The crypto market at the time of writing has tens of thousands crypto projects running on different chains. Making use of different protocols on an individual level becomes a challenge. What is Cosmos crypto platform doing to solve this problem? You will learn about their interoperability solution and multi-chain protocol in our guide.
- Cosmos is a platform with a mission to become “the Internet of blockchains”. It intends to onboard different blockchain solutions to the Cosmos network, in which they can all communicate;
- The central part of Cosmos is called Hub, and it uses the Tendermint BFT consensus algorithm to secure all zones (sub-chains). To ensure consensus and security of the network, the ATOM native tokens need to be staked;
- 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 a platform for the multitudes of blockchain applications (from simple monetary systems to virtual machines) that will be uniformly secured by a common algorithm. In Cosmos, the separate branches 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.
Voting on block inclusion is not the only option for validators: they can determine block gas limits, coordinate updates or changes to the constitution of the Cosmos Hub. Each zone allows for a separate governance mechanism and constitution.
The hub and zones communicate with the help of inter-blockchain protocol (IBP). The Hub keeps track of all tokens in the hubs, and transfers between zones go through it, eliminating the need for tracking 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). 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.
The Cosmos network can also be connected to the existing blockchains with the bridge zones in Cosmos and appropriate contracts on the other blockchain.
The governing contract would keep track of all tokens deposited to and withdrawn from the bridge. 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. The further development and building of the Tendermint-based blockchain was assisted by the co-founder of Tendermint Inc. Ethan Buchman.
Cosmos was unveiled in 2016 with the participation of Interchain Foundation (ICF), which now oversees Tendermint Core, the Cosmos network and SDK. The ICF ran an initial coin offering for ATOM in 2017, boosting the development of these products, and by 2019 Cosmos Hub was launched on the mainnet.
The utility token ATOM distributed in the ICO is still used to support the Cosmos Hub. Read more in the following section!
What is ATOM?
Despite Cosmos Hub being a multi-asset ledger, the voting, staking and paying transaction fees can only be done with atoms, the native cryptocurrency of the Cosmos Hub. Atoms are traded 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.
What is Cosmos Crypto Used For?
According to the fundraiser disclosure, atoms were not designed to be a store of value or a medium of exchange. The coins are to be used for maintaining the Cosmos network and voting.
In practice, ATOM is still traded and used as an investment tool for Cosmos. After all, it can generate yield from staking and then be unlocked after a waiting period of 21 days.
Comparison with Similar Projects
Comparisons to Stellar are drawn in the whitepaper of Cosmos. Their consensus algorithm also uses probabilistic finality but is less secure because instead of total consensus it uses quorums.
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 is Cosmos Criticized For?
The Stellar whitepaper 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. This is not helped by short voting periods (21 days) which favor short-term solutions or a high token dilution rate (7-20%).
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
.@cosmos Theta Upgrade (Scheduled for Mar 31, 2022) is going to be absolute 🔥
Cosmos Theta Upgrade will *potentially* enable:
2. NFT modules
3. Interchain accounts
4. Liquid staking
5. CosmWASM instance on the Hub
6. Upgrades to Gravity Bridge pic.twitter.com/Te0mVdaDzC
— Mason Nystrom (@masonnystrom) January 4, 2022
What is Cosmos crypto ecosystem going to look like after the Theta upgrade? Mason Nystrom gives a quick rundown on features that it will enable.
We’ve updated our list of digital assets under consideration for 2022. See what’s new, and learn more about what this means: https://t.co/GahLhJUgwk$ALGO $AR $ATOM $AXS $BORA $BTT $CVX $DCR $EGLD $ENJ $FTM $GALA $GEL $HNT $HOT $IOTA $ROSE $SCRT $SAND $SPELL $STX $VET $YGG
— Grayscale (@Grayscale) January 24, 2022
One of the largest providers for cryptocurrency derivatives, Grayscale Investments has included ATOM for consideration for inclusion in 2022. In a positive scenario, they will establish and manage the trust which will be offered to their institutional clients.
— Ro₿₿ Stack ⚛️ (@RobbStack_sats) January 21, 2022
And here, Twitter user Robb Stack is pondering the repercussions of institutional investors entering the ecosystem. This neat visualisation is going to become even more expansive, or so they say.
Where to Store ATOM?
ATOM is supported by the majority of multi-coin wallets. 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 that’s left for you 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 sum of cryptocurrency 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 the exchange has been processed, 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.
Frequently Asked Questions
What is Cosmos?
Cosmos is a blockchain platform with a focus on interoperability. It lets users create zones with arbitrary rules, as well as bridge them to existing blockchains.
What is ATOM?
ATOM is the native cryptocurrency of the Cosmos Hub. It is used for spam prevention, voting and securing the chain.
What is Cosmos crypto used for?
The Cosmos Hub coin ATOM is primarily used for staking and securing the network, as well as paid in transaction fees and represents votes.
What is the future of Cosmos crypto?
The Cosmos ecosystem includes hundreds of applications, including those under development. In 2022, it will undergo four major upgrades to improve security, reduce latency and allow for token and NFT creation.