13. April 2022  • clock 3 min •  Daniel Mitrovsky

Cosmos – The Internet of Blockchains

The following article will introduce you to another cryptocurrency from our dynamic portfolio – the blockchain platform Cosmos. Cosmos is a network of many independent blockchains created in response to the shortcomings of interoperability and scalability of individual blockchain networks.


The concept of the Cosmos blockchain platform originated in 2016 under Tendermint leadership. At the time of the introduction of this concept, several alternative blockchain platforms were emerging, focused on solving the shortcomings of the Bitcoin proof-of-work consensus algorithm and blockchain programmability problems.

For many years, Tendermint’s face was Jae Kwon, a computer scientist whose name was associated with the development of the Cosmos network. In June 2016, Kwon published a documentary called Gnuclear. The point of this document was to create a fully decentralised interoperable blockchain system using the Tendermint consensus protocol.

Two months later, Gnuclear was renamed Cosmos. Later in 2017, the Cosmos project raised $17 million through an initial coin offering (ICO).

However, in 2020, something happened that shook the entire Cosmos community. Jae Kwon, the founder and lead developer of the Cosmos network, has resigned from his position due to alleged suspicions of collaborating on the development of another blockchain project. Internal problems among the leadership have triggered various speculations within the community as to whether Cosmos would ever be able to survive without Kwon.

Cosmos is currently among the top 30 crypto projects with a market capitalisation of more than $3.5 billion.

What Is Cosmos

Cosmos is a blockchain project aimed at creating an ecosystem of parallel blockchains that will be able to communicate with each other. Cosmos primarily tries to solve scalability and interoperability issues, which sets it apart from most other blockchain platforms. The developers themselves call this concept “the internet of blockchains”. Many experts compare the concept of the Cosmos network to the Polkadot blockchain platform.

Basic Features of the Cosmos Network

The basic features of the Cosmos blockchain universe include:

  • Interoperability: The Cosmos network was designed to facilitate the communication of independent blockchain networks.
  • Scalability: The application of Tendermint within the Cosmos Network points to the broad-spectrum scalability of this network. Tendermints scalability is actually undetermined because the larger the number of zones and validators in a network, the greater the network’s ability to scale.
  • Decentralisation: Cosmos is built on the principles of cryptography, a healthy market economy, consensus theory, transparency, and accountability, which serve as a new basis for our future financial systems.

Zones and IBC Protocol

As we have already mentioned, instead of prioritising its own network, the aim of the Cosmos network is to support an ecosystem of networks that can share data or tokens with each other without the need for intervention by a central authority.

Every new independent blockchain created in this ecosystem is also called a zone. After its creation, each zone is tied to the Cosmos hub, which records the history and activity of each zone. However, every single zone that is part of the Cosmos ecosystem is able to perform its basic functions independently on its own. These features include, for example, account and transaction authentication, creating and distributing new tokens, and making changes to your own blockchain.

Source: Ledger Insights

All zones are connected to the Cosmos Hub via the IBC communication protocol. The Cosmos IBC protocol was developed to address one of the most important challenges facing blockchain systems today: the lack of communication and data exchange between networks. 

The IBC protocol can be understood as a standard that provides a method of secure data exchange between two independent blockchains. This protocol also provides scaling through a process called sharding. Sharding is the process of horizontally splitting a database to reduce network load. This way, it is possible to enable data exchanges in a fully decentralised manner between all blockchains.

Cosmos Hub

The operation of the network relies on a structure called the Cosmos Hub. The Cosmos Hub was the first proof-of-stake blockchain in the Cosmos network, powered by a native network token called $ATOM. The role of the Cosmos Hub is to facilitate interoperability between all zones in the network by monitoring their activity.

The Cosmos hub also serves as the economic centre of the network, which ensures its smooth operation. We can look at it as a kind of record book that records the history of this whole network. Simply put, the hub stores information about everything that happens on the network. It also stores information about activities between parallel blockchains connected via the Cosmos network.

Source: Cosmos Network

For example, if two interconnected blockchains share an activity, that activity is not only recorded on the respective blockchains that performed the activity but also in the Cosmos hub. This process ensures that mutual evidence of interactions is recorded in a way that cannot be denied. This functionality is very useful because it greatly facilitates communication between decentralised applications of different blockchains.

Byzantine Fault Tolerance (BFT)

Byzantine fault is a condition of a computer system, especially related to distributed computing systems, in which individual network participants may fail while there is imperfect information as to whether a network participant has actually failed.

At the same time, not all participants know if other participants are lying or if messages sent between them are being edited. The system is said to have Byzantine fault tolerance (BFT) if participants can agree on a fact despite persistent problems.

Achieving this resilience is crucial in a decentralised environment. Cryptocurrencies that are not Byzantine fault-tolerant do not really work – they would need some kind of centralised coordination, which would run counter to the basic feature of cryptocurrencies – decentralisation. For example, Bitcoin is Byzantine fault-tolerant due to the consensus PoW algorithm.

Tendermint BFT Consensus Algorithm

The Cosmos network uses a fast and highly scalable Proof-of-Participation consensus algorithm (which belongs to the Proof-of-Stake family of algorithms), also known as Tendermint. The basic concept of Byzantine Error Tolerance (BFT) is embedded in Tendermint’s consensus algorithm.

Jae Kwon created Tendermint in 2014 to introduce the world to an innovative high-speed, and secure algorithm. The Tendermint algorithm consists of two main technical components: the Tendermint Core and a generic application interface (ABCI).

Tendermint Core ensures that the same transactions are recorded on each computer in the same order. This system ensures fault tolerance. It is basically a large distributed computer that shows everyone the same status at the same time. The most important part of Tendermint Core is BFT – Byzantine Fault Tolerance. Even if one-third of the network conducted consensual activities with malicious intent, the network would not be affected. This is a basic feature that all distributed systems must have.

The application interface, also called ABCI (Application Blockchain Interface), operates between Tendermint and the application logic of connected independent blockchains. The application interface allows the processing of transactions in any programming language.

Due to its Proof-of-Stake algorithm, Tendermint has high throughput and can process hundreds of transactions per second.

Cosmos SDK

The Cosmos SDK is a set of tools that allows developers to easily create their own blockchains virtually from scratch. Developers using the Cosmos SDK can not only use pre-built development modules when developing blockchains, but they can also create their own modules, which they can then test before launching their own public network.
Furthermore, the Cosmos SDK allows users to connect their own blockchain to the Cosmos network via the IBC protocol. Examples of using the Cosmos SDK can be seen on Terra, Kava, or Agoric networks.

Source: SlideShare

Native Network Token – ATOM

The Cosmos network has its own native token called ATOM. This token plays an essential role in creating the economic ecosystem of the network. The ATOM token is the only token that can be involved in the foundational blockchain – Cosmos Hube. Validators who stake their ATOM tokens and thus participate in validating the blocks collect the rewards paid in this native token in return.

Moreover, ATOM token holders have the right to participate in the network management system by having the right to vote on important network changes.

The supply of ATOM tokens is not fixed, and therefore it is possible to influence the supply of tokens by changes in the protocol.


In addition to ATOM tokens, there are photons in the Cosmos network. It is a type of token with higher liquidity and speed than ATOM. This token is used to perform transactions between all zones that are part of the Cosmos ecosystem. Therefore, we can perceive photons as tokens used to pay gas fees in the network.

Cosmos Ecosystem

Examples of blockchains and decentralised applications that have emerged within the Cosmos ecosystem:

  • Terra: Terra is a decentralised blockchain infrastructure that uses stablecoins to create an alternative stable monetary system. The Terra network has its native LUNA token while also using Oracle systems and smart contracts to enable users to use programmable internet money in real life.
  • ThorChain: A decentralised liquidity protocol that allows users to easily exchange assets across different networks. Thanks to the ThorChain system, users can easily exchange one asset for another in a potential environment of distrust without having to rely on order books. Instead, market asset prices are maintained through an asset ratio in the pool using AMM.
  • A DeFi platform designed to provide stablecoins and various crypto-lending services for holders of leading cryptoassets. Through Kava DeFi services, Kava acts as a decentralised bank for digital assets, giving its users access to a range of decentralised financial services, including access to fiat-bound stablecoins or synthetic assets.
  • Band Protocol: An Oracle cross-chain data protocol that allows various applications, for example, from the decentralised finance sector, to extract real-world data using APIs using smart contracts. The main purpose of this protocol is to facilitate the exchange of information between various chains and applications.

Final Words

Thanks to the logically precise concept, Cosmos is a well-functioning blockchain that competes perfectly with other blockchains in the constantly evolving market. The cryptocurrency market needs exactly a blockchain universe like this that provides unification between different blockchains to achieve the next level of blockchain mainstream adoption in the future.

Although Cosmos is directly competing with popular smart contract platforms such as Polkadot and Avalanche, mainly due to its friendly interoperable nature and early adaptation, Cosmos has found many supporters and projects that have decided to build their decentralised applications at its peak.

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Daniel Mitrovsky


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