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What is Cosmos? The Ultimate Guide to the ‘Internet of Blockchains’

What is Cosmos? Cosmos (ATOM) is a cryptocurrency that powers and secures the ecosystem of blockchains designed to scale and interoperate with one another.

What is Cosmos? Cosmos (ATOM) is a cryptocurrency that powers and secures the ecosystem of blockchains designed to scale and interoperate with one another.
Source: forkast

Cosmos, an open source, multibranched blockchain network, was released in 2016 with the goal of facilitating communication between distributed ledgers.

The Cosmos white paper was published at the same time, and its founders envisioned it as a decentralized variant of the Internet capable of facilitating seamless communication between blockchains.

Developers have been facing a difficult challenge with regard to blockchain’s interoperability since its inception.

When two or more systems are able to communicate with one another, interoperability is what makes it possible. For example, consider an Android phone that can share data with an Apple iOS device. Or an email from a Gmail account that communicates with a Hotmail one.

Despite the fact that single structures are developed first, systems must still be able to communicate. Unless they are of much use and do not represent a barrier to technology adoption, they will not be of much use.

With over $151 billion in managed digital assets, Cosmos is the first platform to enable interoperability between different systems such as Binance Chain, Terra, and, among others.

Cosmos (ATOM) is an ecosystem of blockchains that powers and secures the Cosmos blockchain.

Let’s start by watching the following video:

How does Cosmos work?

An interconnected ecosystem of apps and services is expanding throughout the Cosmos network.

It uses Tendermint’s hub-based consensus mechanism and the Inter-Blockchain Communication protocol (IBC) to enable blockchains to communicate securely.

Some platforms connect with each other using smart contracts, in which tokens are locked down on one platform and then an equivalent amount of the asset is minted on the other. Wrapped tokens are a common example of this method.

Instead of sending BTC from the Bitcoin blockchain to another platform such as Ethereum, BTC gets locked in a functional blockchain that provides the service. Pegged tokens on another blockchain are issued to correspond to the amount of wrapped BTC.

In contrast, Cosmos allows developers to build decentralized and independent blockchain applications called zones, instead of a single chain. These zones are Cosmos smart contracts.

Cosmos has created an SDK that allows developers to build zones faster, simpler, and cheaper than other platforms like Ethereum.

Cosmos hubs

Source: Figment

Hubs connect the zones to each other. The Cosmos Hub is the main one, but other hubs are also available.

Each zone in the Cosmos network does not necessarily have to work with another zone, but the Cosmos Hub, the first blockchain deployed on the Cosmos network that records zone states and vice versa, does.

Accounts and transactions can be authenticated and new tokens distributed and blockchain changes executed in each zone autonomously.

Cosmos hub maintains a record of all zones’ states to facilitate interoperability between them, even if they do not comply with Cosmos protocol standards. Bridges to proof-of-work blockchains like Bitcoin and Ethereum are also available, despite the fact that they are not part of the Cosmos ecosystem.

Tendermint Byzantine fault tolerance (BFT)

Tendermint BFT is the Byzantine fault tolerance (BFT) engine consensus protocol used by Cosmos SDK tools, but others may also be employed. Developers may build blockchains without coding them from scratch using Tendermint BFT.

The Tendermint BFT algorithm is used to verify transactions and build blocks on the blockchain. It connects to applications using the application blockchain interface protocol.

The Cosmos Hub is powered by a proof-of-stake (PoS) governance mechanism, which integrates the network of distributed computers running the protocol.

Individuals in the network can stake ATOM and receive rewards. The top 100 stakers can act as validator nodes to power the blockchain and vote on alterations. The more ATOM that is staked, the more voting power the validators have.

Users can delegate their ATOM tokens to validators, or swap them. By doing so, validators are incentivized to behave honestly. Users can change which validators they delegate their ATOM tokens to, depending on their preferences.

Hubs and zones can communicate through the Inter-Blockchain Communication, or IBC, protocol, which allows them to interact.

Inter-Blockchain Communication protocol

The Cosmos hub can be connected to heterogeneous blockchains/zones through IBC, a protocol that allows for the transmission of secure messages. This process enables users to freely and securely exchange assets and data across sovereign (autonomous) and decentralized blockchains.

Cosmos Hub is a service provider that connects all chains to one another, enabling them to communicate and exchange data regardless of their applications or business objectives.

With IBC, Cosmos blockchains can perform virtually any type of cross-chain smart contract or nonfungible token (NFT) transfer from crypto to nonfungible tokens. Cross-chain applications can be realised due to the IBC.

What problems is Cosmos addressing?

Cosmos aims to address three primary blockchain issues—sovereignty, scalability, and sustainability—allowing for communication between all blockchains.


The Cosmos free SDK allows developers to build independent blockchain apps without recurring fees. By avoiding smart contracts required to exist on a separate blockchain, these blockchains can be easily interconnected, avoiding congestion and high transaction costs as a result of network congestion while improving scaling capabilities.

The development of DeFi (decentralized finance), NFTs (non-fungible tokens), gaming, DAOs (decentralized autonomous organisations), social networks, marketplaces, and the internet economy in general, especially the ownership economy, will be positively impacted by this initiative.


The Cosmos interoperability model guarantees the functioning of a scalable system by ensuring that any type of sovereign blockchain can communicate with other blockchains and contribute to the development of its protocol.

Cosmos can scale by duplicating a blockchain or dividing applications into distinct blockchain networks. Interchain token transfers keep these separate chains united.


The network is secured by the PoS consensus algorithm, which reduces the carbon footprint by 99% compared with the PoW consensus algorithm.

What’s the difference between Cosmos and Ethereum?

Although Ethereum devs have long supported an upcoming switch to PoS, the platform is still using a PoW consensus algorithm, making it less sustainable than Cosmos.

The biggest problem for Ethereum when it comes to scalability is the time it takes to perform transactions, which can be minutes or even hours.

Cosmos Tendermint BFT proof-of-stake algorithms can handle up to thousands of transactions per second, making the whole process much faster and cheaper than Ethereum’s gas fees, which might be extremely high at times depending on blockchain traffic.

Complex financial instruments are dealt with using permissionless smart contracts with specific functions in Ethereum to build the entire ecosystem. In Cosmos, each smart contract or application is essentially a blockchain itself, ensuring that they will not interfere with each other while maintaining a smooth transaction process.

Cosmos provides a developer-friendly design to build independent blockchains rapidly and inexpensively. Its interoperable system allows simple interchain communication, which Ethereum does not unless the rather complicated and insecure token exchange is used.

Ethereum, however, still remains the most well-known blockchain for DeFi, NFTs, and Metaverse, all of which are blockchain’s most cutting-edge technologies presently and probably in the future.

What’s the difference between Cosmos and Polkadot?

Cosmos and Polkadot are similar in terms of governance, but they are vastly different in terms of transaction validation and token or asset transfer.

100 highest-staked ATOMs are used to validate Cosmos hub protocol transactions.

Anyone can select and alter the pools of validators to stake ATOMs and earn rewards at any time. Zones may have a range of governance structures, ranging from issuing their own token to having their own hub with a unique validation process.

Private permissioned blockchain zones can be created alongside public ones, and assets can be easily transferred between them.

A parachain in Polkadot is similar to a Cosmos blockchain zone in that they all use the same set of validators to provide a stronger security across the network through the Relay chain, the central coordinating blockchain. Cosmos blockchains connected to the hub do not rely on the same unified security.

The Cosmos IBC and Cosmos Hub are what enable token transfers between parachains via smart contracts on Polkadot. In Cosmos, smart contracts essentially refer to blockchains.

The Cosmos hub records each transaction in three locations: the two zones that interact and the hub.

Who develops Cosmos?

The Cosmos project was produced by a consortium of organisations. The Swiss Interchain Foundation (ICF), a non-profit organisation that supports open-source blockchain initiatives, and the Tendermint team provided primary funding and resources.

Tendermint, the consensus algorithm that powers Cosmos, was co-founded by Jae Kwon and Ethan Buchman in 2014. The Cosmos white paper was published in 2016, and its software was released in 2019.

The Interchain Foundation raised over $17 million during a two-week initial coin offering in 2017 for the ATOM token.

Tendermint Inc. raised $9 million in Series A funding in 2019 to continue developing the project. In early 2020, Jae Kwon left the project, vowing to stay involved regardless, while Ethan Buchman remains president of the Interchain Foundation Council.

Several major names in crypto have invested in Cosmos, including Paradigm, Bain Capital, and 1confirmation.

Is Cosmos a good investment?

ATOM has witnessed substantial growth since its creation, shooting up nearly 600% in value. Its all-time high was $38.78 in September 2021.

ATOM tokens are used throughout the Cosmos ecosystem in addition to zone-specific tokens. ATOM tokens are crucial in guaranteeing cross-zone interoperability and can be kept, spent, transferred, or staked.

As more zones in the network rely on ATOM for security and transparency as a multiasset distributed ledger, ATOM becomes more valuable as adoption increases. It is convenient for Cosmos users to own and stake ATOM in order to gain the ability to vote on network upgrades besides earning rewards.

There is no cap on ATOM’s circulation supply, so investors should beware. Instead, Cosmos adjusts the number of tokens created based on the number of ATOM being staked.

Investing in Cosmos (ATOM) is simple. The cryptocurrency debuted on exchanges in 2019. If you want to buy cosmos crypto tokens, Coinbase, Binance, and Kraken, among many other exchanges, are where you can find them.

Staking Cosmos

Getting ATOMs is an important part of Cosmos’ economic security and governance. To participate in the network and earn crypto rewards, you simply select one or more Cosmos validators. You may also cast your vote on future network development proposals and upgrades.

The average annual percentage yield is currently 9.7% of ATOM staked annually. Users who stake 1000 ATOM receive 89.18 ATOM as rewards and 10.28% as commissions, which are subject to variation based on the validation.

Cosmos Hub transaction fees reward staking and distribute cryptocurrency to holders. It is advised to stake with multiple validators at the same time to avoid major issues if one of them misbehaves or goes offline. In that case, the delegated ATOM is destroyed (burned).

No specific Cosmos wallet is required to claim rewards at the end of the staking period; all you need to do is send a transaction with no value or costs using a wallet. Across the Cosmos ecosystem, networks and tokens are supported by exchanges and crypto services, not specific wallets.

There are several web wallets, including Exodus, Math wallet, and Citadel One, among others. You can use Ledger Live, Shapeshift, Trust wallet, and many other applications to send, receive, and store ATOMs.

The future of Cosmos

The future looks promising for the Cosmos ecosystem, thanks to Interchain Security. Security will improve substantially with the development, guaranteeing more protection across all interconnected chains.

DeFi transactions and interchain NFT transfers across different public and permissioned blockchains will be facilitated by increased fluidity in IBC connections.

Cosmos’ future plans are ambitious, but its dedicated development team gives its users reason to be hopeful.

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