What is Cosmos
The Cosmos Network is a remarkable ecosystem of interconnected decentralized applications and services. They’re connected via IBC, the Inter-Blockchain Communication protocol, which enables the exchange of assets and data freely across decentralized blockchains.
What makes Cosmos special is setting itself apart from others as a project focusing on customizability and interoperability. It’s built to provide an easy development environment between chains, fostering an internet (or network) of blockchains.
Cosmos aims to architect a multi- (and cross-) chain future where each chain is built from the ground up, maintains sovereignty free from any central governance, has unique application use cases with fast transaction processing, and is interoperable with other chains in the network.
These application blockchains in the ecosystem, or App Chains, utilize a standardized open-source toolkit to create customizable chains that are secure and highly scalable quickly, enabling the build of unconstrained and user-friendly application experiences.
This vision is being realized today, where multiple chains can interact seamlessly. Examples include Osmosis, the premier decentralized exchange in the network, where users can swap various Cosmos assets from other chains, and Mars Protocol, a lending platform this can serve the entire Cosmos ecosystem.
Who founded Cosmos
Jae Kwon and Ethan Buchman co-founded Tendermint Inc in 2015 and developed Cosmos with support from The Swiss Interchain Foundation (ICF), a non-profit organization. The whitepaper was published in 2016, and the Cosmos Hub was successfully launched on March 13th, 2019.
While Kwon left the project in early 2020, he pledged to stay involved while Buchman continues as president of the Interchain Foundation Council. Today, Kwon returns to his team as CEO of NewTendermint after Tendermint’s rebrand to Ignite and entity split.
About Cosmos Hub
The Cosmos Hub (or "Gaia," its Cosmos SDK name) was the first blockchain built within the Cosmos Network (or simply Cosmos, as it's commonly known). It serves as the heart of this Interchain, providing vital services that create value for the entire network.
Initially, the Cosmos Hub's role was to develop technologies and frameworks that laid the foundation for its mission of creating an Internet of Blockchains network. This was accomplished by creating the Cosmos Stack, which includes Cosmos SDK (CosmWasm and CosmJS), Inter-Blockchain Communication (IBC) protocol relayers, and Tendermint. This stack made it easy to develop customizable and interoperable blockchains.
Since its launch, the Cosmos Hub has provided a growing set of interchain features and is now working towards the goal of growing the Cosmos ecosystem as an interoperable network of blockchains.
How does Cosmos Hub work
As a Layer 1 Proof-of-Stake blockchain in the Cosmos ecosystem, it’s built with the Cosmos SDK and on top of Tendermint Core. As a Hub in the network, it facilitates communication between the various chains connected to it into zones via the IBC protocol, essentially acting as a bridge for cross-chain transfers and interactions with one another.
Let’s take a look at some of the features that make Cosmos work:
The Cosmos software development kit (SDK) is a generalized modular framework that allows developers to easily build new and custom app chains in the ecosystem. The Cosmos SDK features the default Tendermint BFT (Byzantine Fault Tolerance) consensus algorithm to ensure a common mechanism at work across all chains in the network. It includes ready-to-use modules that are easy to integrate and the ability for developers to create their own with specific functionality.
Tendermint (now Ignite)
Tendermint was created to accelerate the development of blockchain applications with everything a developer needs to build, test, and launch their blockchain. It consists of Tendermint Core - the BFT consensus engine, and the Application Blockchain Interface (ABCI) components. Many projects in the Cosmos ecosystem already use the Tendermint BFT consensus and the Cosmos SDK.
Inter-Blockchain Communication (IBC)
The IBC is the basis for the Cosmos network to achieve inter-blockchain communication regardless of their properties. Essentially, allowing blockchains to talk to each other. With it, the protocol’s mechanism enables information to be exchanged freely and securely between each connected chain, facilitating assets and data instantly, including authenticating accounts and millions of transactions.
IBC is not limited to chains on Cosmos, which means that with a certain level of adaptation or additional implementation, non-Tendermint-based chains can become IBC-compatible and connect with the rest of the network’s chains.
About Cosmos (ATOM) Token
The ATOM token is the Cosmos Hub’s primary token and is used to help secure the chain’s interchain services via staking. It is used in the following ways:
- Currency of fees
ATOM is used to pay fees on the network, where the fee amount may be proportional to the computation required by the transaction.
- Staking & rewards
ATOM can be staked to help secure the network and earn rewards as incentives.
ATOM holders may govern the Cosmos Hub with their staked ATOM by voting on governance proposals for the growth and maintenance of the network.
Staking is locking up your ATOM tokens to help validate blockchain transactions for network security. Locked tokens are not liquid and cannot be used for other purposes or transactions until they are unstaked or unbonded. Those who choose to stake can delegate their tokens to validators like Stakewithus and earn rewards as an incentive.
Things to note
Staking rewards are generated and distributed to ATOM holders who lock up their tokens in two ways: 1) Transaction fees collected on the Cosmos Hub and 2) Newly created ATOM.
Rewards earned are not auto-compounded. To do so, stakers must manually claim, and restake rewards earned to do so - note that gas costs will apply for each transaction. Alternatively, tools such as ReStake, which is available on Unagii App, can be enabled to help Unagii users auto-compound rewards.
Staking will lock ATOM tokens for 21 days, and there is a 21-day unbonding period when unstaking ATOM from the network. Stakers can unstake anytime but will not earn rewards and will be susceptible to slashing during unbonding.
Staking risks apply when slashing occurs due to underperformance, i.e., downtime (0.01%) and double signing (5%).
Staking is non-custodial, and you always hold control over your ATOM. Validators do not have access to your delegated assets.
More Info: Staking Rewards - Cosmos Hub
How to stake ATOM
There are several ways to stake ATOM tokens, primarily on a Web3 wallet, or directly with a validator or their platform.
- Set up Keplr wallet (if you do not have one), and connect Ledger (if you have one)
- Click “Stake” or go to the Keplr Staking Dashboard and connect wallet
- Select Cosmos Hub chain
- Select a validator (Stakewithus) to delegate tokens to
- Enter the desired amount of ATOM to stake
- Confirm and approve the transaction
Staking on the Unagii App platform delegates tokens to our Stakewithus validator. Rewards earned are paid per-block basis, and users may manually claim their rewards and restake them to compound their returns. Enabling auto-compound via REstake by Eco Stake is also available on the platform.
- Connect wallet (Keplr / Ledger / Keystation)
- Go to the Cosmos page
- Click “Stake”
- Enter the desired amount of ATOMs to stake
- Select gas option
- Confirm and approve the transaction
Note: A delegation commission fee is paid to Stakewithus for staking as part of the transaction.
Guide to Cosmos Hub governance
ATOM holders that have staked or delegated their tokens to a validator can participate in governance and vote on proposals.
Proposals can be drafted, submitted, and voted on through its native Cosmos Station governance portal and through platforms listed in the infographic below.
The Cosmos ecosystem
As its name suggests, the Cosmos system resembles a universe of stars and planets, consisting of interconnected Hubs and Zones.
A Hub is a blockchain connected to other hubs, and each Hub can have several zones or app chains connected by the Inter-Blockchain Communication (IBC) protocol. The ecosystem has 54 IBC-enabled app chains and hundreds of apps and services.
Digital assets on Cosmos include fungible, and non-fungible tokens (NFTs), and the applications built are largely related to Decentralized Finance (DeFi) or infrastructure, games, social networks, etc., and marketplaces.
To expand the ecosystem and prepare for its next growth phase, a new whitepaper was released in 2022, which includes the improvement of native tokenomics, new ecosystem features, and positioning the Cosmos Hub as the economic hub of app chains.
The next goal in the roadmap is to grow the ecosystem with Interchain, generating more value for the ATOM token. Four new technologies, Replicated Security, Liquid Staking, Interchain Scheduler, and Interchain Allocator, were established for this purpose.
Traditionally, every Proof-of-Stake (PoS) blockchain had to form its own validator set and create a staking token to secure its network. This process could take months of time and energy. The basis of Interchain is to pave the way for new cross-chain opportunities and innovation and to allow staked ATOM to secure more than just the Cosmos Hub.
Formerly referred to as Interchain Security (ICS), and now termed Replicated Security, it’s a shared security model that creates a simple solution to benefit newer (child or consumer) chains with a lower cost of entry. It allows them to lease and leverage the trust, security (validator set), and infrastructure of a more established provider chain, consuming the security of the parent hub. An easier, faster, and cost-efficient path to market means these smaller consumer chains can launch and grow more competitively with room to foster more integrations and collaborative opportunities with other chains in the network.
While ICS enables chains to reuse the same validator set for security, introducing liquid staking will enable the reuse of staked assets across chains. This greatly increases capital efficiency, allowing stakers to explore additional reward opportunities across the ecosystem.
A type of on-chain marketplace, an interchain scheduler is a solution that serves to make the MEV (maximal extractable value) market more efficient, secure, and transparent. This marketplace serves the trade of future cross-chain blockspace and negotiations with validators. This will mean that the price of an asset, like ATOM, will be fairer from one chain to another, reducing arbitrage, liquidations, and frontrunning opportunities.
As Interchain projects and the ecosystem funding come from the Cosmos Hub treasury, the Interchain Allocator was created - a platform for allocating capital and incentivizing long-term alignment for new chains. It works similarly to a venture fund as a governance mechanism that deploys capital to bootstrap Cosmos projects and other initiatives.
It provides two tools of systems for economic coordination: (1) Covenant, a system for establishing agreements between the treasury and projects/protocols, and (2) Rebalancer, an automatic system for managing and rebalancing its asset portfolios.
With this, the Allocator should help provide solutions to alleviate the struggles new projects often face when aligning early stakeholders and boosting their growth trajectories.