The decentralized nature of blockchains changed how information is secured, validated and stored. Ever since Bitcoin introduced blockchain technology to the world in 2009, countless different projects and independent blockchains have been created, spurring growth and development in the novel sector.
However, despite how revolutionary they are, blockchains have a problem with communicating with other blockchains which makes interoperability impossible.
Fortunately, Cosmos aims to be the solution to this problem by being the ‘Internet of Blockchains’. Find out more about this groundbreaking project and how it works here at BTC Post.
What is Cosmos?
Simply put, Cosmos is a decentralized network of blockchains that can communicate with one another. It solves the long-time problems of scalability, usability and interoperability within the blockchain community by using a proof-of-stake algorithm, providing developers all the things they need in building blockchains and utilizing their own inter-blockchain communication protocol.
Jae Kwon started building the code for Cosmos in 2014 but it wasn’t until 2017 that Cosmos officially launched. This came shortly after Interchain Foundation, a Swiss non-profit foundation that funds blockchain projects, contracted Kwon’s for-profit company, Tendermint. Inc that is also known as All in Bits Inc, to continue developing the project.
Running with the Cosmos ecosystem is its native coin called ATOM. It allows members of the network to vote, pay for transaction fees and generate profit by staking and validating transactions. Validators receive ATOMs as a reward.
Problems solved by Cosmos
To maintain the security of a decentralized network, a consensus protocol is used. Bitcoin uses a proof-of-work protocol in securing transactions. This model requires validators to compete with each other to solve the algorithmic problem first. Whoever solves the problem first receives the block reward.
This painstakingly slow framework proved to be unsustainable and unscalable through time. To ensure that the blockchain remains invulnerable to hacks, the algorithmic problems become more complex, resulting in longer validation. As a result, the network can only validate a few transactions per second.
Bitcoin lags in this aspect with only an average of 7 transactions per second. Ethereum improved this framework with 15 transactions per second using a proof-of-work protocol that requires users to stake their coins if they want to be chosen as a validator.
Cosmos, on the other hand, solves the problem of scalability by utilizing the proof-of-stake consensus mechanism called ‘Byzantine Fault-Tolerance’ (BFT). Also referred to as Tendermint BFT, this mechanism guarantees the network’s safety against malicious operators. It allows faster transfer of transactions and consensus-related messages within the Cosmos network.
Not all developers are properly equipped to create blockchain applications because of its complex process. Additionally, blockchains require a different kind of programming language which makes them exclusive to a certain demographic of developers.
As a result, they often turn to platforms for decentralized applications (dApps) such as Ethereum where they can build their own dApps according to the rules of the network.
This takes away sovereignty from the developers since they are merely ‘renting’ space in the Ethereum network. If ever the governance of Ethereum executes changes in the network, they will be subject to them whether they like it or not.
To make blockchain creation more accessible to developers, Cosmos created Cosmos SDK or Software Development Kit. This second layer on the Cosmos blockchain translates different programming languages commonly used by developers such as Java and C++ into a language the blockchain understands. As a result, developers won’t have to learn whatever language the blockchain can understand.
With Cosmos SDK, developers can build not just decentralized applications but blockchains with their own governance structure consensus protocol and set of validators.
Communication has been a long-standing issue in the crypto space and it’s mainly because of each blockchain’s consensus algorithms. There’s no way for one blockchain to connect with another and perform inter-blockchain transactions without third-party applications.
Cosmos solves this problem by introducing their own inter-blockchain communication protocol (IBC) used in a specialized blockchain called ‘Cosmos Hub’. This acts as the central point each blockchain connects to through an IBC, allowing them to transact with other blockchains connected to the hub.
Cosmos can also interact with other external blockchains not made in its own network through the ‘Peg Zone’. This means you can transfer coins such as BTC, ETH and ADA to another blockchain regardless of their consensus protocol.
Peg Zone serves as the bridge between all independent external blockchains. It doesn’t matter if the blockchain utilizes a proof-of-work protocol or a proof-of-stake mechanism, it can still connect to the hub through the Peg Zone and make itself accessible to other blockchains in the Cosmos network.
ATOMs: The building blocks of Cosmos
Unlike Bitcoin, ATOM does not have a maximum supply. Newly minted coins are released to the market whenever a validated transaction is uploaded on the blockchain. Currently, ATOM trades at US$22 and sits at the 17th spot with a market capitalization of over US$4 billion. Over 210 million ATOM circulates the market as of date.
As one of the most promising crypto projects today, the coin is available in the largest cryptocurrency exchanges worldwide such as Binance, Huobi Global, HBTc and OKEx.
What can you do with ATOMs?
If you’re a member of the Cosmos network, you can stake your coins and become a validator to receive more ATOM rewards. If you prefer a more laid back approach, you can also delegate your coins to a validator instead of running your own validating software.
Through staking and validation, you receive the entire block reward for yourself, and if you choose to delegate your tokens, you earn a share of the validator’s block rewards.
The future of Cosmos
Cosmos opened the door to endless possibilities in the world of crypto and blockchain technology. The project is still in its early stages but with continuous development, the world can expect a brighter future with Cosmos.
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