Introduction to the Cosmos network and ecosystem
Designed to connect a multitude of autonomous blockchains, Cosmos often describes itself as “the internet of blockchains". It aims to solve issues related to scalability, usability, and interoperability, and is currently supported by the Interchain Foundation.
But how does Cosmos work and what is the Cosmos ecosystem exactly?
Read this article to get a high-level introduction, understand its structure and core elements, and learn more about some of its notable projects.
What is the Cosmos Ecosystem?
The Cosmos ecosystem is a decentralized and interoperable network of independent blockchains, applications, and services. It was officially introduced in 2016, with the publishing of the Cosmos whitepaper and the launch of the Interchain Foundation.
The Cosmos ecosystem includes all the blockchains built using the Cosmos software development kit (SDK). At the core of the ecosystem is the Cosmos network, which is governed by the ATOM token. Notable projects include Binance Chain and Crypto.org, as well as recently-launched protocols like Axelar and Agoric, which Finoa is supporting both as a custodian and as a staking validator.
Cosmos is home to over 260 apps and services that operate independently and collaboratively to build the value of the ecosystem. In the next sections, we’ll explain the building blocks of Cosmos.
The Tendermint consensus algorithm
Tendermint is a Byzantine Fault Tolerant (BFT) system that ensures the secure and consistent replication of an application on multiple machines. BFT refers to the system’s resistance to one of the problems of distributed systems named “The Byzantine General’s Problem.”
Tendermint allows consensus to be reached when at least two-thirds of the participating nodes don’t fail in arbitrary ways. It also provides instant finality, which means that once a transaction is included in a block and added to the chain, it’s not necessary to wait for a confirmation for it to be considered valid.
Tendermint is divided into two main components:
- Tendermint Core, the blockchain consensus engine that guarantees that transactions are recorded in the same order on every machine
- the Application Blockchain Interface (ABCI), which supports state machines written in any programming language, making it easier for blockchains to be built using Tendermint as their consensus layer.
The IBC protocol and cross-chain communication
The Inter-Blockchain Communication Protocol is an end-to-end software protocol that aims to solve cross-chain communication by becoming the standardized interoperability solution for blockchains.
IBC is very important for communication between applications within the Cosmos Network. Since most of these applications run on their own blockchains and validators, IBC allows them to interact with each other securely. IBC transfers data through dedicated channels, meaning that blockchains don’t need to communicate directly with each other, and can be used with various blockchains or state machines.
Custom development via the Cosmos SDK
The purpose of the Cosmos SDK is to help developers create applications on top of Tendermint.
The SDK’s framework is open-source and provides composable modules, which makes it easy for developers to build their own custom and interoperable blockchains. It does not only support the creation of Proof-of-Stake blockchains but also Proof-of-Authority. Blockchains built with an SDK such as that of Cosmos are commonly called “application-specific blockchains”.
The SDK is a key component that makes Cosmos a developer-friendly ecosystem. Multiple applications have already been built using this kit, such as the Cosmos hub, Terra, and the Binance Chain.
The Cosmos Hub
What are hubs and zones?
Cosmos was the first blockchain to use the Hub & Spoke architecture. Its design includes two classes of blockchains:
- Hubs, which serve as routers for zones and can also be connected to other hubs
- Zones, which are connected to a hub. Zones only need to establish a single connection with a Hub in order to be interoperable with all of the other zones.
Anyone can create a hub or a zone on the Cosmos ecosystem, and blockchains are free to accept or refuse connections between each other.
The Cosmos Hub
The most important blockchain of the ecosystem is the Cosmos Hub.
Each new independent blockchain that is created in the ecosystem is connected to it. The Cosmos hub securely interconnects every blockchain and keeps a record of its state. It also holds Cosmos’ main token: ATOM.
To understand what’s next in the development of the Cosmos Hub, you can take a look at the Cosmos Hub Roadmap, which describes the updates planned for the year. The document is maintained by the Interchain Cosmos Hub team.
Cosmos ecosystem wallets
The Cosmos ecosystem is supported by more than 30 wallets. Finoa recommends using the open-source Keplr wallet which you can use both on your phone and on a computer (via the web app or browser extension).
Other Cosmos wallets include:
- Hyper Pay
- Rainbow Wallet
Cosmos tokens overview
Let's have a look at some of the most prominent Cosmos tokens and projects.
ATOM: the token of the Cosmos Hub
The Cosmos ecosystem has various tokens, from its different networks. ATOM is the native token of the Cosmos Hub. Using ATOM, token holders are able to:
- Pay for transaction fees: used as a spam prevention mechanism.
- Stake and validate blocks: the Cosmos hub is a PoS network. To stake their tokens and secure the network, users can delegate them to a validator, or run their own validator node. In order to be staked, ATOM tokens have to be locked for 21 days.
- Govern the network: ATOM holders can vote on their proposals using their staked tokens. They can also submit their own proposals, and discuss various topics in the Cosmos Hub governance forum.
Top Cosmos ecosystem coins by market cap
Among the most commercially successful protocols in the Cosmos ecosystem, there are 11 other coins besides Cosmos Network's ATOM that have broken past $200M in market capitalization as of the time of writing. Here is a list of those coins ordered by market cap, with brief descriptions of what each of the respective protocols does:
- Cronos (CRO): an open-source, EVM-compatible chain that enables rapid porting of apps and smart contracts
- Luna Classic (LUNC): the legacy token of the Terra blockchain that collapsed in May 2021
- Osmosis (OSMO): the most widely used Cosmos DEX, is a fully customizable automated market maker
- OKC (OKT): an EVM-compatible smart contract platform optimized for metaverse dApp use cases
- THORChain (RUNE): a decentralized network allowing cross-chain asset swap
- Kava (KAVA): a DeFi protocol based on both Cosmos and Ethereum that enables asset lending and borrowing
- Fetch.ai (FET): an open-source blockchain-based platform that uses “software agents” to facilitate access to datasets for AI use cases
- Injective (INJ): a protocol that enables investors to access decentralized finance markets
- Kadena (KDA): a public Proof-of-Work blockchain that aims to offer high scalability and developer-friendliness
- Band Protocol (BAND): a cross-chain data oracle connecting blockchains with real-world data
- Ankr Network (ANKR): a decentralized Web3 infrastructure provider connecting users to nodes via scalable remote procedure calls (RPC)
Finoa Consensus Services, the Finoa subsidiary dedicated to building blockchain infrastructure, is a committed supporter of the Cosmos ecosystem. As a node operator for Injective, Axelar, and Agoric, FCS gives network participants the opportunity to earn staking rewards through token delegations to a trusted party. Finoa also supports the decentralized data lake KYVE Network, both as a custodian and in-custody staking provider for institutional investors.
With its standardized IBC protocol and the developer-friendly SDK, the Cosmos ecosystem is improving the way blockchains connect with each other and successfully working towards a multichain future.
Finoa is supporting institutional engagement with Cosmos through secure token custody and in-custody staking for the Axelar and Agoric tokens, as well as enabling network engagement through its public validators. To learn more about our services or get started with Cosmos, feel free to reach out to our team.