactions are recorded in the appropriate sequence on every machine. This way, the network security has been abstracted away for new developers and they can focus on their application.
Application Blockchain Interface (ABCI)
Another feature of Tendermint that is present in Cosmos is the Application Blockchain Interface (ABCI), an engine that contains both the networking and consensus layers of a blockchain. Developers can then build the application layer, such as a dApp, on top of the ABCI. The Tendermint ABCI is compatible with any programming language, able to be used for both public and private blockchains, and has a block time of approximately 1 second.
The Cosmos SDK is a modular framework that simplifies creating secure blockchain applications on top of Tendermint. For comparison, Angular and React are examples of popular frameworks for JavaScript. Currently, the Cosmos SDK uses Go.
Connecting Blockchains
The Cosmos ecosystem, unlike Ethereum, is not a single blockchain that facilitates state and transaction transfers but rather, a decentralized network of chains built using the shared Cosmos SDK toolkit. Cosmos SDK allows new developers to choose from a selection of pre-built modules based on their specific needs when designing a new blockchain.
In addition to relying on a PoS mechanism that is not encumbered by the nothing-at-stake problem, Cosmos also displays other novel features, such as the idea and technology behind its nickname, “the Internet of blockchains.” Inter-Blockchain Communication (IBC) protocol allows users to send information between two sovereign chains by allowing those chains to relay their headers to one another, also known as running a light client on one another.
Stargate, the name of the upgrade which launched IBC, was implemented in February 2021. With it, 150+ Tendermint-based blockchains now are interoperable as well as allowing Cosmos SDK blockchains to communicate with other blockchain protocols. With IBC live, previously siloed blockchains can now send tokens from/to one another. Blockchains that have onboarded and are now interoperable include Binance Chain, Terra, and the Luna network.
Chains, or zones in the Cosmos ecosystem, connect via a two-way peg, similar to Ethereum and sidechains like Polygon. When a valid cross-chain transaction is submitted on the IBC, the token on the original chain is (essentially) frozen/burned while the receiving chain mints the equivalent amount on new tokens.
The “Internet of blockchains” takes this one step further by creating a hub and zone model. The Cosmos Hub is a Proof-of-Stake (PoS) chain that serves as the primary hub for routing transactions and data between blockchains. Using the hub and zone model, any zone (i.e. blockchain) can send information to a connected hub and then that hub can send the information to any of the other connected zones. Zones plug into hubs, which route and validate the transactions passed between different zones in exchange for fees. The first hub that launched in the Cosmos Network was the Cosmos hub, however, other hubs are expected to be launched in the future. The multiple hubs and zone architecture enables more communication throughput between zones, reducing the need for all data to route through the Cosmos Hub.
Road Map
Since launching Cosmos Network in 2017 with the private and public token sales, Cosmos has since rolled out an MVP of their hub, launched the mainnet on March 13th, 2019, and has onboarded several noticeable projects like Kava and Band protocol.
Early 2021 was dominated by developments around the Stargate, the name of the upgrade which launched IBC. The upgrades present in Stargate were planned to complete the original Cosmos Whitepaper roadmap. Stargate was implemented in February 2021 and allows previously siloed blockchains to send tokens from/to one another. With it, 150+ Tendermint-based blockchains now were interoperable as well as allowing Cosmos SDK blockchains to communicate with other blockchain protocols. Blockchains that have onboarded and are now interoperable include Binance Chain, Terra, and the Luna network.
In June 2021, the Cosmos Hub development teams released Roadmap 2.0, an updated development roadmap.The Hub team's primary objectives over 2021-22 is to enhance liquidity in the Gravity DEX, bolster economic security (Interchain Staking), and improve overall usability for users and developers. The next two upgrades, codenamed Delta and Vega, will introduce Gravity DEX and Gravity Bridge to the Cosmos Hub, respectively.
Gravity DEX, which will allow users to swap digital assets across the network, was released in July 2021 via a testnet. The hope is that having a native DEX will help bring DeFi activity to Cosmos. The Gravity Dex Upgrade will create an Automated Market Maker (AMM) on the Cosmos Hub, similar to Uniswap on Ethereum. This will increase the on-chain transactions that the Hub will need to facilitate and provide more exchange fees for stakers.
Gravity Bridge, an Ethereum-Cosmos bridge, is also planned for 2021. A proposal was passed in April 2021 which provides 100,000 ATOM to fund and develop the Ethermint project. Ethermint is a layer that runs atop Ethereum and is compatible with both the Cosmos and Ethereum ecosystems. Interchain Staking is planned for late 2021. A chain name service (CNS) is also planned for 2021. Staking derivatives are expected to be introduced in 2022.
