What is Cosmos?
With a number of different blockchains currently available, from large open-source protocols to small single use blockchain, the challenge of interoperability has been more prominent than ever. While some people think that the space is a zero-sum game with just one blockchain emerging victorious, others suggest that blockchains will be able to coexist and cooperate with one another. Cosmos is one and that is why they are solving the problem of interoperability among blockchains. Cosmos is a decentralized network of independent blockchains powered by Tendermint Byzantine Fault-Tolerant (BFT) consensus algorithms. It’s overarching goal is to make the Cosmos Hub the internet of blockchains.
Cosmos proposes a connective blockchain that relays messages between other chains through what they call the Cosmos Hub. They also offer a toolkit for developers to build blockchains that can plug directly into the respective ecosystems. (Cosmos SDK). A bridge mechanism is also available to connect other legacy blockchains (Cosmos’ peg zones).
Cosmos also uses IBC (inter-blockchain communication) to create a common standard, which allows two chains to have light clients of the other chain. One example use case is in moving one token from one blockchain to another. In this case, it will create a token that is pegged 1:1, burn the original token from the original blockchain and unfreeze the token on the other blockchain. This allows assets to actually move across blockchains. Unlike having wrapped tokens such as WBTC which is BTC wrapped in an erc20 token with the original BTC held by someone else, there is no one single authority to hold the token. This means that there is less chance of malicious activity since it is not dependent on one token keeper. In the Cosmos network, instead of having a permissioned validator, the assets will secured by a proof of stake based validator set. Since this validator has something at stake, if they decide to do something malicious, their stake will be slashed as a penalty.
However, Cosmos does have its limitations. IBC is designed and currently usable only for BFT chains since that was the original design. While there are already blockchains using BFT such as Ethereum’s Casper and Dfinity, it is still not widely used enough if it wants to unlock interoperability across all major blockchains. In the case of Bitcoin which does not use BFT design, Cosmos created a simple workaround called “peg zones”. These peg zones mirror the blockchains activities so that it can be worked with and connected to the Cosmos Hub.
ATOM is the native staking token of the Cosmos Hub. While there will be many tokens in the Cosmos networks with each blockchain connected possibly having its own, ATOM will be the token that powers the entire Cosmos Hub. It has three main uses. First, it will be used as a fee to conduct transactions across the network. This minimal fee helps avoid spamming of the network. Second, it will be used as a staking token. This incentivizes nodes to conduct honest behavior since misconducts will result in slashing of their staked tokens. And lastly, ATOM tokens allow users to participate in the governance of the Cosmos Hub.
Cosmos is the brainchild of Ethan Buchman and Jae Kwon. Both are industry professionals with years of experience developing and releasing blockchain products. Jae Kwon serves as the president of Interchain Foundation, or ICF, while Ethan serves as the vice president. ICF is a swiss based non-profit that promotes and spearheads the research and development of the Cosmos Network. They are also the founder of Tendermint which is a key technology used on the Cosmos Network.
Key Features and Highlights of Cosmos
Tendermint Core is a pBFT (practical byzantine fault tolerant) based ready-to-use blockchain engine. This allows developers to easily build public and private blockchains all connecting to the Cosmos Hub. With the Tendermint consensus algorithm, users get instant finality which is a great security feature. With this, forks are never created as long as more than a third of the validators are still honest. Transactions are finalized as soon as a block is created and thus does not require confirmations after a block has been created.
IBC (Inter-Blockchain Communication) protocol is a protocol that easily connects independent blockchains together. This allows anyone to accomplish quick and secure exchanges through its instant finality property. Transactions easily occur across chains and layers utilizing a combination of zones. It also supports different programming languages making it easier for developers to use their accustomed programming language.
The Cosmos SDK offers the basic tools developers will require to create their own blockchains. Since there are general features that most blockchains will require, having it available on the Cosmos SDK allows developers to focus more on their application specific blockchains and having assurance that all the basic components are already covered. Having it available from the Cosmos SDK makes it highly modular and secure as well. Some of the components covered in the Cosmos SDK include staking, governance, and token creation.
How does Cosmos Work?
Tendermint is the software that runs the Cosmos blockchain. It describes itself as “ Byzantine fault-tolerant replicated state machines in any programming language”. This means that there is no need for a central authority to validate transactions. Rather, it requires just a majority of the nodes acting honestly to be able to run everything smoothly. This approach allows the network to assign the rights to generate new blocks in a random fashion using validators in a multi round process of voting. Here are some rules that it follows:
- Validating and adding blocks to the blockchain requires the supermajority (⅔ of quorum) of validators to agree. Note that it may take a few rounds to reach supermajority and thus finalize blocks.
- The Tendermint BFT organizes those who are part of the network into two groups: delegators and validators. Delegators are responsible for choosing the validators while validators are responsible for confirming transactions and adding blocks to the Cosmos Blockchain. Both are rewarded.
The Cosmos network’s inflation rate is dynamic and is based on the number of tokens staked. If less than ⅔ of tokens are staked, annualized inflation can be increased up to a ceiling of 20%. If it goes above the ⅔ mark, the inflation rate has a set floor rate of 7%.
|Price of XMR||$2.84|
|Avg. Block time||6-7 seconds|
|Yearly inflation rate||7%|
|Circulating supply||186,772,794 ATOMs|
|Max Supply||Infinite (inflationary token)|
|Avg. Transaction Fee||0.002 ATOM (0.0056 USD)|
|Number of Validators||125|
|Market cap rank||24|
April 2017 – Cosmos held their ICO raising $17.3 million in the process
March 2019 – Cosmos Network launched their Main network
April 2019 – Token transfers were enabled
Where can I buy ATOM?
How to properly store ATOM?
Since its launch of the main network, ATOM tokens can only be deposited into cosmos addresses. It’s easy to see since Cosmos network addresses start with “cosmos” followed by a string of 39 alphanumeric characters.
Hardware Wallets – auto generated
Online Wallets – auto generated
Real world use cases (Who’s using it?)
Since its inception, many projects have opted to use the Cosmos Network already because of its easy implementation and robust system. The most popular user is Binance Chain. Having the support of Binance, the biggest cryptocurrency exchange in the space, helps boost their credibility a lot. So far, it’s just the Binance DEX that’s built on top of the Binance Chain. Other popular projects that use the Cosmos network include Akash Network, which is a super cloud for serverless computing, IRISnet which is designed to be the foundation for next generation distributed business applications and Sentinel Network which is a network layer that enables a true p2p and decentralized Applications & Resources marketplace.
Pros and Cons
- Proof of Stake based system is uses less energy
- It is creating an ecosystem that makes interoperability more feasible
- Network of connected blockchains
- Easily move and transfer assets across different blockchains within the Cosmos Hub
- Support of some big names such as Binance
- Staked ATOM tokens are locked up presenting an opportunity cost
- When staking on validators, tokens are dependent on behavior of the validator.
- 3 weeks to unbind staked tokens
Blocks are produced every 6-7 seconds
Different actions in the network cost different amounts. The average fee when sending ATOMs is 0.002 ATOM (0.0056 USD)
Initial inflation rate is estimated to be around 7% per year.