The Cosmos blockchain was made so that distributed ledgers could talk to each other without using a central server. The Cosmos white paper came out in 2016, and the network was soon thought of as the Internet of blockchains by its founders, who wanted to make a platform where open-source blockchains could work together and make transactions between them easier.
Since the beginning of blockchain, developers have had a hard time making different blockchains work together.
Interoperability is what makes it possible for two or more systems to talk to each other. Think about emails sent from a Gmail account to a Hotmail account. Or, an Android phone that can share data with an iOS phone from Apple.
First, single structures are made, like a particular blockchain. Still, the systems need to be able to talk to each other. If not, they aren’t very useful and may make it harder for people to use technology.
Cosmos is the first completely free platform that makes it possible for different systems to work together. These systems include Binance Chain, Terra, and Crypto.org, to name a few, which manage more than $151 billion worth of digital assets.
Cosmos (ATOM) is the digital currency that powers and protects the ecosystem of blockchains that are built to grow and work together.
How does Cosmos work?
The Cosmos network is an ecosystem of apps and services that is always growing.
It makes sure that blockchains can talk to each other safely by using hubs, the Tendermint consensus algorithm, and the Inter-Blockchain Communication (IBC) protocol.
Using smart contracts, some platforms can talk to each other. During this process, tokens are locked in on one platform, and the corresponding asset amount is created on the other. The tokens that are wrapped up are a good example of this process.
Instead of sending Bitcoin (BTC) from the Bitcoin blockchain to another platform like Ethereum, the BTC is locked in a working blockchain that provides the service.
On another blockchain, pegged tokens are made that match the amount of something like wrapped Bitcoin (wBTC).
On the other hand, Cosmos gives developers open-source tools to make zones, which are blockchain applications that don’t depend on a single chain. The zones are smart contracts made by Cosmos.
The Cosmos team has made a software development kit (SDK) that lets developers build zones faster, easier, and cheaper than on platforms like Ethereum.
It keeps things simple by providing the most common blockchain features, like staking, governance, and tokens, through well-known and easy-to-use software development programs like GO. Developers have the most freedom and flexibility to make plugins and add any features they want.
Cosmos hubs
Hubs connect each zone to the other zones. The main one is Cosmos Hub, but there are also other hubs.
Any zone or hub doesn’t have to work with any other zone or hub, but each new zone is connected to the Cosmos Hub, which is the first blockchain launched on the Cosmos network and keeps track of the state of each zone and vice versa.
Each zone can do things on its own, like verifying accounts and transactions, making and distributing new tokens, and making changes to the blockchain.
Cosmos hub keeps track of the states of all the zones in the network to make it easier for them to work together. It also makes it possible for proof-of-work (PoW) blockchains like Bitcoin and Ethereum to work together through bridges, even though they don’t meet the requirements of the Cosmos protocol. Crypto experts and fans are also looking forward to the coming bridge to Polkadot.
Tendermint Byzantine fault tolerance (BFT)
By default, the Cosmos SDK tools use the Tendermint Byzantine fault tolerance (BFT) engine consensus protocol to keep the network safe. However, other protocols can also be used. Developers can make blockchains with Tendermint BFT without having to code them from scratch.
The Tendermint BFT algorithm verifies transactions and adds blocks to the blockchain. To connect to apps, it uses a protocol called the application blockchain interface.
The protocol works through a proof-of-stake (PoS) governance system that helps connect the Cosmos Hub computers in a distributed network.
People who are part of the network can risk ATOM and get rewards. The top 100 bettors can become validator nodes that power the blockchain and vote on changes. The validators’ voting power goes up with the amount of ATOM they put at risk.
Users can also give their tokens to validators or trade them with other users. This gives validators a reason to do a good job. Users can easily change which validators they give ATOM to based on how they want to vote.
The Inter-Blockchain Communication, or IBC, protocol lets hubs and zones talk to each other and work together.
Protocol for Inter-Blockchain Communication
IBC is a protocol that lets different blockchains or zones send each other secure messages and connects them to the Cosmos hub. This new method makes it possible for users to trade assets and data freely and safely across sovereign (independent) and decentralized blockchains.
People think of the Cosmos Hub as a service provider for the chains that need to connect to it so they can work together. No matter their functions or business goals, any sovereign blockchain with different applications, validators, and consensus mechanisms can still talk to each other and share data.
Cosmos blockchains can use IBC to do almost anything they want, from transferring crypto to transferring nonfungible tokens (NFTs) and even making smart contracts that work across chains. With the IBC, you can build any kind of cross-chain app.
What problem does Cosmos solve?
Cosmos’s goal is to let all blockchains talk to each other and solve the three biggest problems with blockchains: sovereignty, scalability, and sustainability.
Sovereignty
With the free Cosmos SDK, developers can make secure blockchain apps that don’t cost anything to run. These blockchains can easily connect with each other without having to rely on smart contracts on a different blockchain. This means that high transaction fees caused by network congestion can be avoided, and better scaling features can be made.
This will help develop new features in decentralized finance (DeFi), non-fungible tokens (NFTs), gaming, decentralized autonomous organizations (DAOs), social networks, marketplaces, and the internet-based economy, especially the ownership economy where everyone has a stake.
Scalability
Interoperability is what makes sure a scalable system works in the Cosmos. By connecting to the Cosmos interoperability model of shared communication standards, any type of sovereign blockchain will be able to talk to each other and help improve the design of its protocol.
Cosmos can be made scalable by making a copy of a blockchain to relieve congestion or by splitting the apps into multiple blockchains that are each used by a single app. Interchain token transfers make it possible for these different chains to work as one network.
Sustainability
The PoS consensus algorithm, which keeps the network safe, makes sure that the system will last. Compared to the PoW consensus algorithm, the carbon footprint of PoS is cut by 99%.
Ethereum vs. Cosmos
Even though Ethereum developers have been supporting a switch to PoS for years, the platform still uses a PoW consensus algorithm, making it less stable than Cosmos.
Another big problem for Ethereum is that it is hard to grow. An Ethereum transaction may take anywhere from a few minutes to a few hours to finish.
Instead, Cosmos Tendermint BFT proof-of-stake algorithms can handle up to thousands of transactions per second. This makes the whole process much faster and cheaper than Ethereum’s gas fees, which can be very high at times depending on how busy the blockchain is.
In Ethereum, complicated financial instruments are handled by smart contracts that don’t need permission and have specific functions that help build the ecosystem as a whole. In Cosmos, each smart contract or application is essentially its own blockchain. This means that they won’t interfere with each other and that transactions will go smoothly.
Cosmos has a design that makes it easy for developers to make sovereign blockchains quickly and cheaply. Its interoperable system makes it easy for blockchains to talk to each other, which Ethereum doesn’t let you do unless you use the complicated and not very safe exchange of wrapped tokens.
On the other hand, Ethereum’s main benefit is that it is a well-known blockchain. Its network effect still makes it the most popular platform for DeFi, NFTs, and the Metaverse, which are the most popular uses of blockchain right now and probably will be in the future as well.
Cosmos vs. Polkadot
Cosmos and Polkadot seem to have the same kind of governance, but there are two big ways in which they are very different: how transactions are validated and how tokens or assets are moved between the systems.
Cosmos hub protocol says that the top 100 validators who bet the most ATOM are the ones who check transactions.
Delegators can choose and change the pools of tokens and rewards that validators can stake at any time. Zones can choose how they want to be governed. For example, they could issue their own currency instead of ATOM or have their own hub with a different validation system.
Along with public blockchain zones, you can also make private ones with permissions, and it’s easy to move assets between them.
Parachains in Polkadot are like the blockchain zones in Cosmos. But they all use the same set of validators, which is made possible by the Relay chain, the central blockchain that coordinates everything. Cosmos blockchains connected to the hub do not rely on the same unified security.
Polkadot uses smart contracts to move tokens from one parachain to another. Cosmos’ IBC and Cosmos Hub make it easy to move assets between chains and talk to each other. Smart contracts in the Cosmos are really just blockchains.
This lets Cosmos keep track of every transaction in three places: the two zones that interact with each other and the hub.
Who is behind Cosmos crypto?
Cooperation between different teams led to the creation of Cosmos. The Swiss Interchain Foundation (ICF), a non-profit that funds and helps open-source blockchain projects, and the Tendermint team gave most of the resources and money for its development.
In 2014, software developers Jae Kwon and Ethan Buchman started the Cosmos network together. At the same time, they made Tendermint, the algorithm that Cosmos would use to make decisions. The Cosmos white paper was written by Kwon and Buchman in 2016, and its software was released in 2019.
In 2017, the Interchain Foundation raised money for the first time with a two-week “initial coin offering” (ICO) of the ATOM token, which raised over $17 million.
Through a Series A funding round in 2019, Tendermint Inc. got $9 million to keep working on the project. Early in 2020, Jae Kwon left the project, but he said he would still be involved. Ethan Buchman, the other co-founder, is still the president of the Interchain Foundation Council.
Several big names in crypto, like Paradigm, Bain Capital, and 1confirmation, have put money into Cosmos.
Is Cosmos a good investment?
Since it started, ATOM has made a lot of progress since it started, and its value has increased by nearly 600%. In September 2021, ATOM hit its all-time high of $38.78.
Even though each zone can make and use its own cryptocurrency, the main token used in the Cosmos ecosystem is still the ATOM. It is a key part of keeping the network working, and you can hold it, spend it, send it, or stake it.
ATOM becomes more valuable as more and more zones are added to the network and rely on its security and transparency as a multiasset distributed ledger. This is especially true as the number of people who use it grows. Cosmos users don’t have to own and stake ATOM just to vote on network upgrades; they can also get rewards for doing so.
Investors should know that there is no limit on how many ATOMs can be in circulation. Instead, Cosmos changes how many tokens are made based on how many ATOM are staked.
It’s easy to put money into Cosmos (ATOM). The first time the currency could be bought and sold was in 2019. If you want to know how to buy the Cosmos crypto, you can do so on any of the major exchanges. There are many exchanges that offer this service. Coinbase, Binance, and Kraken are just a few.
Cosmos staking
Staking ATOM is a necessary step to help keep the Cosmos ecosystem’s economy safe and make sure it is run well. To start getting rewards in the form of crypto assets, you must choose one or more Cosmos validators. It also gives the right to vote on proposed changes and upgrades that will affect the network’s future.
At the moment, the average annual percentage return on ATOM staked each year is 9.7%. If a user bets 1000 ATOM, they get, on average, 89.18 ATOM as a reward and 10.28% as commission, though this varies from validator to validator.
The Cosmos Hub transaction fees pay for staked rewards, which are then given to cryptocurrency holders. It is best to stake with multiple validators at the same time to avoid big problems if one of them acts up or goes down. In that situation, the delegated ATOM is burned, which means it is lost.
At the end of the staking period, you must use a wallet to make a transaction that costs nothing and has no value.
There is no Cosmos wallet in particular. Instead, networks and tokens in the Cosmos ecosystem are supported by a number of exchanges and crypto services.
Some examples of web wallets are Exodus, Math Wallet, and Citadel One. You can send, receive, and store ATOM with Ledger Live, Shapeshift, Trust wallet, and many others.
The Cosmos blockchain’s future
The Cosmos ecosystem seems to have a bright future ahead. With the development of Interchain Security, security is expected to improve in a big way. This will make sure that all the chains that are linked together are better protected.
If IBC connections are more fluid, DeFi transactions and the transfer of NFTs between public and permissioned blockchains will be easier.
Cosmos’s plans for the future are ambitious and will add many new features, but it has a team of hard-working developers behind it, giving its users hope for a bright future.
