What is Cosmos (ATOM) and How Does It Work?

Picture a world where independent blockchains are able to talk to each other. A world where blockchains with different rules running on different consensus mechanisms are able to freely trade assets and resources with few to no restrictions. 

This is the objective of Cosmos. In this article, you’ll discover what Cosmos is, how it works, and what makes it different from other blockchain platforms.

What is Cosmos?

Cosmos is a network of independent yet interoperable and scalable blockchains connected via open-source tools. An “Internet of Blockchains,” if you will, as self-described by Cosmos’ founders Jae Kwon and Ethan Buchman. 

This is made possible via the Inter-Blockchain Communication (IBC) protocol, which allows different blockchains to transfer data and value with each other directly without relying on intermediaries or custodians.

Although each blockchain offers unique services and features, they aren’t isolated from one another. Instead, they’re completely interoperable and capable of directly interacting with each other. 

Cosmos’ main blockchain is the Cosmos Hub, which serves as the central point of coordination and security for the network. The Cosmos Hub records all the activities and transactions that happen across the network and hosts the native cryptocurrency, ATOM. 

Apart from being an “Internet of Blockchains,” Cosmos is also an open-source project that gives developers the tools and framework to build application-specific blockchains. These blockchains are called zones, which can be deeply customized for different users and use cases such as gaming, finance, social media, or governance. 

As individual blockchains, zones may also have unique consensus mechanisms, programming languages, and governance models.

Apart from the Cosmos Hub, here are some other blockchains that are part of the Cosmos network:

Kava 

A decentralized finance (DeFi) platform that offers lending, borrowing, staking, and trading services. 

Kava uses a multi-token system comprising:

• Kava (KAVA): Used for staking and governance
• Hard Protocol (HARD): Used for lending and borrowing 
• Harvest Finance (HARVEST): Used for yield farming 
• Kava Swap (SWP): Used for swapping 

Akash Network

A decentralized cloud computing platform connecting users who need computing resources with providers who have idle capacity. 

Akash Network‘s native token is Akash (AKT).

Osmosis

A decentralized exchange (DEX) that allows users to swap tokens and collectibles across different blockchains via the IBC protocol. 

Osmosis’ native token is Osmosis (OSMO).

Evmos

An Ethereum-compatible platform that supports smart contracts and decentralized applications (dApps) via the Ethereum Virtual Machine (EVM). 

Evmos’ native token is Evmos (EVMOS).

Check out the full list of blockchains in the Cosmos ecosystem.

How Does Cosmos Work?

Cosmos uses a modular architecture separating the different layers and components of a blockchain, giving greater flexibility and customization to developers and users. The main components of Cosmos are:

• Tendermint Core: The consensus engine powering the Cosmos Hub and the zones, Tendermint Core uses a Byzantine Fault Tolerant (BFT) algorithm that ensures high security, speed, and finality for transactions. Tendermint Core also allows for the creation and management of validators, who are the nodes that participate in the consensus process and secure the network.
• Cosmos SDK: This framework allows developers to build zones with various modules and plugins. Cosmos SDK simplifies the process of creating a blockchain by providing common functionalities such as authentication, banking, governance, staking, and distribution. Developers can also create custom modules or use third-party modules to add more features to their zones.
• IBC: The IBC enables communication between different zones and other blockchains. It allows for the transfer of tokens, assets, data, and smart contracts across different chains, without requiring trust or intermediaries. IBC also ensures that each zone maintains its sovereignty and autonomy while being able to interoperate with other chains.

Why Should You Invest in Cosmos?

Cosmos has strongly distinguished itself from other blockchains with its razor-sharp focus on interoperability and user experience. Here are some key reasons why you should consider adding Cosmos to your investment portfolio by buying its native token ATOM: 

Cosmos Prizes Interoperability Across Multiple Blockchains

Cosmos enables cross-chain communication and collaboration between different blockchains without sacrificing security or performance. This has given rise to a diverse and inclusive ecosystem of decentralized applications (dApps) and services.

It was precisely because of Cosmos’ interoperability that dYdX, an Ethereum-based futures decentralized exchange, announced it would develop its latest version (dYdX v4) as a standalone blockchain on Cosmos in June 2022. At one point, Cosmos was even thought of as a possible contender that could “dethrone Ethereum.”

Cosmos Has a Solution to the Blockchain Scalability Problem

Scalability is a continuing problem for all major blockchains, but Cosmos solves this problem by allowing each zone to process transactions in parallel without compromising the speed or throughput of other zones. As a result, Cosmos can handle up to 10,000 transactions per second (TPS), compared to Ethereum’s 29.33 TPS or Bitcoin’s 7 TPS.

Cosmos Is Deeply Customizable

Cosmos gives developers and users the freedom and flexibility to create and customize their blockchains. For developers, they can choose consensus mechanisms, programming languages, and governance models. As for users, they can select the zones they wish to interact with based on their interests and goals.

Cosmos Is Open-Source

As an open-source project, Cosmos welcomes contributions from anyone who wants to improve or expand the network. You can use the Cosmos SDK to create personalized zones or modules, or you can simply join an existing zone as a validator or user. And if you’re interested in the governance of Cosmos’ network, you can participate by staking ATOM tokens and voting on proposals.

What Limitations Does Cosmos Have?

Although Cosmos has a bright future as a network of interoperable and scalable blockchains, it does have some limitations. 

Some of Cosmos’ key challenges include:

Coordination 

Cosmos relies on the coordination and cooperation of different zones and blockchains to maintain its interoperability and security. This can create some conflicts and disputes among different stakeholders like validators, developers, users, and regulators. 

For example, some zones may have incompatible rules with other zones or the Cosmos Hub. Other zones could also experience technical issues or attacks that may affect the whole network.

Competition

Cosmos competes with other blockchain platforms that offer similar services and features, such as Polkadot, Cardano, Avalanche, and Binance Smart Chain. These platforms may have more resources, adoption, innovation, or compatibility than Cosmos. Some may even offer more incentives or benefits for developers and users.

Build Your Cosmos Position Today With Bake’s Smart Bundles

Cosmos may have competition, but that shouldn’t deter you from adding it to your investment portfolio. In fact, to mitigate some of the uncertainty associated with Cosmos, you can consider investing in it alongside a few other similar projects.

You can get started with Bake’s Next-Gen Blockchain Innovators Smart Bundle, which ties Cosmos’ native token ATOM with ADA (Cardano) and DOT (Polkadot). Together, these three tokens create a powerful combo in the blockchain innovation space — investing in this bundle enables you to establish your position in this segment of the crypto ecosystem.

Ready to begin your Cosmos journey? Head over to Bake now to create your account and buy your first ATOM coins now!

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