Author: Paul Veradittakit, Partner, Pantera Capital; Translation: Jinse Finance 0xxz

Traditional blockchain systems face a range of challenges that hinder their widespread adoption and scalability. One of the challenges is the lack of interoperability between different blockchain networks, making communication and data transfer complex and inefficient. Additionally, scalability has been a major hurdle, as blockchain design choices focus on security rather than scalability, resulting in slower communication and increased costs when the network is congested.

Cosmos introduces the interconnected blockchain paradigm as a solution to these challenges. It utilizes the Inter-Blockchain Communication (IBC) protocol to achieve seamless communication and secure asset transfer between different blockchains. Through a standardized inter-chain interoperability framework, Cosmos facilitates efficient cross-chain interactions and expands the possibilities and practicability of blockchain technology. Furthermore, Cosmos solves the scalability problem through its modular architecture and consensus algorithm. Developers can use the Cosmos Software Development Kit (SDK) to create application-specific blockchains for specific needs and goals, called “zones”. These zones can adopt different consensus mechanisms to achieve horizontal expansion and optimize performance. By enabling parallel processing across multiple zones, Cosmos significantly increases the transaction capacity and scalability of the network. The network also utilizes the Comet consensus algorithm, which provides fast block confirmation times, enhanced security and robustness against malicious attacks. This consensus algorithm provides a reliable foundation for interconnected blockchain networks, combining efficiency, determinism, and robustness.

Core: Cosmos SDK, IBC and Comet

The Cosmos SDK provides developers with the ability to create custom blockchains or zones to meet specific needs and goals. Leveraging the interoperability capabilities of Cosmos, these custom zones push the boundaries of interchain interaction. This remarkable feature is enhanced by the powerful Comet consensus algorithm, ensuring that the Cosmos network operates in terms of security and efficiency. In addition, IBC enables seamless communication between different chains.

Reasons why Cosmos is promising

**1. Interoperability: **The advantage of Cosmos is that it is committed to interoperability, making it easy to connect independent blockchains within the Cosmos network. This interoperability fosters groundbreaking cross-chain applications and collaborations, driving innovation and enhancing the utility of decentralized systems.

2. Scalability and performance: Cosmos solves scalability challenges by giving independent blockchains or “zones” the ability to customize their consensus mechanisms and scalability features. This approach allows for horizontal scaling by adding regions to accommodate increased transaction volumes. Therefore, the Cosmos ecosystem has excellent performance and scalability.

3. Autonomy: The Cosmos ecosystem provides the ideal platform for the creation of autonomous chains that prioritize individuals. By utilizing the basic elements provided by Cosmos, such as Cosmos SDK, IBC (Inter-Blockchain Communication) and Comet BFT consensus algorithm, developers can flexibly customize various aspects of the technology stack to enhance key aspects of the chain such as performance, throughput, security, etc. For example, Evmos-like EVM chains have been built using existing technology stacks. In addition, it is also possible to support chains running on different virtual machines (VMs), such as Move or SVM, by developing a dedicated application layer.

**4. Friendly development environment: **Cosmos provides a friendly environment for developers who want to enter the blockchain field. The Cosmos SDK (Software Development Kit) is a feature-rich platform for building decentralized applications (DApps). Utilizing the SDK’s modular framework, developers can create their own unique blockchains on the SDK, simplifying the development process. This streamlined approach allows developers to create custom chains from the Cosmos SDK, facilitating the adoption and growth of the blockchain ecosystem.

Cosmos App Chain

App Chain (Application Chain) is an important part of the Cosmos ecosystem, which represents specialized and application-specific blockchains that serve different use cases. Unlike traditional single blockchains, Cosmos adopts a modular approach, allowing developers to customize consensus, storage and network mechanisms through the Cosmos SDK to meet the specific requirements of their decentralized applications (DApps). This allows Lisk to have a level of autonomy, giving developers greater control over their applications and enhancing their ability to shape the user experience. In addition, the Cosmos application chain model provides attractive opportunities for revenue capture, enabling DApp creators to explore unique monetization strategies and promote sustainable growth on their respective chains.

In addition, the flexibility of the Cosmos application chain also includes the processing of Miner Extractable Value (MEV). By providing developers with the tools to design MEV strategies tailored to their individual needs, Cosmos encourages fair and transparent MEV extraction, promoting a fairer and more efficient ecosystem. In addition, the interconnectivity facilitated by the Inter-Blockchain Communication (IBC) protocol is a great advantage of the Cosmos application chain model. The protocol enables seamless communication and asset transfer between different application chains, making it possible to develop advanced cross-chain DeFi applications, expanding the possibilities of developers and users. All in all, within the Cosmos ecosystem, Lisk offers a promising avenue for the development of decentralized applications, providing support for autonomy, revenue opportunities, flexibility of MEV, and seamless interoperability to foster a vibrant and thriving blockchain ecosystem.

Interchain Security

Interchain Security is an innovative approach in the blockchain space to enhance the security and facilitate the smooth launch of new Cosmos chains. It involves “renting” economic security from an already established and secure Cosmos ecosystem such as the Cosmos Hub.

Key benefits of interchain security include:

1. Economic security leasing: In order to launch a new Cosmos chain, developers can take advantage of the security of Cosmos Hub or other security chains by locking a certain amount of the new chain’s native tokens as collateral. This staking process helps create a financial link between the new chain and the security chain.

**2. Cross-chain security: **With the economic security obtained through the inter-blockchain security mechanism, the new Cosmos chain is more resistant to attacks. It can rely on a large and diverse set of validators from a secure chain to protect its transactions and assets, mitigating the risk of security threats such as 51% attacks.

3. Decoupled blockchains: Each Cosmos chain operates independently, with its own governance, token economics, and use cases. However, through inter-blockchain communication protocols such as Inter-Blockchain Communication (IBC), they can securely exchange data and value, promoting interoperability and synergy within the Cosmos ecosystem.

By adopting interchain security mechanisms and cooperating within the Cosmos ecosystem, new blockchains can significantly lower the barrier to entry and gain immediate access to a well-tested security infrastructure. This fosters innovation and accelerates blockchain development, ushering in a new era of secure and connected decentralized applications.

Cosmos SDK

The Cosmos SDK is a flexible framework that simplifies the process of building application-specific blockchains by seamlessly integrating pre-built modules into applications. The module customization of the Cosmos SDK provides unprecedented flexibility, allowing developers to precisely customize these modules according to application requirements, providing broad possibilities for blockchain applications. As the Cosmos network grows, the SDK module ecosystem will thrive, providing developers with ever-expanding options and capabilities. In this dynamic environment, complex and highly specialized blockchain applications can be fostered, fostering innovation and driving the development of the Cosmos ecosystem.

The Cosmos SDK also prioritizes security through its security concept capabilities. These capabilities act as vigilant guardians, defining clear boundaries between modules and mitigating risks arising from malicious or accidental interactions. Created with protection, the Cosmos SDK is firmly committed to uncompromising security measures.

Inter-Blockchain Communication

The Inter-Blockchain Communication Protocol (IBC) is a protocol in the Cosmos ecosystem that facilitates secure decentralized communication across blockchains. It acts as a bridge to facilitate the transfer of data across blockchains in the Cosmos network. By using cryptographic proofs and consensus algorithms, IBC promotes the integrity and credibility of cross-chain transactions, maintains data confidentiality, and prevents tampering or unauthorized access. The protocol not only enhances blockchain interoperability, but also fosters collaboration and innovation by allowing project-based systems to be used on the network. With IBC, Cosmos has the potential to usher in a new era of blockchain connectivity, opening up new possibilities for decentralized applications, cross-chain asset transfers, and the creation of interconnected blockchain networks.

1. Tracking: Chain B continuously receives the block header of chain A, and vice versa. This allows each chain to keep track of the other chain’s validator set. Essentially, each chain runs a light client of the other chain.

2. Mortgage: When the IBC transfer is initialized, the tokens are locked (mortgaged).

3. Proof relay: Then, a proof is relayed from chain A to chain B, proving that the 10 tokens are mortgaged.

4. Validation: The proof of the block header from chain A is verified on chain B, and if valid, 10 credentials are created on chain B.

Cosmos environment

The active Cosmos ecosystem attracts diverse projects and influential partnerships. By leveraging the solid Cosmos foundation, these projects tap into a vast field of interoperability, potentially unleashing powerful network effects. This seamless cooperation and integration greatly enhances the overall ecosystem, driving the adoption of Cosmos as a superior blockchain solution and opening up new possibilities for the future.

The following are projects built on Cosmos:

Osmosis：

Osmosis is an innovative cryptocurrency project built in the Cosmos ecosystem, providing a DEX platform to provide liquidity. Driven by the Inter-Blockchain Communication (IBC) protocol, Osmosis enables seamless token exchange within the Cosmos network. This unique feature empowers users to access various asset and liquidity pools, facilitating an efficient and secure trading experience. By leveraging the interoperability and scalability features of Cosmos, Osmosis creates an inclusive and interconnected ecosystem that enhances liquidity and enables cross-chain collaboration. With its user-centric approach and focus on optimizing liquidity management, Osmosis brings new opportunities to decentralized finance (DeFi) players, allowing them to explore a wider universe of assets and maximize trading potential.

DyDx

Dydx is a decentralized cryptocurrency trading platform that stands out for its user-centric approach to trading digital assets. By giving users full control over their private keys and funds, Dydx removes the need to rely on centralized institutions, facilitating a more secure and transparent trading experience. As a platform based on the Cosmos chain, Cosmos is known for its scalability and modular architecture. Dydx utilizes the Cosmos SDK to achieve fast and efficient transactions, as well as seamless interoperability with other Cosmos-based applications. In addition to basic crypto-to-crypto trading, Dydx also offers margin trading and lending services, catering to both seasoned traders looking for strategic leverage and lenders looking to earn interest on idle assets. With multiple audits in place, Dydx presents a promising prospect on the Cosmos chain, sparking a revolution in the decentralized exchange space, changing the way traders interact with cryptocurrencies and driving growth in the decentralized finance ecosystem.

Akash Network

Akash Network is a decentralized cloud computing marketplace. By leveraging the power of the universe, Akash Network provides a secure platform where users can send data to each other and develop new ideas. The network operates through a consensus mechanism of PoS, which facilitates the security of transactions. Akash Network’s native cryptocurrency is AKT, which acts as a utility tool within the ecosystem. Through the integration with Cosmos, Akash Network benefits from a larger network, enabling seamless communication with other blockchain platforms. Thus, Akash Network empowers developers and organizations to access affordable and decentralized cloud computing resources.

You are Network

Sei Network is a high-performance blockchain platform in the Cosmos ecosystem, operating as Layer 1 of the Cosmos SDK blockchain, providing users with access to financial services and facilitating the deployment of a thriving DeFi ecosystem. The network is the brainchild of the founders, who realized the need for a decentralized financial system that prioritizes transaction speed and security, while providing users with innovative financial tools. Powered by its proprietary PoS consensus algorithm, Sei provides secure transaction confirmation through token staking and ownership verification. The platform’s three-tier architecture includes a client layer, a service layer, and a blockchain platform layer, which can achieve high throughput, handling up to 20,000 transactions per second. With built-in smart contract support for the Rust and Solidity programming languages, Sei empowers developers to easily build custom blockchain projects and DeFi applications. The network’s native token, SEI, is used for commissions, staking, and project management, facilitating a sustainable and thriving ecosystem. Additionally, Sei’s integration with Cosmos endows it with interoperability and scalability, allowing seamless communication with other blockchain platforms, opening up the possibility for widespread adoption and wider decentralized financial services. Ultimately, Sei Network is an affordable and powerful blockchain platform that promotes financial inclusion and supports innovative applications in different blockchain fields.

Neutron

Neutron is a DeFi platform within the Cosmos ecosystem, leading the transformation of cross-chain communication. As the first consumer chain on Cosmos, Neutron adopts an open policy and fully supports Inter-Blockchain Communication (IBC) functions to promote seamless interaction between cross-blockchains. This revolutionary approach to implementing smart contracts in multiple programming languages through CosmWasm provides flexibility and scalability. Its superior interoperability gives developers access to the feature sets of other blockchains, opening up new possibilities and unlocking the true potential of blockchain technology. By adopting Replicated Security from the Cosmos Hub, Neutron facilitates a secure and reliable infrastructure that lays the foundation for mutually beneficial relationships within the economic zone. The characteristics and strategic positioning of Neutron herald the advent of a transformative era in the Cosmos ecosystem, which will have a profound impact on DeFi and cross-chain collaboration.

Celestia

Celestia is a project in the Cosmos ecosystem that provides on-demand consensus and security. It aims to potentially significantly reduce overhead by eliminating the need to spin up a new consensus network. Unlike traditional blockchains, Celestia’s throughput scales with the number of users due to the unique property of data availability sampling. Celestia’s blockchain does not rely on an honest majority assumption of state validity, ensuring the highest standards of security. In addition, Celestia’s flexible design allows developers to define their own execution environment, giving them freedom and creativity. By providing support for various types of rollups, including a focus on the Ethereum Virtual Machine (EVM) and the Cosmos SDK, Celestia provides solutions for building secure and scalable interconnected blockchain networks.

Stride

Stride is a liquid staking platform based on the Cosmos blockchain that will change the way token staking and DeFi are done. By allowing users to stake any IBC-compatible token and earn corresponding stTokens, Stride unlocks liquidity and enables users to compound returns through DeFi activities. This innovative approach empowers users to maintain flexibility while earning rewards, promoting a more dynamic and productive ecosystem. The enhanced security measures adopted by the platform ensure the safety of user assets. The significance of Stride is that it may reshape the staking landscape, bring enhanced liquidity and yield opportunities to the Cosmos ecosystem, and drive growth in the DeFi space through seamless integration and user-centric governance.

Leap Wallet

Leap Wallet launches an innovative mobile browser extension and app dedicated to optimizing Web3 interactions, with the promise of simplicity and security. Emphasizing user autonomy, Leap adheres to the principle of decentralization to ensure that all digital assets are always under user control. Fast and cost-effective asset swaps facilitate DeFi investing and seamless NFT exploration. Leap’s extensive network of collaborations between dApps, aggregators, DEXs, and marketplaces creates a harmonious and immersive Web3 experience. After rigorous audits, the platform provides users with a safe environment that enhances trust and confidence. With multi-platform support on a variety of devices, including mobile, tablet, laptop and desktop, Leap Wallet is a versatile tool that makes it easy for individuals to explore the limitless potential of Web3 while simplifying protection.

in conclusion

Cosmos is a flexible framework that enables secure asset transfers between different blockchains, unlocking the full potential of blockchain technology. Notably, the thriving success of key projects like Terra, Polygon, and Cronos on early Cosmos releases underscores its versatility in supporting a diverse ecosystem. The exciting cooperation between Noble and Circle will seamlessly bring USDC into the Cosmos ecosystem, opening up new horizons for DeFi. Tether’s launch of its USDT stablecoin on Cosmos’ Layer 1 blockchain Kava further strengthens Cosmos’ multi-chain presence, heralding a vibrant and connected future for the entire cryptocurrency community