The Cosmos Ecosystem - Technology, Tokenomics, History

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Cryptocurrency
14 June 2023
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The Cosmos ecosystem is a decentralized network of independent blockchains. Its goal is to solve the interoperability problem. It was created under the leadership of Jae Kwon, who is also one of the founders of the Tendermint protocol.

A brief history of the Cosmos ecosystem

The beginning of Cosmos goes back to 2014. At that time, Jae Kwon began working on Tendermint, a consensus algorithm with Byzantine Fault Tolerance (BFT). The goal was to create a protocol that could support a wide range of applications and use cases, from payment systems to gaming platforms.

After developing Tendermint, Jae Kwon realized that it could be used as the basis for creating a new type of blockchain. In 2016, he founded Tendermint Inc. to develop the Cosmos ecosystem.

A few years later, in 2017, the company held an ICO to fund the development of the Cosmos ecosystem. The ICO was very successful and raised $17 million. With this funding, the Cosmos team was able to build the software and infrastructure needed to support the Cosmos network.

In March 2019, Cosmos Hub, the very first blockchain, went live. Since then, the ecosystem has grown significantly, with new blockchains joining the network and more and more applications being created based on it.

Cosmos ecosystem

Brief excursion

The Cosmos ecosystem is based on the "Tendermint" protocol, which is a BFT consensus algorithm. This means that it is designed to be fast, secure and scalable, making it ideal for use in a decentralized network.

The Cosmos ecosystem uses a unique architecture that separates the consensus layer from the application layer. This allows different blockchains to use different consensus algorithms while still being able to interact with each other.

The ecosystem uses a unique communication protocol called IBC (Inter-Blockchain Communication).

This protocol provides the ability for different blockchains to communicate and transfer data and assets, even if they use different consensus algorithms.

Cosmos: Funds and investments

The Cosmos ecosystem has raised more than $100 million in funding from private investors. Among the most significant investors are Paradigm, Bain Capital and 1confirmation.

  • After a successful 2017 ICO, Cosmos attracted significant investment from private investors.
  • The 2019 Series B, led by Paradigm, raised $55 million.
  • In 2020, the team raised $10 million in funding led by 1confirmation and with Bain Capital.
YouTube

Roadmap

  • 2014 - Tendermint, the consensus algorithm that powers Cosmos, is created.
  • 2016 - Jae Kwon founds Cosmos to create a blockchain network.
  • 2017 - Cosmos raises $17.3 million in an ICO.
  • 2018 - Cosmos Hub mainnet launched, allowing users to transfer and exchange assets between different blockchains using the Interblockchain Communication Protocol (IBC).
  • 2019 - Stargate update to improve the efficiency, security, and usability of Cosmos Hub. 
  • The Interchain Foundation, a Swiss non-profit organization, was created to develop the Cosmos ecosystem and related projects.
  • 2021 - Cosmos SDK 2.0 was released, providing improved tools for developing and customizing your own blockchains with the Cosmos SDK.
  • 2022 - Gravity DEX, a decentralized exchange that allows users to trade assets on different blockchains within the Cosmos ecosystem, is launched.
  • 2023 - The ecosystem continues to improve its interoperability with other blockchain ecosystems - Polkadot and Ethereum.
Cosmos

Social activity and community of the Cosmos ecosystem

The Cosmos ecosystem has an active community of developers, users, and investors. There are many popular social groups, twitter accounts, blogs, and other resources dedicated to the Cosmos ecosystem.

Among the most popular niche resources is Cosmos Forum, a community forum where programmers and users can discuss the network and its applications. The number of users is not very high, but the involvement is great: almost everyone who registers becomes a regular member.

There is also a Cosmos Telegram group and a Cosmos Reddit community with more than 76,000 members.

Additionally, there are many popular Twitter accounts and blogs dedicated to the Cosmos ecosystem. 

Among the most popular are the Cosmos Twitter account, which has more than 500,000 followers, and the Cosmos Blog, which is regularly updated with news and network updates.

Cosmos forum

Cosmos Basic Protocol

The main goal of Cosmos is to make blockchains scalable, interoperable and easily customizable. The Cosmos ecosystem is powered by the Tendermint Core protocol.

Tendermint Core is the fundamental part on which Cosmos is built. It is the engine that provides consensus in blockchain systems. One of the main advantages of Tendermint is its consensus algorithm, which is called "BFT (Byzantine Fault Tolerance) Consensus". Tendermint is the built-in default consensus mechanism. However, developers have the option to choose an alternative consensus mechanism if they decide that Tendermint is not suitable for their project.

Tendermint plays a key role in maintaining system security, processing transactions, and adding new blocks to the blockchain. A feature of Tendermint's consensus is that once a transaction is confirmed and included in a block, it becomes irreversible, meaning it cannot be undone or changed. In such a system, if a majority of nodes (two-thirds) agree on a particular block, it is added to the blockchain. This provides a high level of security.

In the Bitcoin blockchain, transaction security increases with the addition of each new block and most transactions are completed after only six confirmations.

Tendermint in turn provides instant finalization. As soon as a transaction is included in a block and the block is added to the blockchain, it is immediately considered finalized. This eliminates the need to wait for multiple confirmations and provides a high level of security and confidence that transactions cannot be canceled or modified once they have been confirmed.

Tendermint Core also stands out for its performance and scalability. In terms of performance, Tendermint Core is able to process a large number of transactions in a short period of time. This is achieved through its efficient consensus algorithm, which speeds up the process of transaction confirmation and block formation. As a result, blockchains running on Tendermint can process thousands of transactions per second, far exceeding the capabilities of many other blockchain platforms. This makes it ideal for building various types of blockchain projects.

In addition, Tendermint Core provides flexibility and extensibility for blockchain systems. With its modular architecture and ability to easily integrate with various applications and services, Tendermint-based blockchains can easily scale. This enables the creation of complex and feature-rich blockchain networks that can operate efficiently at both small and large scales.

Cosmos uses Tendermint not only for security and consensus, but also as a means to simplify the development process. Developers can focus on building apps and smart contracts without worrying about the blockchain infrastructure. This significantly lowers the threshold of entry for developers and fosters innovation.

Components of the Cosmos ecosystem

Cosmos HUB

Cosmos Hub is the centerpiece of the Cosmos ecosystem. The primary purpose of Cosmos Hub is to enable cross-blockchain communication. Cosmos Hub tracks the total number of tokens in each blockchain within the Cosmos ecosystem, allowing different blockchains to exchange tokens without the need for centralized exchange platforms.

This opens up the potential for complex ecosystems, where each blockchain can specialize in a specific function while maintaining deep integration with other chains in the Cosmos network. 
In addition, Cosmos Hub also plays an important role in securing the entire network. It utilizes a Proof-of-Stake (PoS) consensus mechanism where ATOM token holders can participate in the blockchain validation (staking) process, protecting the network and earning additional coins.

ATOM

ATOM is the native token of the Cosmos ecosystem and plays a central role in its operation and governance. This token is integrated into the core operation of the entire Cosmos network.

ATOM serves as a management tool in the Cosmos ecosystem. Token holders have a say in decisions on key issues concerning the future and development of the network. This includes protocol changes, upgrades, and other important changes. ATOM is also used to pay transaction fees.

IBC (Inter-Blockchain Communication) Protocol 

Cosmos: Funds and investments

The IBC (Inter-Blockchain Communication) Protocol is a key component of the Cosmos ecosystem designed to enable interoperability and data transfer between different blockchains.

The purpose of IBC is to allow different blockchains, even if they are built on different technologies and principles, to securely exchange data. It serves not only to send tokens, but also to exchange different types of data. This is why Cosmos can be used not only to create decentralized exchanges, but also for decentralized applications in areas such as marketing, logistics, etc. 
IBC also improves the scalability of blockchain networks, allowing them to distribute the load and process transactions more efficiently. As a result, networks connected through IBC can achieve higher throughput and better performance than is possible in traditional blockchains.

The main function of Cosmos Hub is to track the states of each individual zone in the ecosystem and keep them interconnected. This system utilizes the Tendermint algorithm to achieve consensus.
Cosmos Hub provides fast transaction confirmation (about 7 seconds), after which transactions become irreversible. In addition, the cost to execute a transaction on the network is approximately $0.01.

There are two main types of blockchains in the Cosmos ecosystem: Hubs and Zones, each of which plays a different role in ensuring the interoperability and scalability of the network.

Hubs: Hubs in the Cosmos ecosystem act as central hubs through which transactions between different zones flow. The best known example of a hub is the Cosmos Hub. It serves as a kind of communication and coordination center, supporting the exchange of data and tokens between different blockchains in the network. Hubs provide security and facilitate communication between zones, allowing them to focus on their unique functions and applications.

Zones: Zones are individual blockchains that connect to hubs. Each zone can be designed for a specific purpose and have its own architecture and rules. For example, a zone may be optimized for a specific type of transaction, smart contracts, or decentralized applications. Zones use the IBC protocol to communicate with hubs and other zones, exchanging tokens and data.

 

Zones are essentially blockchains that can quickly finalize transactions, while hubs function as the connecting elements that link these zones into a single network. Each zone is a blockchain that runs on the Tendermint consensus algorithm. 
Hubs, on the other hand, are technically similar to zones, but their key difference is their function as hubs that connect multiple blockchains. Hubs simplify and standardize communication between multiple zones, while zones can be customized and optimized for specific tasks or services, providing flexibility and innovation across a broad ecosystem.

This architecture allows Cosmos to support an extended network of decentralized and interoperable blockchains, each of which can specialize in specific functions while maintaining overall connectivity and security through hubs.

Cosmos SDK

Cosmos SDK

Cosmos SDK is the basic platform for blockchain development. It is a set of tools and libraries that allows developers to create blockchain applications with a high degree of modularity and flexibility.

Cosmos SDK is designed with ease of use and scalability in mind, making it accessible to developers of all skill levels.

One of the key features of the Cosmos SDK is its modularity. Developers can choose from available modules, develop their own, or modify them to meet the specific requirements of their blockchain. These modules cover a wide range of features including account management, token management, interblock communication and more. This allows for the creation of unique blockchains that can be specifically configured for specific applications or needs.

In addition to being modular, the Cosmos SDK is tightly integrated with Tendermint Core, providing blockchains built with it with high performance and security. Thanks to this integration, blockchains based on the Cosmos SDK can easily scale and achieve fast consensus.

TOP coins of the Cosmos ecosystem

Cosmos (Atom) – native token of the Cosmos ecosystem. The market capitalization of the asset is – $4,320,205,206. The token performs several key functions on the network. Firstly, it is used in the staking mechanism, where ATOM holders can delegate their tokens to validators to support the operation and security of the network, for which they receive rewards. Secondly, ATOM is used to pay transaction fees on the network, providing operational efficiency. ATOM is an important asset enabling user participation in the economics and governance of the Cosmos network.

Injective (INJ) is the primary governance and reward token of the decentralized exchange (DEX) Injective Protocol. The market capitalization of the asset is – $3,016,404,202. INJ token holders have the right to vote on various proposals regarding the development of the Injective protocol. Additionally, the token is used to pay transaction and trading fees on the platform. INJ is also used in the staking mechanism to ensure network security and participate in protocol governance.

Cronos (CRO) – native token of the Crypto.com exchange. The market capitalization of the asset is – $2,513,623,389. Crypto.com – an exchange that has become popular primarily because of its crypto cards. In addition, on it, like any other, you can store cryptocurrencies and trade. The CRO token is used primarily as a means to pay fees on the Crypto.com platform. It also serves as a tool for gaining access to certain benefits, such as preferential trading rates, deposit rewards, and discounts on cryptocurrency cards.

TOP coins of the Cosmos ecosystem

In addition, CRO can be staked on the platform, allowing users to earn interest and participate in the management of certain aspects of the ecosystem.

Kava (KAVA) is a utility token that is part of the Kava ecosystem, a decentralized platform specializing in lending. 
The market capitalization of the asset is $945,754,064.
The KAVA token is used to participate in the governance of the Kava platform, allowing holders to vote on proposals for changes to the protocol and system parameters. KAVA also serves to pay transaction fees on the Kava network. In addition, KAVA is used in the lending system on the platform, where it can be used as collateral to obtain loans in stableblocks.

Benefits of the Cosmos Ecosystem

  • Inter-Blockchain Communication (IBC): This feature allows different blockchains to communicate and exchange data and assets. This overcomes one of the main disadvantages of blockchain – isolation of individual networks. 
  • Scalability. Thanks to its modular structure and the use of Tendermint Core, blockchains in Cosmos can process a large number of transactions quickly and efficiently (10,000+ transactions per second). 
  • High degree of flexibility and customizability. Thanks to the Cosmos SDK, developers can create blockchains specific to their needs and applications. This, in turn, reduces technical barriers to new projects. 
  • Decentralized management. The Cosmos ecosystem gives the community the opportunity to directly participate in key decisions and development of the network.

Tokenomics

The ATOM token is a native Cosmos token. It is used to protect the network, incentivize validators, and pay for transactions. Validators are responsible for maintaining the network. They are rewarded for their work in the form of ATOM tokens. Users can also place their ATOMs to receive rewards and participate in management.

The total number of all ATOM tokens is 267,023,478 units. As of March 2023, there are over 90 million ATOM tokens in circulation and a market value of over $3.5 billion (as of March 2023). 

The Cosmos ecosystem has a management system that allows token holders to vote on proposals and changes to the network.

ATOM token

All ATOM tokens were initially generated in the genesis block and distributed to early investors. Following this, an inflation model was activated in the Cosmos ecosystem, designed to reward validators for their contribution to maintaining the network. The inflation rate on the network varies from 7% to 20%, depending on the total number of coins participating in staking. ATOM does not have a fixed maximum coin supply limit, but the issuance of new tokens is regulated by an inflation mechanism that adapts over time depending on the level of staking participation.

It is assumed that by 2030 the total number of ""mined"" ATOM coins will reach the initial supply size of 236,198,958 coins, and the number of validators in the Cosmos Hub network will increase to 300, which is just the same  will require more staking ATOM coins. However, if the inflationary mechanism does not change, the rapid increase in the number of new coins could put significant pressure on their value.

ATOM Staking

Model of total emission increase

ATOM Staking

One of ATOM's key functions is to participate in the Proof-of-Stake (PoS) consensus mechanism on Cosmos Hub. ATOM staking gives token holders the ability to participate in supporting the network and earning rewards. Steaking is a process by which ATOM token holders can "freeze" (steak) their tokens to maintain the security and stability of the network and earn rewards in return.

However, ATOM steaking for regular users occurs by delegating their tokens to validators.

When a user participates in steaking, they are actually delegating their ATOMs to validators - nodes in the network responsible for validating transactions and creating new blocks. Validators are selected based on the number of tokens frozen to support them, creating a system where more reliable and efficient validators receive more support.

Validators receive remuneration for their work, part of which is distributed among users who delegated their ATOMs to them. In this way, the participants of steaking receive passive income, the amount of which depends on the efficiency and reliability of the chosen validator. However, users are exposed to a certain risk: if the validator to which ATOMs have been delegated acts inappropriately or inefficiently, it may lead to a temporary loss of some of the frozen tokens. Therefore, choosing a reliable validator is key to the steaking process.

The coin delegation process is instantaneous, and users have the ability to change the validator they have delegated their coins to at any time. They can also distribute their coins among multiple validators, which helps reduce potential risks. The withdrawal process from steaking takes 21 days. 

ATOM steaking is also linked to participation in network management. Token holders who participate in token staking get a say in decisions regarding the future and development of the Cosmos network, such as protocol updates or changes to network rules.

Market Condition

The Cosmos ecosystem has experienced significant growth and development since its launch in 2019. The ATOM token has grown significantly in value: its value has increased by over 1,500% since launch. As of March 2023, the price of ATOM is around $12.

Some of the most popular projects built on Cosmos include Terra, Akash Network, and IRISnet. The ecosystem has also noted partnerships with other blockchain projects including Binance and Kava.

The future looks bright as there are many upcoming events and improvements planned for the network. The Stargate update, scheduled to launch in March 2023, will introduce new features and improvements to the Cosmos SDK. Gravity DEX, an autonomous decentralized exchange that will allow users to trade assets on different blockchains, is scheduled to launch in June 2023.

Competitive Analysis

Cosmos is often compared to Polkadot, Ethereum, Cardano and Avalanche. 

One of the main advantages of the Cosmos ecosystem is its focus on interoperability. The Cosmos SDK allows developers to create and connect their own blockchains that can interact with each other and seamlessly share data and assets. 

In comparison, some other ecosystems, such as Ethereum, have a more centralized approach to interoperability and require more effort to connect different blockchains.

Cosmos also places a strong emphasis on security and scalability. Tendermint's algorithm is designed to be secure and efficient. In comparison, some other ecosystems, such as Polkadot, are still working to improve their security and scalability.

Overall, while each of these ecosystems has its own strengths and weaknesses, the Cosmos ecosystem stands out for its focus on interoperability, decentralized control, security and scalability, and an active community.

blockchain Cosmos

Final thoughts from the Cryptology team on the Cosmos ecosystem

The Cosmos ecosystem is an innovative solution aimed at solving the problems of scalability and interoperability. Its key feature is the ability of different blockchains to communicate with each other via the IBC protocol. Thanks to this, developers have more opportunities to create complex and multifunctional decentralized applications. At the same time, Cosmos SDK and Tendermint Core provide developers with flexible and powerful tools to create customizable blockchains, allowing them to focus on innovation and application development instead of struggling with technical limitations.

Overall, Cosmos represents a promising ecosystem that can make a significant contribution to the development of blockchain technology. Cosmos has positioned itself as one of the leading players in this field, providing a powerful alternative to existing blockchain platforms. Cosmos' prospects seem bright, especially with continued innovation and development already on the horizon. We can only look forward to more positive news and achievements from this innovative and exciting project.

Frequently asked questions about the Cosmos ecosystem

What is the Cosmos ecosystem?

The Cosmos ecosystem is a blockchain platform that enables the creation and interoperability of various blockchains and applications called zones. Cosmos provides the infrastructure for scalable and interoperable blockchains.

How is Cosmos different from other blockchains such as Ethereum or Bitcoin?

Cosmos is different from Ethereum and Bitcoin in that it focuses on interoperability. It provides tools and protocols to create custom blockchains that can interact with each other and with other blockchains. This allows scalable and flexible applications to be built.

What are zones in the Cosmos ecosystem?

Zones are independent blockchains built on top of the Cosmos ecosystem. They can have their own rules and governance, but can also interact with other zones and with the main Cosmos blockchain, called Hub.

What token is used in the Cosmos ecosystem?

The main token in the Cosmos ecosystem is ATOM (Atom). It is used for network security, voting, and other purposes.
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