Cosmos

Internet of Blockchains

Cosmos is one of the first blockchain platforms focused on blockchain interoperability with the goal of connecting blockchains together in an ‘Internet of Blockchains.’ It was designed for a world where many blockchain platforms like Bitcoin, Ethereum and others that are built with different technologies would need to interoperate with each other. Cosmos would also provide the technology for other projects and developers to adopt so they can bootstrap their own blockchain while being able to easily connect with other blockchains in the Cosmos ecosystem at the same time. Binance, currently the most successful crypto companies in the world, currently uses Cosmos technology for their own decentralized exchange. Cosmos was started by Jae Kwon in 2014 under a company called Tenderment that developed it’s core proof-of-stake byzantine fault tolerant (BFT) consensus algorithm to provide fast finality and scalability to blockchains.

Background & History

Founder Jae Kwon established Tendermint (aka All in Bits) in 2014 along with co-Founder Ethan Buchmann and Zarko Milosevic to develop the Tendermint consensus algorithm.  Tendermint had an agreement with the Interchain Foundation, a Swiss non-profit that is led by Kwon and Buchmann along with three other council members, to develop the Cosmos platform.  In April of 2017, the Tendermint team launched an ICO that raised over $17.3 million for 168 million ATOM tokens in less than a half hr.  70% of the ATOMS was sold in the public ICO.  5% went to pre-fundraiser donors, 5% went to initial donors, 10% went to the Tendermint team and 10% went to the ICF.  Hence the initial distribution was simple, fair and balanced.  The ATOM inflation rate of roughly 7% is allocated to the 100+ validators who secure the network.  The goal of the network is to provide enough inflation rewards to validators to incentivize 60% of the ATOMs in circulation to be staked with the validators.

In March 2019, the Tendermint team officially launched its mainnet Cosmos Hub.  In December Cosmos 3 was launched to add governance on the hub to enable stakeholders to vote on network parameters such as the inflation rate and spend funds in the governance pool. 

The next big upgrade called Stargate is scheduled before year end.  The main feature will be the inter-blockchain communication protocol that was the basis for the ‘Internet of blockchains’ idea first proposed in the whitepaper.  Other upgrades include a migration to Protobuf to increase blockchain performance and accelerate frontend development, State Sync that allows nodes to sync in minutes rather than days, full-featured light clients, and a chain upgrade module that allows nodes to update chain software in minutes.

In the latest ICF update, they reported that Nomic.io is building a Rust SDK on Tendermint called Orga, Althea is working on a peg zone with Ethereum for ERC20 tokens, the ICF is funding the next iteration of the PANIC validator monitoring tool, and ixo and Persistence one was formed a NFT and Metadata working group to build an NFT module.

Technology

The foundation of Cosmos technology is the Tendermint Core software that integrates the consensus algorithm and the inter-blockchain communication (IBC) feature that connects blockchains together.   The Cosmos SDK is used to build smart contract applications on the main Cosmos blockchain.  There is also a middle-layer called the Application Blockchain Interface (ABCI) that allows developers to use any programming language and consensus mechanism to interact with the Tendermint Core.  Other blockchains platforms using Tendermint Core can either develop their own smart contract layer or use the Cosmos SDK.  

Network Architecture

The Cosmos blockchain ecosystem will consist of zones of different blockchain ecosystems that are connected to hubs using the Tendermint Core software that connects these zones and hubs together.  The initial Cosmos hub will connect with other hubs that have their own set of zones and governance mechanisms.  Currently IRISnet, Binance and Kava are three other hubs in the ecosystem.  Some zones will be for 1) networks that use Tendermint Core software and the Cosmos SDK 2) private or enterprise networks 3) other blockchains like Bitcoin or Ethereum that only use Tendermint Core to connect to the Cosmos Hub.  Peg zones are zones that attempt to achieve interoperability with blockchains with different consensus mechanisms and finality requirements.  PoW chains like Bitcoin for example have probabilistic finality so it is more difficult for Tendermint Core to interoperate with Bitcoin than with other Tendermint-based blockchains.  One peg zone implementation Nomic uses a Bitcoin sidechain to hold Bitcoin reserves in a multisig address.  A zone can also be a network like Ethermint, a ‘spoon’ of Ethereum that is similar to Avalanche’s Athereum, that will allow Ethereum developers and users to receive new ETH tokens on Cosmos 1:1 for every ETH token they have so they can try out or switch to the Cosmos platform and technology. A module on the Cosmos SDK enables developers to access the Ethereum virtual machine (EVM) to execute their smart contracts.  

Consensus

The core technology of Cosmos is the Tendermint consensus algorithm that enables fast finality and scalability.  Jae was one of the first blockchain architects to base the consensus algorithm using classical BFT research.  He proposed a practical BFT consensus algorithm based on a research paper by Dwork, Lynch, Stockmeyer in 1988 under partially synchronous communications.  Kwon also introduced a slashing or bonding system that punishes bad behavior in nodes and where the system could quantify it’s security and could be intrinsically proven to be more costly to behave dishonestly.  This quality is analogous to how security is measured based on the value of Bitcoin’s proof of work over time.  Instead of the cost of  work however, the cost of the bonded stake at risk is the economic measure of the security of the system.  The consensus is based on ensuring that at least ⅔ of all nodes are honest and nodes that misbehave would lose stake.  Cosmos also achieves fast finality under 3 seconds and there are currently over 100 validators securing the network.

Community

The grant funding from the Interchain Foundation (ICF) works similar to the Ethereum Foundation.  The Interchain Foundation has an open and public application process and each quarter, developer and community members apply for funding.  In the beginning of the year, Informal Systems spun-off from the ICF as an R&D company and a new organization Interchain GmbH was formed from former employees of Tendermint after some political turmoil when Jae Kwon decided to focus on a personal project called Virgo.  Informal systems is focusing on research for formal verification and blockchain infrastructure and is led by Arianne Flemming, Ethan Buchmann and Zarko Milosevic.  As of mid-2020, the ICF had roughly $103 million in assets, 47% being ATOM tokens, 66% in crypto and the rest in cash and public securities.  ICF committed $14.9 million in grants for Q1 and Q2 in 2020.  36 of 71 grant applications were approved.  $9.5 million was spent on research, $3.2 million was for product development, and $2.1 million went to the community and social good.  The main recipients of the grants include: Regen Network, Informal Systems, All in Bits, EPFL Lausanne, University Lagano, Interchain GmbH, Agoric, Iqlusion, Lunie, Confio, Chainapsis. 

Projects

Many of the top Cosmos Projects are listed on Cosmonauts World.  (Note: Project market caps as of 9/20/20)

Binance Chain – is the top cryptocurrency exchange company in the world. Its decentralized exchange uses Tendermint and the Cosmos SDK.  Although the Binance DEX has not gained very much traction so far, its presence and support for Cosmos technology is strong validation of the technology.

Terra ($135 million market cap) – a South Korean based mobile payments platform has a presence in South Korea, Mongolia, Singapore and plans to expand to Thailand, Taiwan and more countries in Asia.   It has 1.8 million users and has processed $250 million in payments.

Aragon ($132 million market cap) – a longtime Ethereum project that helps communities organize with decentralized autonomous organizations (DAO) and with a dispute resolution system.  

IRISnet ($48 million market cap) – provides a decentralized service layer on Cosmos with the goal of helping to accelerate both consumer and enterprise business applications using Cosmos technology.  It also provides interoperability at the service layers of  various Cosmos blockchains. 

Akash – developed Decloud, a decentralized cloud computing marketplace

e-Money – a fiat-backed stablecoin focused for global payments

Regen Network – builds open tools that facilitate ecological regeneration

Kava – is a DeFi hub for the Cosmos ecosystem

Microtick – is a decentralized oracle service 

IOV – The IOV Name Service provides a human-readable address instead of a blockchain address. Starname is a universal username to receive any kind of crypto-currencies or to log in to blockchain applications in a seamless way. 

Agoric – supports the development of secure smart contracts and market institutions across many different scales, from large public blockchains to small two-party contracts.  

Althea – uses the Cosmos hub for their decentralized Internet Service Provider (ISP) network that allows users to provide routers in a local area to provide internet bandwidth and earn money.

Conclusion

Cosmos has designed and developed a robust consensus and ecosystem architecture at a steady pace since its token sale in 2017 and since Tendermint started in 2014.  Its consensus system is highly regarded and less complex than Polkadot or Ethereum 2.  It will be important to monitor the level of adoption after the inter-blockchain protocol feature is added in the next Stargate upgrade.   The key to success is to have as many projects adopt Tendermint Core software to grow a rich ecosystem of interconnected projects.  The Cosmos ecosystem should allow more sovereignty and independence to each blockchain zone that is within it, but  it will be interesting to see what amount of value the Cosmos hub will derive as the main hub.  Binance is a powerhouse and could eventually dominate as the central hub in the Cosmos ecosystem because it currently has the largest cryptocurrency user base.  Ultimately with all blockchain networks, beyond cryptocurrency users, mainstream user adoption is the key driver of success and the technology must eventually be ready and usable for tens of millions of users. 

If you live in the US or Europe you can buy ATOM on Coinbase, a reputable Silicon Valley based firm backed by major venture capital companies:

>>  Buy Cosmos ATOM from Coinbase here  <<

You can also use Coinbase to buy if you’re from: Canada, Mexico, Australia, Chile, Singapore

You can use another reputable exchange Binance almost anywhere in the world outside the US.