Since the creation of its virtual currency ATOM, the Cosmos platform has been bringing many innovations to the blockchain world. Cosmos focuses its efforts on creating an ecosystem that could solve the 3 main problems of blockchain technology to make it less complex for developers and users, Scalability, Usability, and Interoperability. Let’s take a deep dive and understand everything you need to know about Cosmos in 2022.
How was Cosmos born?
The origins of the Cosmos project can be traced back to 2014 with the startup Tendermint Inc, which is now a major contributor to the cryptocurrency world. However, it was in 2016 that the project’s white paper was published, and it was only a year later that ATOM tokens hit the market. At its inception, the Cosmos project was already considered the solution to blockchain problems. If its concept were to be described in a few words, those words would be “The Internet of the Blockchains“.
Tendermint Inc.
Promoted on YouTube and Twitter at the time of the mining of its first block, the project was created by a startup specialized in software development, Tendermint Inc. The company designed the Cosmos crypto to avoid the intervention of miners who, on the bitcoin network, are responsible for validating transactions. Instead, you have validators who make sure to confirm the transactions made between users. This is one of the first networks to use this method, also called Proof-of-Stake (PoS).
Blockchain 3.0
The Cosmos network is often referred to as blockchain version 3.0. The first version of blockchain technology would have arrived with the announcement of Bitcoin and the cryptocurrency Ethereum would have brought blockchain 2.0 with the concepts of decentralized finance (DeFi) and smart contracts. The contribution of the Cosmos crypto to the functioning of this technology is described by the ability of a blockchain to connect to several others to facilitate communication between different cryptocurrency networks on a single platform.
Project Objectives
The Cosmos project aims to solve 3 problems noticed in cryptocurrencies. This is the first step towards achieving its goal of intercommunication between blockchains. The developers of Tendermint Inc. have noticed that the blocks that allow operations on the networks of a cryptocurrency like bitcoin were limited by their size, which is 1 MB. This scalability problem brings significant disadvantages such as a long processing time for transactions, as well as high costs allocated to the validation of these transactions.
Another limitation observed concerns the diversity of payment methods that exist to acquire cryptos. Indeed, each token has a mode of operation that makes interactions with another token, complex or even impossible, in some cases. The Cosmos project aims to allow different blockchains to inter-communicate with each other through IBC and composability.
Fundamental Architecture of Cosmos
Before we dive deep into the Cosmos blockchain, we first need to understand the fundamental architecture that Cosmos employs, which is also known as “Hubs and Zones“. Blockchains in the Cosmos network use a hub and spoke model. “Zones” are Cosmos-speak for “application-specific blockchains”. Each Zone is a spoke connected to a hub. Hubs can be connected with other hubs. Together, this ecosystem of connected Hubs and Zones makes up the Cosmos Network, or what is commonly referred to as the “Internet of the Blockchains“.
It is also interesting to note that the Cosmos ecosystem is entirely permission-less which means that anyone can create a Hub or Zone, and each blockchain is free to accept or decline connections with other blockchains. Zones only need to establish a single connection with a Hub in order to be interoperable with all of the other Zones that are each connected to that Hub. The Cosmos Hub is one of the first Hubs to be launched on the Cosmos Network, and anybody is free to fork the Cosmos Hub codebase and launch other Hubs in the Cosmos Network.
Interchain Security
The goal of Interchain Security is to elevate the Cosmos Hub’s status. The Cosmos Hub was created with the goal of making the Internet of Blockchains better and easier to utilize for various applications, such as De-Fi. Today, however, the Hub still lacks prospective use cases. By introducing Interchain Security, the Cosmos Hub will be responsible for securing the Internet of Blockchains.
Traditionally with Proof-of-Stake (PoS) networks, validators secure the network by staking cryptocurrency and validating new blocks based on how much of the cryptocurrency they own, also known as their stake. The more value staked in a network, the more secure the network. For smaller and emerging chains, the relatively low amount of resources to carry out an attack can make their networks vulnerable. To avoid this problem, larger networks can share security by lending their cryptocurrency capital to validate blocks on smaller chains, also known as Shared Security.
Shared security, in essence, describes the fact that a superior network is responsible for securing a subordinate network. One of the best examples is the concept of optimistic rollups. Optimistic Rollups (ORs) are one type of layer 2 constructions that do not run on Ethereum’s base layer but on top of it.
In the Cosmos network, this shared security is known as Interchain Security. In essence, Interchain Security allows a parent chain (the Cosmos Hub) to generate blocks for a child chain. The Cosmos Hub’s validators would be shared with its child chains. As a result, the validators who participate operate two nodes, one for the Cosmos Hub and one for the child chain. The Cosmos Hub and the child chains will then pay fees and rewards to validators.
3 Essential Components of Cosmos
To achieve its goals, the team at Tendermint Inc. has put together three components that allow the Cosmos network to exist.
The Developer Toolkit (Cosmos SDK)
The Cosmos SDK is available to all developers who want to create a blockchain or secure application from modules. Thanks to the work done by the Tendermint Inc. team, this SDK is regularly enriched to allow developers to adapt their ideas more quickly to the Cosmos network.
The Tendermint Core
By processing nearly 25,000 transactions per second, the Tendermint Core has established itself in the landscape of blockchain development platforms as the most beneficial system for developers looking to create decentralized applications. Moreover, the tool is open source, which greatly improves compatibility with them.
The Inter Blockchain Communication (IBC) Protocol
The third component of the project is also the most important. It is through the IBC Protocol that communication can be established between the blockchains of different cryptocurrencies. The system is based on checks that allow a certain amount of cryptocurrency to be created on a B-chain after verifying their presence as well as a transfer request from an A-chain.
How To Stake Cosmos (ATOM)
With crypto staking growing bigger as a trend, investors are curious how, as well as where can one stake their ATOM tokens so that they can make their crypto work harder for them. As such, here are some ways you can stake your ATOM token to get up to ~14.49% APY.
Centralized Exchanges (CEXs)
As with most crypto exchanges, you can now easily stake your cryptocurrency with these platforms. Here is a compiled list of platforms you can stake ATOM tokens with, the expected APY as well as if there is a lock-up period.
| Expected APY (up to) | Lock-Up Period | Minimum Stake | |
|---|---|---|---|
| Crypto.com | 3% | 3 Months | 12 ATOM |
| Binance | 3% | - | 0.5 ATOM |
| Kraken | 7.5% | - | - |
| Tokenize* | 8% | 30 Days | 2 ATOM + 100 TKX |
* = Higher APY if you stake ATOM + 100 TKX, which is also Tokenize’s own token
Active Validators
As you can see from the above table, the highest yield you can get through CEXs is 8% with Tokenize. To achieve this high yield, you will need to go through a 30 day lock-up period in addition to the fact that you also need to stake 100 TKX, which is around ~USD$8.42 per TKX, just so you can get that 8% yield.
Another alternative would be to delegate your ATOM tokens to Active Validators. Validators are node operators who each store a copy of the blockchain. They keep the network secure by verifying movement on the chain. They also vote and help govern proposed changes to the blockchain network. Validator nodes are responsible for processing transactions and authoring new blocks. As you delegate your ATOM tokens to these Validators, you will receive rewards whenever a transaction is successfully processed and validated. Not to mention the fact that the yield can go up to 14.49%. On top of all this, you are also eligible for airdrops or stake drops as well.
Finding Validators
To find validator nodes, you can simply head over to this link to find out. There isn’t a perfect guideline as to how to find the best one but always make sure to avoid validator nodes with high fees. Try to go with validators with lower fees (1%-3%). Make sure you check out each validator and research each of them to make sure that they are not doing anything suspicious. Lastly, to make sure that the overall network is decentralized, try to delegate your ATOM tokens across several validators.
It is good to note that when you delegate with these validator notes, there is a lock-up period, also known as the unbonding period, of 21 days. There is also a small fee of 0.01 ATOM when you want to claim your rewards or reinvest/redelegate back into the validator node.
So how do we access and delegate, which is similar to staking, our ATOM tokens to these validators? The 2 most popular ways are through Keplr and Cosmostation. Here is a quick guide on how to get started and delegate your ATOM tokens with both platforms.
Keplr Wallet
If you don’t already have a web 3.0 wallet, like Keplr, download it and install the extension in either Chrome or Brave Browser. Keplr is also available for Apple users in January of 2022. Make sure you click your way to the Chrome store by using the link on the wallet’s official website.
Note: Scammers have fake extensions in the Chrome Store so be careful
- Download Keplr Wallet browser extension
- Create an Account
- Select the Cosmos network from the drop down at the top of the wallet
- Click the “stake” button and the main wallet dashboard will open up in a new tab or window
- Scroll down to find the validator you are looking for in the list of active validators and click “manage”
- A window will pop up that displays your available ATOM tokens. Click “delegate”
- Enter the amount you’d like to delegate to the validator node you chose. (IMPORTANT) Be sure to leave at least .01 ATOM in your wallet to pay for future transactions, like claiming rewards.
- Click “delegate”
- A new window will pop up that allows you to choose the transaction fee. NEVER choose the cheapest fee because transactions can fail and you’ll still be charged. The middle fee should be adequate.
- That’s it. Your ATOM tokens are now delegated/staked!
Cosmostation Wallet
Cosmostation is another great choice for staking ATOM tokens because it’s simple to use as a mobile wallet and can be used by connecting your Ledger hardware wallet while using a PC.
- Download the Cosmostation app onto your mobile device, or connect your Ledger Nano S or X while using a PC
- If using a connected hardware wallet, open the Cosmos app on your physical Ledger device
- Click “Reward” on the left side of the wallet
- Scroll down the list of active validators to find the validator you are looking for and then click “Delegate”
- Enter the amount you’d like to delegate. (IMPORTANT) Be sure to leave at least .01 ATOM in your wallet to pay for future transactions, like claiming rewards.
- Click “Generate & Sign Transaction”
- That’s it. Your ATOM tokens are now delegated/staked!
You’ll then see your staked tokens at the top of the page under the heading “My Validators.”
Cosmos v. Polkadot
Now when we look for comparisons with Cosmos across the many cryptocurrencies on the market, there isn’t one exact coin we could take and compare with Cosmos. The best comparison we could find is Polkadot, which is a protocol that aims to connect blockchains, allowing value and data to be sent across previously incompatible networks such as Bitcoin or Ethereum.
One important difference between Polkadot and Cosmos concerns their membership and governance. Within the Polkadot network, for example, there is just a single Relay Chain plus a set amount of Parallel chains (backed up via the Relay Chain validator). Today’s current expectation seems to be approximately 100 Parallel chains available in the Polkadot network, although it is possible to scale this number upwards or downwards over time.
On the other hand, no fixed rules apply to membership within the Cosmos network. Everyone is free to construct a Hub chain as well as a Zone chain. The Hub chain on its own is a so-called sovereignty (control) blockchain, meaning that the whole idea behind creating it involves linking other blockchains together.
Read Also: Cosmos vs Polkadot: Which is the best interoperability protocol?
Cosmos Roadmap 2022
As with all crypto projects, it is very important to understand the project’s roadmap to see how they are going to further grow. Here is what Cosmos has planned for 2022.
Theta Upgrade (expected Q1 2022)
In the Theta Upgrade, Cosmos will upgrade their SDK to v0.45. This upgrade will bring in new features such as Meta-Transactions, allowing transactions to be submitted by separate accounts that receive tips, Groups module, enabling higher-level multisig permissioned accounts, e.g., weight-based voting policies as well as Gov Module Improvements such as execution of arbitrary transactions instead of just governance proposals.
Cosmos will also introduce an NFT module, enabling the simple management of NFT identifiers, their owners, and associated data, such as URIs, content, and provenance. It will also include an extensible base module for extensions including collectibles, custody, provenance, and marketplaces. Another interesting feature that will be introduced is Liquid Staking, which frees secure and low-risk delegations for use in other parts of the Cosmos ecosystem. Liquid Staking will include key features such as enabling the transfer of rewards and voting rights.
Rho Upgrade (expected Q2 2022)
In the Rho Upgrade, Cosmos will introduce Interchain Security v1. This is the Cosmos solution to shared security that uses IBC Cross Chain Validation (CCV) to relay validator set composition from a Provider Chain (Cosmos Hub) to a Consumer Chain. This validator set is in charge of producing blocks on both networks using separate nodes. Misbehavior on the Consumer Chain results in slashing Provider Chain staking tokens (ATOM). This will allow independent modules like Gravity DEX or Bridge to live on separate chains with their own development cycles.
Lambda Upgrade (expected Q3 2022)
In the Lambda Upgrade, Cosmos will further improve Interchain Security to v2, where Provider Chain validators have the ability to opt-in to block production for various Consumer Chains. We will also see the introduction of Token Issuance which enables the creation of tokens directly on the Hub, which will help provide ERC20 capabilities.
Epsilon (expected Q4 2022)
In the Epsilon Upgrade, there is not much being mentioned since it is still many months away but the roadmap did mention a third upgrade for Interchain Security to v3 where Consumer Chains combine their own staking token validator set with Provider Chain validator set.
There are is also a huge list of Future Upgrades that Cosmos has planned such as Cross-chain bridges (non-IBC), Atomic Exchange, Decentralized identifiers (DID) as well as smart contract languages.
Final Thoughts
On paper, Cosmos tries to solve the biggest problem of cryptocurrencies today: the lack of accounting between the different blockchains, which tends to create a gap between all decentralized projects instead of bringing them closer together. The Cosmos project aims to facilitate inter-blockchain communication as well as the democratization of decentralization in application design. With such an exciting roadmap for 2022, we can definitely expect Cosmos to see new highs and grow much bigger as a platform.