Cosmos (ATOM) is a network that consists of independent blockchains. The network is completely decentralized and is designed to facilitate communication between different blockchain platforms and increase their scalability.
Table of contents
- Who Created Cosmos?
- How Does Cosmos Work?
- What Problems Does Cosmos Solve?
- Purpose and Utility
- The Future of Cosmos
Cosmos is often called the “Internet of blockchains”. It works to create a more connected and efficient blockchain ecosystem. While the majority of blockchains operate in isolation, Cosmos provides infrastructure that enables their interaction. With it, it addresses such key limitations as scalability, usability, and interoperability.
Cosmos can support many sovereign blockchains and ensure that they can communicate and transfer assets among themselves. The Inter-Blockchain Communication (IBC) protocol is the main component that allows this communication. This innovation makes Cosmos one of the most advanced blockchain projects.
Who Created Cosmos?
Cosmos was founded by Jae Kwon and Ethan Buchman. They introduced the concept in 2016 under the umbrella of Tendermint Inc. The project was developed by the Interchain Foundation (ICF), a Swiss non-profit organization that works on the advancement of blockchain interoperability. The Cosmos network officially launched in March 2019.
Jae Kwon, a computer scientist, played an important role in developing Tendermint, the consensus mechanism that powers Cosmos. Ethan Buchman co-authored the Tendermint whitepaper and co-founded Cosmos. Tendermint Inc., now known as Ignite, still plays an important role in developing Cosmos-related technology.
How Does Cosmos Work?
Cosmos is decentralized. It consists of many interconnected blockchains. Its key components are the following.
Cosmos Hub and Ecosystem
The Cosmos Hub is the central blockchain within the Cosmos network. It is responsible for interoperability among various independent blockchains (zones). Each blockchain operates independently but can exchange data and assets through the Cosmos Hub. This is how cross-chain communication is enabled.
The Cosmos Hub performs not only the function of a blockchain. It is also the main ledger that coordinates inter-chain transfers and is responsible for security mechanisms.
Now, the Cosmos ecosystem includes numerous active blockchains, such as Terra, Osmosis, Juno, and Kava. Each blockchain uses the Cosmos technology for their own applications and smart contracts. The IBC protocol has already enabled over 100 million cross-chain transactions, it demonstrates the efficiency of the Cosmos architecture.
Tendermint and Its Role in Cosmos
Tendermint is the consensus engine that powers Cosmos. It provides a Byzantine Fault Tolerant (BFT) consensus mechanism that allows to ensure the network security and efficiency.
Tendermint allows developers to build blockchains without a need to create a consensus layer from scratch. This reduces development time.
Tendermint enables instant finality. It means that transactions are confirmed almost immediately, as soon as the network nodes validate them. This makes Cosmos one of the fastest blockchain networks.
Tendermint's consensus model also enhances security. Malicious actors cannot compromise the network unless they control a significant portion of the staked ATOM tokens. This structure helps maintain decentralization and provide high-speed transactions.
Proof-of-Stake (PoS) Consensus Mechanism
Cosmos utilizes a Proof-of-Stake (PoS) consensus model. Validators stake ATOM tokens and secure the network with them. Validators propose on and validate new blocks. In return, they earn rewards.
Validators are selected based on the number of ATOM tokens they stake. ATOM holders can also delegate their tokens and with it, contribute to the network security and earn a share of a validator’s rewards.
Cosmos SDK
Cosmos SDK is a modular framework. It allows developers to create custom blockchains with built-in interoperability. The SDK provides pre-built modules. With it, it not only simplifies the blockchain development but allows developers with different expertise levels to launch projects within the Cosmos ecosystem easier.
The main projects that use the Cosmos SDK are Binance Chain and Crypto.com Chain.
What Problems Does Cosmos Solve?
Cosmos helps to solve the following issues.
Blockchain Interoperability
Most blockchains operate independently, and it makes cross-chain communication difficult. Cosmos enables seamless interaction between different blockchain networks. It allows for assets transfer and data sharing across blockchains.
For example, a decentralized application (dApp) that runs on the Cosmos network can interact with another blockchain, such as Ethereum. To do so, it uses bridges and IBC connections. This interoperability is very important for DeFi applications, NFT marketplaces, and other decentralized ecosystems and networks.
Scalability and Transaction Speed
Many blockchains suffer from scalability issues. Low scalability means slow transaction processing and high fees.
Cosmos solves these issues. It enables multiple parallel blockchains to operate together. This way, Cosmos reduces congestion and increases the transaction processing speed.
The network can process thousands of transactions per second. It is much higher than traditional blockchain networks can do.
Decentralization and Security
Cosmos allows different blockchains to operate with their own governance models. With it, Cosmos enhances decentralization because each blockchain maintains its own validators, and this is why no single entity can control the entire network.
The ATOM Token: Its Purpose and Utility
ATOM is the native token of the Cosmos network. It performs many roles in the ecosystem.
Functions of ATOM in Cosmos
ATOM is used for staking, securing the network, paying transaction fees, and participating in governance decisions. It incentivizes network validators because rewards are also paid in ATOM.
Staking ATOM and Passive Income
Holders of ATOM tokens can stake their asset and become validators. They can also delegate their ATOM tokens to existing validators and get a share of rewards based on the number of tokens they’ve delegated. This is how ATOM holders can get passive income.
Considering that the majority of ATOM’s circulating supply is staked, it is possible to see how strong the community participation is in the project.
Governance Through ATOM
ATOM holders not only can stake the token. They can participate in the network governance. They can vote on network upgrades, protocol changes, and other proposals.
This ensures that the community can participate in the project development. For now, this participation has impacted the development of the project a lot.
The Future of Cosmos
Cosmos is a very promising project. Its main future developments are the following.
Ecosystem Growth
More new blockchains are integrating with Cosmos. This increases not only the network interoperability but also its use cases.
Market Prospects for ATOM
ATOM plays an important role in the Cosmos ecosystem. A lot of projects join Cosmos, and with it the value of ATOM will be growing.
Interaction with Other Blockchains
Cosmos is working towards broader integration with major blockchain networks such as Ethereum and Bitcoin. It develops new bridges. It will further boost the growth of the entire Cosmos ecosystem and attract new projects.