Cosmos Network — Quick Guide & Overview


Mar 16, 2021

5 min read

Cosmos Network — Quick Guide & Overview

Hi Readers👩‍💻,

Cosmos is an inter-chain ecosystem where blockchains can scale and interoperate with each other instead of the one chain rule them all strategy adopted by many protocols. More than a simple product or blockchain, Cosmos is a whole ecosystem of tools to build interoperable application-specific chains, among which the Cosmos Software Development Kit (SDK), Tendermint, the Inter-Blockchain Communication protocol (IBC), Cosmos Hub, are the main components.

  • Cosmos SDK: A developer-friendly framework making it easy for people to write their application-specific blockchain.
  • Tendermint: BFT consensus protocol and its software implementation named Tendermint Core. For more information on Tendermint, read our full article here.
  • IBC: Sidechain protocol enabling blockchains to communicate with each other. IBC was released with the launch of the Stargate upgrade on February 18th 2021. The launch of Stargate completes the original roadmap laid out in the Cosmos Whitepaper. With IBC, there are 200+ projects already building on the Cosmos SDK, representing $40bn+, that will be able to connect with each other.
  • Cosmos Hub: the name of one of the blockchains connected to the ecosystem, this one being built by the Cosmos team, keeps a record of the total number of tokens in each zone. It is different from Cosmos Network, also called Cosmos, which designates the whole ecosystem.

Key Characteristics

Cosmos’ vision is to make it easy for developers to build blockchains and break the barriers between blockchains by allowing them to transact with each other. The end goal is to create an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way. If you wish to know more about this, you can also check the intro guide made by the Cosmos team, which is pretty holistic.

Most importantly, Cosmos solves some of the critical challenges that are currently present within the blockchain industry:

  • Scalability: Tendermint is a BFT consensus protocol that can have a block time on the order of 1 second and handle up to thousands of transactions per second, allowing blockchain applications to scale to millions of users as having several and specialized chains interacting efficiently through IBC. In case the propagation time increases suddenly, Tendermint can adapt and just increase the block time, which allows pushing the block time as low as possible.
  • Interoperability: The connection between blockchains/hubs is achieved through IBC protocol, a side chain protocol enabling blockchains to communicate with each other. IBC is enabled via the Stargate upgrade. To read more about interoperability, find our full article here.
  • Governance: Within the Cosmos ecosystem, each blockchain maintains its sovereignty and set of rules, making it optimal for various use cases and enabling the economic integration of different application-specific blockchain without political trouble. Moreover, Cosmos Hub itself is governed by the ATOM token holders, who benefit from voting rights regarding protocol amendments.
  • Usability: Tendermint Core allows developers to focus on application development instead of the complex underlying protocol, saving hundreds of hours of development time: developers can quickly develop an application-specific blockchain. Not only do developers not have to write a consensus or protocol by themselves, but they can also program with the language of their choice and build both public and private blockchains. The Cosmos SDK modularity, a framework to code your blockchain, also allows us to port any existing blockchain in Golang on top of Cosmos; Ethermint is, for example, porting the Ethereum Virtual Machine and its tools (Truffle, MetaMask). With tools such as Starport, anybody can create its blockchain effortlessly!
  • Security: Tendermint most notably offers instant-finality: users can be sure their transactions are finalized as soon as a block is created. As long as at least two-thirds of the validators are honest, a client can trust any header that is signed by a known validator set, forks are not created, and malicious validators can be somehow punished. Cosmos SDK builds on top of the BFT consensus algorithm Tendermint.
  • Bonded Proof-of-Stake (BPoS): The state of the Cosmos Hub, as well as one of your future application-specific chains, can be maintained through BPoS, a variant of Proof-of-Stake where token holders can earn additional tokens based on the size of their stake. In return for securing the network, validators and delegators will be able to earn an interest rate. Critical advantages of BPoS include energy-efficiency, automatic rewards, and the fact that staking ratios are not required for validators. We’ve written an article about the variants of PoS if you’d like to know more. In BPoS, it is essential to note that in case of safety or liveness fault, a portion of the validators’ and delegators’ stake will be slashed: carefully choose your validator.

At Stakin, we would be more than happy to help you earn interest in your ATOM tokens and shed light on some of your questions. We’ve been running nodes for most of the Cosmos ecosystem, on many testnets and mainnets, including Cosmos, Iris, Terra, Regen, Akash, Band Protocol and more. Our Cosmos validator address is: cosmos1fhr7e04ct0zslmkzqt9smakg3sxrdve6etv27e

The Cosmos Native Asset

Cosmos’ native asset is called $ATOM and has a total supply of 268,253,961 ATOM, with at the time of writing a market cap of 〜$6bn according to Furthermore, around 66% of all ATOMs are staked as of the 17th of Feb.

Inflation: Cosmos Hub has a multi-token model with a hyper-inflationary staking token, which is the ATOM ranging from 7% to 20%. The fewer ATOMs are staked, the more hyper-inflationary Cosmos becomes. With 0% of the ATOMs staked, Cosmos Hub will have a 20% inflation rate. With 67% of the ATOMs staked, the inflation rate drops to 7% and just remains constant for the rest.

You can acquire ATOM by buying them on an exchange such as Binance, Kraken, or directly in Atomic Wallet. Finally, if you wonder which wallet to use for staking/delegating your $ATOM, have a look at a few of our favorites:

Cosmos DeFi Space

When we talk about DeFi, many automatically think of Ethereum. However, when it comes to DeFi, Cosmos is presenting itself as a fascinating option. What makes Cosmos so intriguing for DeFi is that it has the needed infrastructure. Many of the well-known names in DeFi are connected to Cosmos, such as Kava’s credit market, Terra, and its native stablecoin and Mirror trading platform. Via Band Protocol, off-chain data feeds are realized, which seems to be only the start for DeFi in the Cosmos Ecosystem.

The recent creation of the Althea Bridge: Peggy and its evolution Gravity have made it possible for users to transfer and connect to Ethereum quickly. And with the Cosmos’ Inter-Blockchain Communication, the options seem endless. For a full article on Cosmos DeFi, please click here.

  • For more information about Peggy and Gravity Bridges, click here.

The Cosmos Ecosystem

Cosmos is working towards becoming the “Internet of Blockchains”. Over 200 different assets are connected in the Cosmos Ecosystem, from DApps to digital assets to entire blockchains, covering a total value of over $40 Billion and growing.

And that’s not so crazy because there is a lot of cool stuff to be built on top of Cosmos; you can, for example, focus on building your application-specific chain, but also enhance the current Cosmos ecosystem with modules such as Oracles, Prediction Markets, DEX, Stable coins, and Atomic Swaps.

Just some projects connected to Cosmos are:

  1. Binance Smart Chain: powering the Binance DEX and offering an alternative for issuing and exchanging digital assets
  2. Regen Network: ecological monitoring platform
  3. e-Money Protocol: The e-Money Protocol is the leading European provider of currency-backed stable coins.
  4. The Band Protocol is a decentralized data oracle for Web 3.0 applications.

For a full overview of all DApps and Blockchains on the Cosmos Ecosystem, please read our article here or visit the Cosmos Network website.

If you’re interested in building something on Cosmos yourself, you can follow the masterclass here.

DISCLAIMER: This is not financial advice. Staking and cryptocurrencies investment involves a high degree of risk, and there is always the possibility of loss, including the loss of all staked digital assets. Additionally, delegators are at risk of slashing in security or liveness faults on some PoS protocols. We advise you to DYOR before choosing a validator.

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