Disclaimer: Expert advice for this material was provided by the developers of the mixbytes.io and the founder of the Citizen Cosmos project Sergey Simanovsky.
What is Cosmos?
Cosmos is a decentralized, scalable, interoperable ecosystem of interconnected independent blockchains operating on the Tendermint Core protocol. It is based on theByzantine Fault Tolerant (BFT) mechanism, which is used to scale public PoS blockchains.
The goal of Cosmos is to create a “blockchain internet,” i.e., a blockchain network in which participants are able to interact in a decentralized manner.
Who created Cosmos and when?
The creator of Cosmos is an American programmer and entrepreneur Jae Kwon. In 2005, he graduated from Cornell University with a bachelor’s degree in computer science, after which he worked in Silicon Valley for Alexa and Yelp.
According to Kwon, his involvement in these projects, “inspired by the spirit of cypherpunk and hacking,” led him to work on Tendermint:
“Around 2013, I decided to take up blockchain and create a system based on Proof-of-Stake (PoS). At that time, the developers did not know how to carry out such a task, so I postponed it for the future and began to work on a cryptocurrency exchange, “said Kwon.
Kwon got his hands on about a hundred scientific publications dating back to 1988. Among these materials was an article titled“Consensus in the Presence of Partial Synchrony”, written by Mit professors Cynthia Dwork and Nancy Lynch in collaboration with IBM Almaden Research Center in California Larry Stockmayer.
The authors of the article presented the results of studies of the classical BFT and all the components necessary to create a PoS system. Starting to work with these calculations, Kwon came up with the idea of creating a BFT protocol based on Proof-of-Stake, capable of scaling to hundreds of nodes in a decentralized environment.
Thus arose the concept of Tendermint, the first Proof-of-Stake consensus algorithm created using the Practical Byzantine Fault Tolerance (PBFT) protocol, which was proposed in 1999 by MIT employees Barbara Liskov and Miguel Castro.
“At the time, bitcoin as a global currency was a major concern for us – mainly because of its incredible energy intensity. Therefore, we launched Tendermint to create a more environmentally friendly cryptocurrency, “said Kwon about the initial period of cosmos development.
In 2014, Kwon founded Tendermint Inc (All in Bits Inc), a software development company headquartered in California. In the same year, the team presented a whitepaper of the project.
In 2015, the project was joined by developer Ethan Bueqman, a graduate of the Canadian University of Guelph, who at that time worked at Eris Industries (later renamed Monax). Kwon and Bueeman founded the Interchain Foundation (ICF), a non-profit organization, where they held the posts of president and vice president, respectively.
In the summer of 2016, Tendermint conducted the first round of funding. Thanks to the funds raised, the number of developers has grown to seven people.
The team launched Ethermind on Tendermint, as well as Basecoin, a framework for creating cryptocurrencies that uses the Go programming language (Golang) and allows you to support plugins with all sorts of additional features. With its help, developers began to create the first iteration of Cosmos Hub.
The Cosmos ICO took place on April 6, 2017, collecting $17.3 million in ETH, BTC and US dollars. Approximately 75% of the stock of available tokens was sold; 5% — reserved for seed investors; All in Bits Inc and the Interchain Foundation received 10% each.
Subsequently, in an interview with Cryplogger, Ethan Buchan clarified that the organizers did not position public fundraising as an ICO, since they focused not on those “who would purchase a token for financial gain, but on those who were sincerely interested in the underlying technology, vision and values of the project.”
In 2017, the Interchain Foundation, which promotes technologies and decentralized applications of the Cosmos ecosystem, signed a contract with All in Bits Inc to develop the Cosmos Network.
In February 2018, Cosmos joined the Ethereum Community Fund(ECF),an initiative to create a special fund designed to accelerate the development of blockchain infrastructure and dapps.
In March 2019, the Tendermint Inc. team announced the launch of the Cosmos Hub, the first of a series of Proof-of-Stake blockchains designed to become part of the Cosmos ecosystem.
What is the Cosmos base protocol?
Cosmos works on the basis of the Tendermint Core protocol, which uses Tendermint, the BFT consensus algorithm.
A consensus algorithm is the way in which nodes in a distributed system come to an agreement about the state of the environment. In the field of public blockchains, only algorithms that are resistant to Byzantine falls are relevant. There are two families of consensus protocols in this class of algorithms: classical consensus protocols, such as PBFT, and Nakamoto Consensus, such as Proof-of-Work.
Tendermint is based on the work of the classical BFT consensus and provides one hundred percent guarantee of the finality of the transaction, the determinacy of the algorithm for the production of blocks and the presumption of the state of synchronicity.
Unlike Proof-of-Work blockchains, blocks in Tendermint are finalized as soon as they receive 2/3 + 1 signatures from validators – it is impossible to reverse or change them.
In Nakamoto consensus-based networks, such as Bitcoin, transactions are typically finalized after six confirmations, after which the probability of reversibility of the block through chain reorganization is extremely small.
However, the number of confirmations depends on the mining power that the attacker possesses. In recent years, this factor has often been used to carry out 51% (double spending) attacks, the organizers of which stole millions of dollars in various cryptocurrencies. Using a deterministic finalization consensus algorithm (such as Tendermint), it is possible to guarantee the irreversibility of transactions after block finalization.
Prioritizing Security Over Viability
When a PoW network splits into two chains, it eventually reorganizes, choosing the longest chain as canonical and rejecting transactions of the other chain. However, in Tendermint, when there is a network split, the protocol chooses not to make further progress until more than 2/3 of the validators come to an agreement again. Such a choice should ensure that there is always “one source of truth” and that the blockchain always maintains consistency.
This makes Tendermint consensus not as fast in terms of finalizing the blockchain as other PoS consensuses, but it completely relieves users of uncertainty about their transactions – if the block with the transaction has been finalized, the transaction will never be pumped out (without changing the logic of the algorithm), and if the network is split or validators are disabled – no transaction will be finalized.
A synchronous network has a known upper limit to the message delivery time. Bitcoin has a limit of 10 minutes, which imposes an artificial delay in time on all network participants.
Tendermint uses a model of assumption of partial synchronicity – no fixation in time is required for the progress of the blockchain. The “bottleneck” in blockchain progress is the actual speed of the network, not the artificial time delay set by the protocol. Thus, Tendermint is faster than most other proof-of-work protocols.
What are the key components of the Cosmos ecosystem?
Cosmos, positioned as “blockchain 3.0”, contains three key components:
Cosmos Hub is the first blockchain launched within the Cosmos Network blockchain ecosystem, and a central element of the ecosystem. Its main task is to take into account the total number of tokens in each zone (blockchain) in the ecosystem, so that the zones can directly send tokens to each other.
Cosmos Hub uses the Tendermint consensus algorithm, through which validators lay (steak) ATOM tokens.
ATOM is a native asset of Cosmos Hub, which is divided into 1 million micro-ATOM (uATOM).
The ATOM token performs the function of a working token: users can steak independently or delegate tokens to the validator, thus increasing its rating and receiving part of the profit.
Depending on the number of aggregated tokens, the validator has a proportional share of the vote,which makes it possible to create blocks and receive a reward for this in the form of new ATOM tokens (every year from 7% to 20% of the total emission is issued).
Validators transfer a portion of the block reward to the delegating users (minus the network tax). Similar to PoW networks, validators charge a commission for aggregating “shares of votes”. The validator is obliged to honestly confirm the blocks, participate in the management of the system and a high-performance hardware server, the operation of which costs from $ 10,000 (the price will increase as the blockchain grows). A validator who is unable to perform these tasks is deprived of tokens and the corresponding status. The validation architecture may vary. From it, among other things, depends on the level of security. As a rule, as the level of security of the architecture increases, its cost, including maintenance, also increases. To get into the active set, the validator needs to overcome the threshold level. At the time of writing, the validator, which is in 125th place, has slightly less than the $250,000 delegated to it. Thus, if the validator does not have this amount, or no one delegates it, he will not get into the active set.
During the first year after the launch of the main network, only 125 validator slots are available; it is planned that in the next 10 years this number will grow to 300. The network inflation index has a framework of 7% – the minimum and 20% – the maximum. The block reward is adjustable according to the stated target level of 2/3 staking participation (66.66%). All tokens must remain in the steak for 21 days so that owners cannot sell them immediately after the steaking.
The network tax goes to the backup pool, the funds from which are used to improve the security of the Cosmos Network.
The project may also issue or implement an airdrop of a secondary Photon token intended solely for transaction fees. According to the plan, validators and steakers will generate Photon tokens. Photon parameters will be determined by voting.
IBC (Inter-Blockchain Communication) Protocol
The IBC (Inter-Blockchain Communication) Protocol is a standardized interoperability protocol that cryptographically confirms that a message was sent from one zone to another.
The purpose of the IBC is to transfer not only tokens, but also any data. This allows you to create not only decentralized exchanges and automated market makers, but also any decentralized applications from the field of marketing, logistics, etc.
The Cosmos architecture includes two classes of blockchains: Hubs and Zones.
Zones consist of blockchains with rapid transaction finalization, hubs are blockchains that link zones together. The difference between them lies solely in the plane of social consensus. A zone (blockchain) is a blockchain that works using the Tendermint consensus algorithm. In fact, a hub (a hub connecting multiple blockchains) is the same as a zone. Their conditional difference is due to the strategic planning of connections of one blockchain with others with the help of IBC.
IBC blocks a certain number of ATOM tokens in the first blockchain (zone), then sends confirmation and its validation to the second zone, after which the previously blocked tokens are issued on the second blockchain. Such a scheme facilitates the issuance and creation of tokens representing assets on other blockchains.
The protocol is compatible with blockchains, in which transactions are confirmed instantly or almost instantly. Thanks to the assurances of finality, achieving the interoperability of blockchains is quite simple: once a transaction of a certain type is finalized on both blockchains, it can be assumed that the transaction was sent from one blockchain to another.
Using the PoW consensus algorithm, Bitcoin and Ethereum are not directly compatible with the IBC protocols, however, these and other blockchains, which lack rapid finalization, can also be used in IBC thanks to Peg Zonesproxy chains. They set the threshold of finality in 100 blocks, the passage of which serves as a guarantee of the irreversibility of the transaction.
At the heart of The work of Peg Zones is Peggy, a cosmos-created protocol of interoperability between Tendermint blockchains and PoW systems. When the threshold of finality is reached, the transaction is assumed to be finalized. This state is then transferred back to the Cosmos “pseudofinality” ecosystem using Peg Zones.
The first Peg Zone for Ethereum was launched in 2018. Since then, some other blockchains, such as Loom, have announced compatibility with Cosmos Hub. With the help of IBC and various schemes similar to Peggy, Cosmos expects to achieve interoperability of all existing blockchains.
The Cosmos SDK is a framework that allows developers to create their own customized blockchains based on the Tendermint consensus algorithm.
Previously, developers had two options – to write a blockchain from scratch or to build it on Ethereum or its variations. The process of creating a blockchain on Ethereum is relatively simple – you can connect to the network and consensus levels of Ethereum and build your own application on EVM, but the developer is forced to sacrifice customization capabilities.
Solving this problem, the Cosmos SDK allows you to create blockchain systems without being distracted by consensus levels and networks and focusing directly on creating application logic.
To create your own blockchain, you need to have a set of validators, which is unattainable for those who are engaged in the development of decentralized applications at the amateur level. It will be easier and faster for them to deploy a contract on Ethereum. Realizing this, the Cosmos team, using the Cosmos SDK, has created an Ethereum clone – Ethermint,where a set of validators is available and developers can use their code on Ethereum without worrying about customization.
How is Cosmos evolving?
- In May 2019, the Tendermint team working on Cosmos reported a successful update to the CosmosSDK following the identification of a critical vulnerability.
- In January 2020, Informal Systems was spoused out of the Interchain Foundation, which promotes technologies and decentralized applications of the Cosmos ecosystem.
- Against the background of the conflict within the team in February 2020, one of the key directors of the Cosmos development company – Director of Tendermint Labs Zaki Manian – left the post, but continued to work on the development of the Cosmos blockchain ecosystem. The developers formed several independent teams, refusing to cooperate with Tendermint.
- In February 2021, China’s blockchain infrastructure platform (BSN) added support for Cosmos to a localized version of the network. With the OPB initiative, developers can develop decentralized applications in a local version of the BSN in accordance with Chinese law.
- In March 2021, the IBC interoperability protocol began operating. At the same time, the project announced the creation of a decentralized exchange Gravity.
- In March 2021, the Tendermint project announced the launch of a fund to support promising projects based on the Cosmos blockchain with assets worth $ 20 million.
- In April 2021, the Plasm Network and Secret Network, based on Polkadot and Cosmos respectively, launched the first iteration of the bridge.
- Binance DEX, FOAM and Sentinel manage blockchains based on Tendermint. Other projects, such as the IRIS Network,create services and support services related to the Cosmos ecosystem. A full list of projects developing in the ecosystem can be found here.