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What Is Cosmos? A Beginner-Friendly Guide to the Crypto

Since its launch in 2019, Cosmos has positioned itself as the next great innovation in blockchain technology. Building on the innovations of Bitcoin and Ethereum, the Cosmos team envisions a future where separate blockchains can seamlessly communicate in Web3

Although Cosmos is still under development, it has attracted much attention in the crypto community. Even investors outside crypto are noticing Cosmos’ hi-tech tools and features––the Chicago Mercantile Exchange (CME) announced it’ll track the price of Cosmos’ native crypto ATOM in 2022, and American investment firm VanEck also publicly endorsed the Cosmos Network. 

So what is Cosmos in crypto, and why are so many people excited about this project?

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What is the Cosmos crypto project? 

Cosmos’ founder Jae Kwon initially started work on a new blockchain consensus algorithm called Tendermint. Along with fellow computer scientist Ethan Buchman, Kwon founded Tendermint Inc. to further develop this novel technology. The innovations at Tendermint Inc. would serve as the basis for the Cosmos cryptocurrency project. 

Cosmos frequently brands itself as an “Internet of Blockchains.” This project’s intricate architecture allows developers to create distinct blockchains within the Cosmos ecosystem. The Cosmos Hub and Tendermint algorithm provide security and cross-chain communication without limiting the sovereignty of separate blockchain projects. 

After multiple funding rounds, Cosmos launched its mainnet in 2019. All In Bits Inc. is behind the software design for Cosmos, while Swiss nonprofit Interchain Foundation helps fund and organize the Cosmos project. Cosmos ATOM coin frequently ranks as one of the top 25 cryptocurrencies by market cap, with more than a dozen blockchains running on the Cosmos Network.  

What makes Cosmos unique?

Cosmos views itself as the third evolution in blockchain technology (following Bitcoin and Ethereum). It allows developers to build blockchains designed for specific use cases, known as application-specific blockchains, which can be interconnected to pass data between each other. While Cosmos aims to encourage Web3 developers to build decentralized projects, it does so without relying on Ethereum’s smart contract design. Instead of building dApps (decentralized applications) on a foundational blockchain, Cosmos created a modular architecture that gives developers the freedom to create independent blockchains. 

Cosmos’ developers don’t have to rely on the consensus or networking layers of layer-1 blockchains like Ethereum. When crypto enthusiasts build on Cosmos, they can create their own blockchains that fit their design specifications. Rather than making dApps with smart contracts, Cosmos gives Web3 programmers the maximum freedom to develop blockchains while enjoying the security of its Tendermint algorithm. 

But Cosmos isn’t just focused on helping Web3 developers create self-contained blockchains. Many crypto enthusiasts associate Cosmos with the term “interoperability,” which refers to communication between blockchains. To date, it has been challenging to connect different blockchains due to their unique consensus mechanisms and coding specifications. While cross-chain bridges help transfer value across blockchain networks, they have been vulnerable to hacks. 

Cosmos developed an Inter-Blockchain Communication Protocol (IBC) that helps disparate blockchains communicate. The Cosmos team is also working on blockchains known as “peg-zones” that can link with projects outside the Cosmos ecosystem. For example, Cosmos can deploy a peg-zone between Bitcoin and Ethereum. 

In addition to all these features, Cosmos can handle 10,000 transactions per second (TPS), has low gas fees, and has minimal environmental impact because of its proof-of-stake (PoS) design. 

What are the Cosmos crypto ecosystem’s tools? 

Cosmos provides developers with a set of tools to create their blockchain projects. Here are a few examples:  

Tendermint Core

Tendermint Core refers to the open-source software that secures the Cosmos Network. This distributed system runs on a PoS algorithm that requires nodes to “stake” the native cryptocurrency to validate transactions. Here, validators need to lock Cosmos’ ATOM coins to secure the network and receive crypto rewards. 

The software is unique from other PoS chains because it’s separate from the application layer. The Tendermint Core algorithm only handles the base protocol aspects of achieving consensus between validator nodes. 

Unlike monolithic blockchains like Bitcoin, Cosmos’ ecosystem isn’t self-contained and interdependent. Instead, Cosmos uses the separation between Tendermint Core and the application layer to offer a modular blockchain that’s easier for developers to build on top of.  

Tendermint’s developers designed this algorithm to be Byzantine fault tolerance (BFT), which means it’ll continue operating even if 33% of nodes fail. Tendermint Core also offers instant finality for all transactions. 

Application BlockChain Interface (ACBI)

The application layer of Tendermint’s structure is known as the Application BlockChain Interface (ACBI). This is where Web3 developers create blockchains with unique use cases in the Cosmos ecosystem. Since the ACBI is distinct from the Tendermint Core layer, it gives programmers greater freedom to develop scalable blockchains.

In contrast, developers who build on Ethereum can’t separate their projects from the Ethereum mainnet. Every dApp on Ethereum is directly connected to the primary blockchain’s consensus mechanism. Unlike Cosmos, Ethereum developers have to factor in ETH gas fees and potential network congestion. Also, Ethereum uses the Solidity coding language, while Cosmos’ ACBI allows developers to choose from multiple programming languages.

The Cosmos SDK

Cosmos offers an open-source SDK (software development kit) to encourage more blockchain developers to build in its ecosystem. Similar to SDKs from big tech companies like Apple and Microsoft, the Cosmos SDK includes tools that give developers a framework for building blockchains on the ACBI. 

With the documents and Go coding samples in the Cosmos SDK, Web3 coders have an easier time writing and deploying PoS blockchains in Cosmos. Developers can also enjoy blockchain interoperability on Cosmos by connecting with other projects for enhanced functions and data feeds.

What makes Cosmos work?

Cosmos is divided into “hubs” and “zones,” which help blockchains preserve their sovereignty while reaping the benefits of the Cosmos ecosystem. Here’s what these terms entail: 

  • Zones: A zone is a separate blockchain project within Cosmos. The Cosmos Network also refers to zones as “application-specific blockchains.” 
  • Peg-Zones: Peg-zones are special blockchains that connect with networks outside the Cosmos Network. For example, Cosmos is working on creating peg-zones between Bitcoin and Ethereum. 
  • Hubs: A hub is a blockchain that serves as a communication bridge between various zones. The Cosmos Hub was the first hub introduced in 2019 and serves as the central connection point for every Cosmos blockchain.
  • Inter-Blockchain Communication Protocol (IBC): The IBC is a technology that makes multi-chain communication possible through Cosmos zones and hubs. Using a smart contract infrastructure, the IBC helps different Cosmos blockchains send coins and tokens between each other without relying on a third-party validator. 

What is the ATOM coin? 

The ATOM cryptocurrency plays a crucial role in the Cosmos ecosystem. Most significantly, this coin is used for staking to secure the PoS consensus mechanism. Crypto investors need to stake the same amount of ATOM coins as the current top 150 Cosmos validators to authenticate transactions. However, investors holding ATOM can delegate their tokens to a staking pool to earn a percentage of crypto rewards. 

Beyond staking, the ATOM coin is used to pay network fees and for on-chain governance. Cosmos allows ATOM holders to use their coins to vote on upcoming proposals. One ATOM coin equals one vote on the protocol. 

Which blockchains are on Cosmos?

Although Cosmos is still growing, it has attracted many Web3 developers thanks to its flexible architecture. A few of the most notable projects on Cosmos include:

  • Osmosis: Created in 2021, Osmosis is currently the largest decentralized exchange (DEX) in the Cosmos ecosystem.  
  • Cronos Chain: Funded by centralized crypto exchange, Cronos Chain is an Ethereum-compatible blockchain built in Cosmos. Cronos runs on a PoS algorithm, with’s CRO coin serving as the primary cryptocurrency.  
  • Binance Chain: Centralized crypto exchange Binance also built its Binance Chain using Cosmos’ suite of tools. Like Cronos Chain, Binance’s blockchain features many DEXs, crypto lending platforms, and NFT markets.  
  • Thorchain: Thorchain is a DEX on Cosmos that’s trying to make cross-chain swaps a reality, which means it aims to make it possible to securely swap native coins and tokens on any blockchain, including Bitcoin, Dogecoin, and Ethereum. Thorchain runs on a PoS algorithm and uses its native RUNE cryptocurrency to secure the network. 

Wrapping up

Projects like Cosmos highlight interoperability’s role in the future of Web3. As more blockchains and dApps go live, there will be a need for secure communication between protocols. While Cosmos isn’t the only network interested in addressing blockchain interoperability, it has become one of the most influential in this field. 

Worldcoin is another revolutionary project that aims to make Web3 more secure and accessible. The company is focused on verifying crypto wallets without sacrificing users’ anonymity and privacy. Subscribe to Worldcoin’s YouTube channel to learn more.

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