Defining Cosmos

Cosmos is one of the most exciting blockchain projects on the market today. Its name evokes a wide array of various, complicated moving parts all working together to create one grand tapestry, which Cosmos truly is.

More specifically, Cosmos is an ecosystem of interlinked blockchains that can scale with each other. In this manner, Cosmos solves the many problems created by an industry of blockchains that work independently. Each blockchain within its purview is mutually beneficial to the entire Cosmos ecosystem. 

The project was launched in 2014 by Tendermint, which develops decentralized software. In 2019, the Cosmos mainnet went live, with ATOM as the native token on the platform. The main use case for Cosmos is to connect blockchains with each other through expanding functionality and improving overall efficiency. With over $89B in assets under management by the network according to the Cosmos website, it clearly deserves a deeper look into what makes it tick. 

The Vision And Infrastructure Of Cosmos

Cosmos was born to fill the perceived gaps made by Bitcoin, Ethereum, and their off-shoots. Scalability, usability, and sovereignty within a blockchain network all represented challenges to users and blockchain developers before Cosmos came along. 

Bitcoin is arguably difficult to use, and all of its parts function as one entity. Ethereum’s biggest issue was that the layers of its governance would always be at odds with each other, or create such a bottleneck that the most important initiatives inevitably spark a major battle. Such an issue was on display as miners fought against developers over the EIP-1559 proposal. 

While the limitations of Bitcoin and of Ethereum are not exclusive to each of them respectively, they indicate problems endemic to any blockchain with similar architecture. This is where Cosmos differentiates itself from the others.

The Vision

The vision that founder Jae Kwon had for Cosmos was a lofty one. Although Kwon is no longer with the project, amid some controversy as to why, Cosmos still pushes forward with its initial vision and mission for the world.

Put simply, the Cosmos mission is to make it easy for developers to build blockchains by making it easier for independent blockchains to communicate and/or transact with each other. To this end, imagine a world where Ethereum and BSC can interact with each other seamlessly via dApps - that type of interaction is what Cosmos envisions for all blockchains. The end goal is to create an Internet of Blockchains that can communicate with each other in a decentralized way.

Cosmos manages to make the vision a reality with Tendermint open-source code, the Cosmos SDK, and IBC (the Inter-Blockchain Communication protocol, like the TCP/IP for blockchains). 

Tendermint BFT

Much credit must be given to Ethereum for making it simpler for developers to create dApps. The EVM increased the efficiency and possibilities for developers, in ways no other blockchain had before. It did not, however, make it easier to develop a blockchain. This is where Tendermint BFT comes in.

‍Tendermint BFT combines the networking and consensus layers of a blockchain so that developers can focus on app development rather than the underlying protocol. As the underlying protocol of a blockchain, it operates using the Byzantine Fault Tolerant consensus algorithm. 

From a corporate perspective, Tendermint may seem quite attractive since it allows the creation of permissioned, private blockchains. On the other hand, it also allows for public Proof-of-Stake (PoS) blockchain development, which would appeal to decentralized blockchain enthusiasts.

As the combined networking and consensus layers, Tendermint BFT helps nodes and validators agree on transactions and block production. In fact, Tendermint can expedite block production to one block per second. It is also highly secure and fault tolerant - the threshold for node outages to prevent finality on the blockchain is considerably high.

Finality in the blockchain - where the network agrees on the completion of a new transaction - comes with just a third of the nodes coming to a consensus. This threshold for fault tolerance is quite high, but is a trademark of BFT consensus algorithms. 

Cosmos SDK

While Tendermint BFT reduces the time a developer needs to spend in creating their blockchain, it does not help much with app development. As we mentioned before, Ethereum’s hallmark contribution to blockchain was in increasing the possibilities for dApp functionality. Building on that precedent, Cosmos SDK further simplifies the app-development process.

Cosmos SDK is based on the principles of modularity and security based on the capabilities of an app. 

The main goal of Cosmos SDK is to make an ecosystem of modules that lets developers easily call up code from application-specific blockchains. This allows them to create something of a library of app codes so that they don’t have to write each line of code from scratch when they make a new app. The application-specific blockchains can be imported to any blockchain you design on Cosmos.

Furthermore, other developers within the Cosmos ecosystem may gain access to the application-specific blockchains. This inherent developer community support built into Cosmos is one of the reasons it is so popular among developers. As time goes on, the ecosystem of SDK modules is expected to expand, which will make developing even easier.

Cosmos SDK also focuses on capabilities-based security. As capabilities increase, security usually decreases. SDK looks to solve that by limiting the scope of malicious or unexpected interactions between chains within the ecosystem.

Inter-Blockchain Communication Protocol (IBC)

With the previous two foundational portions of the Cosmos infrastructure laid out, the final portion, IBC, makes it possible for multiple blockchains to interact. After all, the hallmark of Cosmos is allowing blockchains to communicate with one another.

IBC uses the improved finality aspect of Tendermint BFT to allow independent chains to transfer value or data, as long as they are sovereign and have fast finality. This is a breakthrough in the blockchain industry, where independent foundations typically have a vested interest in improving their products, but cannot find a way to harness the advancements of others in the industry.

Compatibility with IBC comes down to the fact that blockchains have different layers and are sovereign. Independent, or heterogeneous chains, can differ in how their networking, consensus, and application layers work. IBC reduces the requirements for a blockchain to function properly, the main requirement being that the consensus layer must have fast finality. 

IBC cannot, in reality, apply to Bitcoin and Ethereum because they use Proof-of-Work to reach finality. In the future however, with Ethereum 2.0, Ethereum could potentially integrate into Cosmos.

All blockchains that have their own nodes and validators are sovereign, just as your nation’s government has its own checks and balances and distributions of power. The second requirement for compatibility with IBC is chain sovereignty.

ATOM

ATOM is the native cryptocurrency to the Cosmos network. The token is used as the primary means of transferring data or value between chains on Cosmos. 

For example, if someone wants to send data from BSC to Kyber Network, an IBC transfer must be initiated with ATOM. In this process, a number of ATOM tokens are locked, or bonded, on the first chain. A proof that those ATOM tokens exist is sent to the receiving chain. With that proof on the receiving chain, an equal number of ATOM vouchers is created. The entire transfer is finished when the ATOM vouchers are returned and the original tokens are unbonded.

In the case of interconnected chains that do not run on Tendermint, a special mechanism is put in place to facilitate data and value transfer. This is called a peg, which is a type of proxy chain specially designed for each chain. ATOM is used to interact with those proxy chains.

ATOM is also used to pay transaction fees on the Cosmos network.

Takeaways

Expect the Cosmos ecosystem to expand greatly over the next few years. Interoperability is important, but true interaction and communication between sovereign chains will create a far more robust blockchain industry. With the efficiency, speed, security, and openness of Cosmos, developers will surely jump at the chance to bring their projects onboard.