There are over 10,000 blockchains operational today. However, developers can build their dApps and smart contracts with only a few blockchains. Cosmos helps to solve this issue. The Cosmos ecosystem enables blockchains to work together smoothly and focuses on interoperability. Developers need not rely on the same blockchains for building their products.
How does Cosmos work?
Ethan Buchman and Jae Kwon founded Cosmos in 2014. The idea behind Cosmos was to bring about an Internet of blockchains. Cosmos has three vital features to enable its functionality. Tendermint is used for consensus, while the Cosmos hub and zones form the network of interconnected blockchains. The zones and hubs are tied together using the IBC protocol.
Tendermint BFT
Tendermint BFT is the protocol used for securing the blockchain through consensus. Apps developed using Cosmos are secured using this protocol by default. This system is a modified version of the proof-of-stake (PoS) system.
To create nodes, users must stake their tokens. The top 100 stakers become validators and vote on blocks to be added to the blockchain. Other users can earn a portion of their block rewards by delegating their staked tokens to validators.
Delegated tokens can be assigned to another validator or taken back. This feature keeps the network protected and validators honest.
IBC protocol
The IBC communication protocol allows blockchains and apps on the Cosmos network to communicate with each other using the Cosmos hub. The IBC protocol enables users to exchange assets and information across blockchains.
Blockchains connected to Cosmos can transfer anything from NFTs to tokens to any other blockchain connected to Cosmos. This feature helps to resolve an issue plaguing blockchains since their inception.
What are the Cosmos Hub and Zones?
Cosmos Hub
The Cosmos Hub is the central blockchain that connects all other blockchains. The IBC protocol enables information to travel smoothly from one blockchain to another. The Cosmos hub acts as a ledger for all transactions between zones.
Cosmos Hub is the primary blockchain, while other chains are also available for zones.
Cosmos Zones
Zones are custom blockchains created on the network. Each zone can be used to build many applications. These zones can connect to share assets and information.
On blockchain projects, zones are the same as side chains. Each zone can have its tokens, transactions, and custom protocols or applications. They connect to other zones by linking to a hub. Zones can prevent other zones from connecting with them if they do not want them to.
What is the Cosmos SDK?
The Cosmos SDK enables users to build custom blockchains using its in-built features. Cosmos SDK is an open-source software development kit that makes it much easier for users to create solutions. With its built-in features, it is possible to create a new zone without developing everything from scratch.
Problems that Cosmos solve
Interoperability
Since its inception, the biggest challenge for blockchains has been connecting with others. Traditionally, any NFTs or tokens users own can only be used on their native chains. Cosmos resolves this issue by using its custom zones and IBC protocol.
Scalability
Blockchains such as Ethereum become costly to transact on during congestion. Such blockchains prevent dApp functionality, and gas fees can be higher than transaction amounts. Cosmos zones help to resolve this issue.
As each Cosmos Zone is a sidechain, it is not affected by congestion on other blockchains. If users create a new zone for their dApp on Cosmos, its functioning will not be affected by the traffic in other zones.
Energy Efficiency
All Cosmos zones use proof-of-stake validation. This type of validation is much more energy efficient and faster than the proof-of-work validation system.
What is the Cosmos ecosystem?
The Cosmos ecosystem consists of IBC protocol, zones, hubs, and its native token, ATOM.
As stated before, hubs are communication points for all zones. Each Cosmos zone is a sidechain on its network and enables users to create custom blockchains.
The IBC protocol allows the zones to share information. This exchange of information is achieved by connecting them to various hubs on the blockchain network.
The native token of Cosmos is ATOM. To become validators on the network, users have to stake these tokens.
How do I stake ATOM?
Users can earn in two different ways by staking ATOM.
Validation
Users must stake their ATOM to become validators on the network. Users can become validators for Cosmos if they are among the top 100 stakers. By becoming a validator, you can receive block rewards and vote on block additions.
Delegation
Users can still earn from the Cosmos network even if they cannot stake enough ATOM. Users can delegate their staked ATOM to any validator and get a part of the block reward. This method can keep the network secure, as users can shift their delegated tokens to a validator at any time.
Is Cosmos Crypto a good investment?
The Cosmos network has resolved many vital issues in the crypto industry. Integration between blockchains is essential as the crypto market develops. The Cosmos network will be essential to helping integrate other blockchains and is sure to perform well. Both developers and users can benefit from its unique solutions.
Currently, the ATOM token is trading at $13.98 and has a total market capitalization of $4 billion. The token hit an all-time high of $44.7 in September 2021.
Investors should perform their due diligence before buying or selling crypto. This article intends to be educational and not to provide investment advice.
You can now buy Cosmos (ATOM) on ZebPay
