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Betting Against Chain-Maximalism - Cosmos
Hey DEFI TIMES community,
We talked a lot about chain-maximalism in the past. Maximalism can have positive aspects. It has protected Bitcoin from several malicious forks (BCH, BSV, or Bitcoin Diamond). It has kept the Bitcoin narrative alive. Bitcoin maximalism not only has prevented several attacks but has also united the Bitcoin community as a whole.
However, the negative side effects of chain-maximalism are toxic to the whole crypto ecosystem. Bitcoin maximalists deny the fact that different opinions and narratives could be right too. They believe that crypto is a zero-sum game. It prevents innovation and growth. Bitcoin Maximalists generally believe that all cryptocurrencies can only have two utilities: store of value and payment mechanism.
They believe that ETH directly competes with BTC. But in fact, tokens can fulfill way more purposes than storing value or making payments. The best example is DeFi tokens. They are capital assets, voting rights, and utility tokens.
Many different blockchains will host different tokens in ten years. So there is no reason to believe that only one chain will rule them all.
That’s exactly why we are looking for projects that are betting on this exact future. Projects that try to complement other blockchains add incredible value to the crypto ecosystem. One of these projects is Cosmos.
Cosmos aims to connect every single blockchain, similar to the idea of Polkadot. The interoperability of blockchains is the last piece of the puzzle. That’s how we will achieve mass adoption: not by competing, but rather by working together.
Let’s explore the Cosmos ecosystem!
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How Cosmos works
Cosmos is a network of several blockchains that are all connected. They are interoperable in such a way that their assets can be seamlessly transferred from one blockchain to another. The Cosmos network doesn’t only connect the blockchains inside of it but also all other blockchains outside of its network.
Customizing blockchains with Tendermint BFT
Tendermint is a framework to easily create new blockchains from scratch.
“Tendermint BFT is a solution that packages the networking and consensus layers of a blockchain into a generic engine, allowing developers to focus on application development as opposed to the complex underlying protocol. As a result, Tendermint saves hundreds of hours of development time. Note that Tendermint also designates the name of the byzantine fault tolerant (BFT)consensus algorithm used within the Tendermint BFT engine.”
Tendermint BFT only handles networking and consensus for a blockchain, which is why the creator of the blockchain can make individual adjustments. For example, the blockchain can be public or private.
Tendermint BFT can have a time per block of one second and handle several thousands of transactions per second. The finality is instant, which means that fork will never be created until at least one-third of the validators are honest. When a block is created, the transactions are settled. The instant finality makes the Tendermint BFT extremely secure.
All of the blockchains inside the Cosmos network are built using Terndermint BFT. This leads to the Cosmos network being extremely fast and scalable for the masses.
Developers can build customized blockchains with Tendermint BFT. Now, let’s explore how they can be connected with each other. The connection between blockchains is achieved using a protocol called Inter-Blockchain Communication protocol (IBC).
By leveraging the instant finality feature of Tendermint blockchains, IBC can be used to transfer value from one blockchain to another. This value can be anything from tokens, NFTs, or any other kind of data. Currently, Bitcoin or Ethereum are not included in the interoperable Cosmos ecosystem because their consensus has only probabilistic finality.
How IBC works in detail
Let’s assume that we have two blockchains (Chain A and Chain B). We want to send 100 tokens from A to B.
Chain B receives the headers of chain A and the other way around. This allows both chains to track the validator sets, which means that both chains run a light client of the other chain.
When the transfer of the 100 tokens is initiated, they are first locked up on chain A.
Then chain A sends a proof to chain B that the tokens are locked.
The proof is checked against chain A’s header and then 100 tokens-vouchers are created on chain B.
The 100 tokens, which are now free to transfer on chain B, are technically not the original tokens. The original tokens are still locked on chain A.
The tokens on chain A are frozen until the tokens on chain B are burnt.
Building the internet of blockchains
The goal is to connect not only every blockchain inside the Cosmos network but also every blockchain outside of it. For example, when Ethereum releases sharding, it can be connected to Tendermint based blockchains.
Value can freely flow from Ethereum shards to Cosmos based blockchains and vice versa. Cosmos is the ultimate bet against chain-maximalism.
Every blockchain will be interoperable with the others and Cosmos is building the infrastructure to establish the internet of blockchains.
ATOM is the native token of the Cosmos network, which can only be used on the Cosmos Hub. The Hub is a PoS blockchain that connects all other Tendermint based blockchains.
ATOM is used for staking and thus establishing consensus across the network. Stakers receive rewards based on the inflation of the token.
By owning and staking ATOM, users can vote on network changes. Each vote is proportional to the amount of ATOM staked.
The more ATOM a user stakes the bigger the inflation reward he receives. Users can also delegate their tokens to other stakers, which is favorable for participants not willing to run a full node.
There is no hard cap on the ATOM supply and the yearly inflation depends on the number of tokens staked. Currently, the inflation rate is between 7-20%.
Cosmos aims to bring true interoperability to the crypto space. The network has three main advantages over other standalone blockchains:
1. Cosmos makes blockchains easy to create using Tendermint BFT and the modularity of the Cosmos SDK.
2. Cosmos makes blockchains interoperable allowing them to transfer value with each other through IBC and Peg-Zones, while also keeping their sovereignty.
3. Cosmos is a decentralized AND scalable blockchain, which is not the case for most other PoW blockchains like Ethereum or Bitcoin.
Cosmos is a step in the right direction. It establishes the internet of blockchains allowing developers to leverage liquidity and data from different blockchains networks. Today, most capital sits on the Ethereum blockchains, which makes it hard for other blockchains to create network effects.
The Cosmos network changes this by allowing anyone to transfer tokens from one blockchain to another.
We can’t stress this enough: The future is diverse!
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.