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Cosmos (ATOM) is a cryptocurrency that powers an ecosystem of blockchains designed to scale and interoperate with each other. The team aims to “create an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way.” Cosmos is a proof-of-stake chain. ATOM holders can stake their tokens in order to maintain the network and receive more ATOM as a reward.
In a nutshell, Cosmos bills itself as a project that solves some of the “hardest problems” facing the blockchain industry. It aims to offer an antidote to “slow, expensive, unscalable and environmentally harmful” proof-of-work protocols, like those used by Bitcoin, by offering an ecosystem of connected blockchains.
The project’s other goals include making blockchain technology less complex and difficult for developers thanks to a modular framework that demystifies decentralized apps. Last but not least, an Interblockchain Communication protocol makes it easier for blockchain networks to communicate with each other — preventing fragmentation in the industry.
Cosmos’ origins can be dated back to 2014, when Tendermint, a core contributor to the network, was founded. In 2016, a white paper for Cosmos was published — and a token sale was held the following year. ATOM tokens are earned through a hybrid proof-of-stake algorithm, and they help to keep the Cosmos Hub, the project’s flagship blockchain, secure. This cryptocurrency also has a role in the network’s governance.
How Does Cosmos Work?
The Cosmos network consists of three layers:
In order to tie all the layers together, and to allow developers to build blockchain applications, Cosmos relies on a set of open-source tools.
The most essential element to this layered design is the Tendermint BFT engine, the part of the network that allows developers to build blockchains without having to code them from scratch.
Tendermint BFT is an algorithm used by the network of computers running the Cosmos software to secure the network, validate transactions and commit blocks to the blockchain. It connects to applications through a protocol called the Application Blockchain Interface.
Tendermint Byzantine Fault Tolerance (BFT)
Central to Tendermint is Tendermint Core, a proof-of-stake (PoS) governance mechanism that keeps the distributed network of computers running Cosmos Hub in sync.
In order for the participants (“validator nodes”) to power the blockchain and vote on changes, they need to first stake ATOM. To become a validator, a node needs to be in the top 100 of nodes staking ATOM. Voting power is determined by the amount of ATOM staked.
Users can also delegate their tokens to other validators, allocating votes to them while still earning a portion of the block reward.
Validators are incentivized to perform honestly, because users have the flexibility to easily switch between the validators they delegate ATOM to, depending on their voting preferences.
Cosmos Hub And Zones
The Cosmos Hub was the first blockchain to be launched on the Cosmos network. It was built to act as an intermediary between all the independent blockchains created within the Cosmos network, called “zones.”
In Cosmos, each zone is able to carry out its essential functions on its own. This includes authenticating accounts and transactions, creating and distributing new tokens and executing changes to its own blockchain.
The Cosmos Hub is tasked with facilitating interoperability between all the zones within the network by keeping track of their states.
Inter-Blockchain Communication Protocol
Zones are connected to the Cosmos Hub via the Inter-Blockchain Communication protocol (IBC), a mechanism that enables information to travel freely and securely between each connected zone.
Once a zone is connected to the Cosmos Hub, it is interoperable with every other zone connected to the hub, meaning blockchains with vastly different applications, validators and consensus mechanisms can exchange data.
The Cosmos team has also built the Cosmos software development kit (SDK), allowing developers to build blockchains using the Tendermint consensus algorithm.
The SDK minimizes complexity by offering the most common functionality contained among blockchains (i.e., staking, governance, tokens). Developers can create plugins to add any additional features they want to have.
What Is Behind Cosmos (ATOM)?
As mentioned at the beginning, Cosmos’ focus is on the interoperability of different blockchains via a central protocol. The challenge is to optimally align all security standards as well as the individual use cases. The respective blockchains that are connected to the central network are referred to as zones. They are managed and controlled by the Tendermint BFT consensus algorithm. The first of these zones is the Cosmos Hub. This serves as the central docking point where the external blockchains come together. The Cosmos Hub, in turn, is its own blockchain-based on proof of stake. An inter-blockchain protocol regulates the transfer and exchange of individual cryptocurrencies.
Some of the functionalities are similar to Polkadot’s blockchain, which is also designed for interoperability. Yet neither project is a simple copy of the other; instead, both Cosmos and Polkadot focus on a different subset of the technology. Nevertheless, Cosmos also offers a framework — similar to Substrate at Polkadot — with which developers can set up their blockchain projects via building blocks. Cosmos wants to represent something like the “Internet of Blockchain Technology (IoB).” The selected algorithm Byzantine Fault Tolerance (BFT) is considered extremely reliable in this context, even in the event of a heavy workload on the blockchain.
What Will You Build?
Developers in Cosmos are the pioneers of the new era of blockchain technology. Join a fast-growing token economy and build upon a secure and stable foundation.
What Makes Cosmos Unique?
A major concern for some in the crypto industry centers on the levels of fragmentation seen in blockchain networks. There are hundreds in existence, but very few of them can communicate with each other. Cosmos aims to turn this on its head by making this possible.
Cosmos is described as “Blockchain 3.0” — and as we mentioned earlier, a big goal is ensuring that its infrastructure is straightforward to use. To this end, the Cosmos software development kit focuses on modularity. This allows a network to be easily built using chunks of code that already exist. Long-term, it’s hoped that complex applications will be straightforward to construct as a result.
Scalability is another priority, meaning substantially more transactions can be processed a second than more old-fashioned blockchains like Bitcoin and Ethereum. If blockchains are to ever achieve mainstream adoption, they’ll need to be able to cope with demand as well as existing payment processing companies or websites — or be even better.
Cosmos Interchain Accounts Upgrade
The Interchain Foundation, a non-profit organization of the Cosmos ecosystem, announced the release of the Interchain Accounts upgrade on Feb. 17, 2022. Launched in April 2021, the Inter-Blockchain Communications (IBC) protocol is the Cosmos standard for blockchain interoperability. It allows an individual blockchain to control an account on a separate chain. There are 38 projects utilizing IBC currently, notably Terra, Crypto.org chain and Gravity bridge. The Interchain Accounts upgrade will be the largest to the ecosystem since Stargate — which enabled Cosmos blockchains to connect with each other using the standardized protocol for IBC for the first time ever. With Interchain Accounts, users can stake, vote, swap tokens and more on other blockchains. The upgrade serves the purpose of “enabling composability in IBC [which] allows innovation in distinct applications to be deployed without needing to upgrade the entire Interchain.”
Cosmos SDK And Other Application Layer Frameworks
Tendermint BFT reduces the development time of a blockchain from years to weeks, but building a secure ABCI-app from scratch remains a difficult task. This is why the Cosmos SDK exists
The Cosmos SDK is a generalized framework that simplifies the process of building secure blockchain applications on top of Tendermint BFT. It is based on two major principles:
• Modularity: The goal of the Cosmos SDK is to create an ecosystem of modules that allows developers to easily spin up application-specific blockchain without having to code each bit of functionality of their application from scratch. Anyone can create a module for the Cosmos SDK, and using ready built modules in your blockchain is as simple as importing them into your application. For example, the Tendermint team is building a set of basic modules that are needed for the Cosmos Hub. These modules can be used by any developer as they build their own application. Additionally, developers can create new modules to customize their application. As the Cosmos network develops, the ecosystem of SDK modules will expand, making it increasingly easier to develop complex blockchain applications.
• Capabilities-based security: Capabilities constrain the security boundaries between modules, enabling developers to better reason about the composability of modules and limit the scope of malicious or unexpected interactions.
The Cosmos SDK also comes with a set of useful developer tools for building command line interfaces (CLI), REST servers and a variety of other commonly used utility libraries.
One final remark: the Cosmos SDK, like all Cosmos tools, is designed to be modular. Today, it allows developers to build on top of Tendermint BFT. However, it can be used with any other consensus engines that implements the ABCI. As time goes by, we expect multiple SDKs to emerge, built with different architecture models and compatible with multiple consensus engines – all within a single ecosystem: the Cosmos Network.
Connecting Blockchains Together – IBC
Now that developers have a way to quickly build customized blockchains, let us see how to connect these blockchains together. The connection between blockchains is achieved through a protocol called Inter-Blockchain Communication protocol (IBC). IBC leverages the instant finality property of Tendermint consensus (although it can work with any “fast-finality” blockchain engine) to allow heterogeneous chains to transfer value (i.e. tokens) or data to each other.
What Are Heterogeneous Chains?
Essentially it comes down to two things:
- Different layers: Heterogeneous chains have different layers, meaning they can differ in how they implement the networking, consensus and application parts. To be compatible with IBC, a blockchain needs only follow a few requirements, the main one being that the consensus layer must have fast finality. Proof–of–Work chains (like Bitcoin and Ethereum) do not fall in this category, as they have probabilistic finality.
- Sovereignty: Every blockchain is maintained by a set of validators whose job is to agree on the next block to commit to the blockchain. In Proof–of–Work blockchains these validators are called miners. A sovereign blockchain is a blockchain with its own validator set. In many instances it is important for blockchains to be sovereign, as validators are ultimately responsible for modifying the state. In Ethereum, applications are all run by a common set of validators. Because of this, each application only has limited sovereignty.
IBC allows heterogeneous blockchains to transfer tokens and data to each other, meaning that blockchains with different applications and validator sets are interoperable. For example, it allows public and private blockchains to transfer tokens to each other. Currently, no other blockchain framework enables this level of interoperability.
How IBC Works?
The principle behind IBC is fairly simple. Let us take an example where an account on chain A wants to send 10 tokens (let us call them ATOM) to chain B
Continuously, chain B receives the headers of chain A, and vice versa. This allows each chain to track the validator set of the other. In essence, each chain runs a light-client of the other.
When the IBC transfer is initiated, the ATOM are locked up ( bonded ) on chain A
Then, a proof that the 10 ATOM are bonded is relayed from chain A to chain B.
The proof is verified on chain B against chain A’s header and, if it is valid, then 10 ATOM-vouchers are created on chain B.
Note that the ATOM that have been created on chain B are not real ATOM, as ATOM only exist on chain A. They are a representation on B of ATOM from chain A, along with a proof that these ATOM are frozen on chain A.
Designing The “Internet Of Blockchains”
IBC is a protocol that allows two heterogeneous blockchains to transfer tokens to each other. From there, how do we create a network of blockchains?
One idea is to connect each blockchain in the network with every other via direct IBC connections. The main problem with this approach is that the number of connections in the network grows quadratically with the number of blockchains. If there are 100 blockchains in the network and each needs to maintain an IBC connection with every other, that is 4950 connections. This quickly gets out of hand
To solve this, Cosmos proposes a modular architecture with two classes of blockchain: Hubs and Zones. Zones are regular heterogenous blockchains and Hubs are blockchains specifically designed to connect Zones together. When a Zone creates an IBC connection with a Hub, it can automatically access (i.e. send to and receive from) every other Zone that is connected to it. As a result, each Zone only needs to establish a limited number of connections with a restricted set of Hubs. Hubs also prevent double spending among Zones. This means that when a Zone receives a token from a Hub, it only needs to trust the origin Zone of this token and the Hub.
The first Hub launched in the Cosmos Network is the Cosmos Hub. The Cosmos Hub is a public Proof-of-Stake blockchain whose native staking token is called the ATOM, and where transaction fees will be payable in multiple tokens. The launch of the Hub also marks the launch of the Cosmos network.
Now that we can easily create and connect blockchains there is one final issue to tackle: Scalability. Cosmos leverages two types of scalability:
Vertical Scalability: This encompasses the methods for scaling the blockchain itself. By moving away from Proof-of-Work and optimizing its components, Tendermint BFT can reach thousands of transactions per-second. The bottleneck factor is the application itself. For example, an application like a Virtual Machine (e.g. the Ethereum Virtual Machine) will impose a much lower limit on the transaction throughput than an application where transaction types and state transition functions are directly embedded in it (e.g. a standard Cosmos SDK application). This is one of the reasons why application-specific blockchains make sense
- Horizontal Scalability: Even if the consensus engine and the application are highly optimized, at some point the transaction throughput of a single chain inevitably hits a wall it cannot surpass. That is the limit of vertical scaling. To go beyond it, the solution is to move to multi-chain architectures. The idea is to have multiple parallel chains running the same application and operated by a common validator set, making blockchains theoretically infinitely scalable. Details about horizontal scalability are fairly complex and out-of-scope for this intro.
Cosmos will offer very good vertical scalability at launch, which will be a major improvement over current blockchain solutions in and of itself. Later, after the completion of the IBC module, horizontal scalability solutions will be implemented.
So In The End, What Is Cosmos?
Hopefully by now you have a clearer picture of the Cosmos project. Here is a quick recap of what Cosmos is in three concise points:
- Cosmos makes blockchains powerful and easy to develop with Tendermint BFT and the modularity of the Cosmos SDK.
- Cosmos enables blockchains to transfer value with each other through IBC and Peg-Zones, while letting them retain their sovereignty.
- Cosmos allows blockchain applications to scale to millions of users through horizontal and vertical scalability solutions.
More than anything, Cosmos is not a product but an ecosystem built on a set of modular, adaptable and interchangeable tools. Developers are encouraged to join the effort to improve existing tools and create new ones in order to make the promise of blockchain technology a reality. These tools are the foundation needed to create the decentralized internet and global financial system of tomorrow.
Is Cosmos (ATOM) A Good Investment?
As Cosmos continues to benefit from its first-mover advantage as an interoperable blockchain platform, many crypto analysts and experts believe that Cosmos (ATOM) is a good investment compared to other mainstream cryptocurrencies and DeFi coins. Despite all the ups and downs in Cosmos’ history, analysts believe that ATOM’s price could grow further in the long term.
One of the factors that will influence investing in ATOM is its Fundamental Crypto Asset Score (FCAS).
In July 2021, Cosmos ranked 36th with a score of 788/1,000. In simple mathematical terms, this can be taken down with a percentage score of 78.8 which is down from the 90% status it enjoyed in May. What is the fundamental crypto-asset score? This is a comparative metric that is employed to assess the fundamental health of crypto projects.
Because Cosmos continues to make waves in the space, their FCAS must continue to remain above 500. This means that Cosmos continues to provide an effective service that sees more exchanges and marketplaces created. Such marketplaces allow people to lend, invest, buy, and trade without any intermediaries such as traditional financial institutions.
Aside from this, Cosmos’ ecosystem is healthy enough to allow the creation of resilient autonomous organizations. What’s more, the core of the Cosmos Network enables developers to create game economies that are owned by players. In addition to this, the Interchain Foundation provides grants for developers who have a unique innovation they would like to include in the Cosmos ecosystem.
Coin Quora has weighed into the discussion of ATOM’s price patterns in the future. According to analyst Alyssa Wiselin “Due to the ongoing development happening within the ATOM ecosystem, as well as in the overall crypto market, we may see ATOM reach new heights.” ATOM is expected to trade for a coin at an average price of $32 and reach $50 by the end of 2022. Based on this forecast, Coin Quora posits that ATOM is likely a good investment that could return 121.76% in the short term.