Pantera Capital discusses Cosmos: Core Technology, Innovative Mechanism, and Ecological Projects
Original author: Paul Veradittakit, Executive Partner of Pantera Capital
Original translation: Leo, BlockBeats
Recently, Paul Veradittakit, Executive Partner of Pantera Capital, wrote an article about "Cosmos Core Technology and Ecological Projects," interpreting the core advantages of Cosmos in technology, innovative mechanisms on application chains, and several important projects on Cosmos. The translation by BlockBeats is as follows:
One of the major challenges faced by traditional blockchains today is their widespread adoption and scalability. One problem is the lack of interoperability between different chains, leading to complex and inefficient communication and data transfer. In addition, scalability has always been a major issue as the focus has been on security rather than scalability, resulting in slower communication speeds, congested networks, and increased costs.
By introducing an interconnected blockchain paradigm, Cosmos has launched a solution to address these challenges. It uses the Inter-Blockchain Communication (IBC) protocol to enable seamless communication and secure asset transfers between different chains. With a standardized framework for interchain interoperability, Cosmos facilitates efficient cross-chain interactions, expanding the possibilities and practicality of blockchain technology. Additionally, Cosmos addresses scalability issues through its modular architecture and consensus algorithm. Developers can use the Cosmos SDK to create application-specific blockchains called "zones." Zones (independent blockchains, also known as regions) can utilize different consensus mechanisms, allowing for horizontal scalability and optimized performance. By supporting parallel processing across multiple zones, Cosmos significantly enhances network transaction capacity and scalability. It also utilizes the Comet consensus algorithm to provide fast block confirmation times, increased security, and resilience against malicious attacks. These types of consensus algorithms serve as a reliable foundation for interconnected blockchain networks, combining efficiency, finality, and robustness.
Core: Cosmos SDK, IBC, and Comet
The Cosmos SDK provides developers with the ability to create customized blockchains or zones that meet specific requirements and goals. Leveraging the interoperability features of Cosmos, these custom zones expand the boundaries of interchain interactions. The Comet consensus algorithm enhances this functionality, ensuring the secure and efficient operation of the Cosmos network. Additionally, IBC supports seamless communication across different chains.
Highlights of Cosmos
Interoperability: The advantage of Cosmos lies in its guarantee of interoperability, which allows for easy connection between independent blockchains in the Cosmos network. This interoperability fosters breakthroughs in cross-chain applications and collaborations, driving innovation and enhancing the practicality of decentralization.
Scalability and Performance: Cosmos addresses scalability issues by empowering the creation of independent blockchains or zones. These zones can customize their consensus mechanisms and scalability based on user needs. This approach supports horizontal scalability by merging additional zones to accommodate increased transaction volume. As a result, the Cosmos ecosystem boasts excellent performance and scalability.
Individual Sovereignty: The Cosmos ecosystem provides an ideal platform for creating chains focused on individual sovereignty. By leveraging the infrastructure provided by Cosmos, such as Cosmos SDK, IBC, and Comet BFT consensus algorithm, developers can flexibly customize any aspect of the technology stack to enhance performance, throughput, security, and other key factors of the chain. For example, EVM chains like Evmos are built using the existing technology stack. Additionally, dedicated application layers can be developed to support these specific virtual machines (VMs), enabling the construction of chains running on different virtual machines, such as Move or SVM.
Developer-Friendly Environment: Cosmos offers a developer-friendly environment for blockchain developers. Cosmos SDK is a feature-rich platform for building dApps. By utilizing the modular framework of the SDK, developers can create their own unique blockchains outside of the SDK, simplifying the development process. This simplified approach allows developers to create custom chains that extend from Cosmos SDK, thereby increasing the adoption and growth of the blockchain ecosystem.
Cosmos Application Chains
Application Chains are an essential component of the innovative Cosmos ecosystem, representing specialized and specific application blockchains that cater to different use cases. Unlike traditional monolithic blockchains, the adoption of a modular approach through Cosmos SDK enables developers to customize consensus, storage, and networking mechanisms according to the specific requirements of their dApps. This empowers application chains with a certain degree of autonomy, allowing developers to better control their applications and enhance their ability to shape user experiences. Additionally, the Cosmos Application Chain model offers enticing profit opportunities, allowing dApp creators to explore unique monetization strategies and promote sustainable growth within their respective chains.
In addition, the flexibility of the Cosmos application chain extends to the processing of MEV. By providing developers with tools to design MEV strategies that suit their needs, Cosmos incentivizes fair and transparent MEV extraction, promoting a more fair and efficient ecosystem. In addition, the interoperability facilitated by the IBC protocol is a key advantage of the Cosmos application chain model. It supports seamless communication and asset transfer between different application chains, enabling the development of advanced cross-chain DeFi applications and expanding possibilities for developers and users alike. In summary, the application chains in the Cosmos ecosystem provide a promising path for dApp development, offering sovereignty, income opportunities, flexibility in MEV, and seamless interoperability, nurturing a vibrant and thriving blockchain ecosystem.
Interchain Security
Interchain security is a groundbreaking approach aimed at enhancing the security of new Cosmos chains and facilitating their smooth launch. It involves the concept of "renting" economic security from the already established secure chain (Cosmos Hub) within the Cosmos ecosystem.
Key Advantages
Economic Security Leasing: In order to launch a new Cosmos chain, developers can utilize the security of Cosmos Hub or other secure chains by locking a certain amount of the new chain's native tokens as collateral. This process helps establish financial connections between the new chain and the secure chain.
Cross-chain Security: By acquiring economic security through interchain security, the new Cosmos chain is better protected against attacks. It can rely on a large number of different validators in the secure chain to safeguard its transactions and assets, reducing the risks of 51% attacks and other security threats.
Independent Blockchains: Each Cosmos chain operates independently with its own governance, token, and use cases. However, through interchain communication protocols like IBC, they can securely exchange data and value, promoting interoperability and synergy within the Cosmos ecosystem.
By adopting interchain security and collaborating within the Cosmos ecosystem, new chains can significantly lower entry barriers and gain a strong and proven security infrastructure. This fosters innovation, accelerates the development of blockchain, and ushers in a secure and interconnected dApp era.
Cosmos SDK
The Cosmos SDK supports modularity and creates an ecosystem with a large number of interchangeable modules. This approach frees developers from the previous task of "building complex functionality from scratch". Instead, developers can seamlessly integrate pre-built modules into their applications, simplifying the creation of application-specific blockchains. The Cosmos SDK provides high flexibility in module customization, allowing developers to precisely tailor these modules to their application requirements, opening up a realm of possibilities for fine-tuning chain applications. As the Cosmos Network evolves, the ecosystem of SDK modules will also evolve, providing developers with scalable choices and functionality. In this dynamic environment, complex and highly specialized blockchain applications can be nurtured, fostering innovation and driving the development of the Cosmos ecosystem.
The Cosmos SDK also prioritizes security through its capability-based security concept. These capabilities act as "guardians" that define clear boundaries between modules and mitigate risks from malicious or unforeseen interactions. By protecting the creation process, the Cosmos SDK focuses on security measures.
Inter-Blockchain Communication Protocol (IBC)
IBC is a protocol within the Cosmos ecosystem designed to facilitate secure and decentralized communication across blockchains. It acts as a bridge, facilitating data transfer across the entire Cosmos network. Through the use of cryptographic proofs and consensus algorithms, IBC ensures the integrity and trustworthiness of inter-chain transactions, maintains data confidentiality, and prevents tampering or unauthorized access. This protocol not only enhances inter-operability among chains but also enables collaboration and innovation by allowing project-specific systems to leverage the network. With IBC, Cosmos has the potential to usher in a new era of blockchain interconnectivity, enabling new possibilities for dApps, cross-chain asset transfers, and the creation of interconnected blockchain networks.
Tracking: Chain B continuously receives data headers from Chain A, and vice versa. This allows each chain to track the validator set of another chain, essentially running a light client of the other chain.
Binding: Tokens are bound when an IBC transfer is initiated.
Relay Proofs: Then, 10 token binding proofs are relayed from Chain A to Chain B.
Validation: On Chain B, the data header from Chain A is validated against a proof, and if the proof is valid, 10 tokens are created on Chain B.
Cosmos Environment
The current Cosmos ecosystem has a good environment, attracting a variety of projects and establishing influential partnerships. By leveraging Cosmos' powerful infrastructure, these projects enter a highly interoperable blockchain space, potentially unleashing powerful network effects. This seamless collaboration and integration greatly enhance the overall ecosystem, promote innovation, and drive the adoption of Cosmos as a popular blockchain solution.
Projects based on Cosmos
Osmosis
Osmosis is an innovative cryptocurrency project built on the Cosmos ecosystem, providing a DEX platform that facilitates liquidity provision. With the support of the IBC protocol, Osmosis enables seamless token swaps between different chains within the Cosmos network. This unique functionality allows users to access a variety of assets and pools, facilitating efficient and secure trading experiences. By leveraging Cosmos' interoperability and scalability, Osmosis creates an inclusive and interconnected ecosystem, enhancing liquidity and enabling cross-chain collaboration. With a focus on user-centricity and optimized liquidity management, Osmosis opens up new opportunities for DeFi participants to explore a broader range of assets and unleash their trading potential.
dYdX
dYdX is a DEX platform that is popular for its user-centric approach to encrypted transactions. By allowing users to have full control over their private keys and assets, dYdX eliminates reliance on centralized institutions, promoting a more secure and transparent trading experience. Running on the Cosmos chain, dYdX utilizes Cosmos SDK to facilitate fast and efficient transactions, as well as seamless interoperability with other Cosmos-based applications. In addition to basic encrypted trading, dYdX also offers margin trading and lending services to cater to traders seeking leverage and borrowing users looking to earn interest from idle assets. With its strong security, Cosmos presents vast opportunities on dYdX, revolutionizing the way traders engage with cryptocurrency and fostering the growth of the DeFi ecosystem.
Akash Network
Akash Network provides a decentralized cloud computing marketplace. By leveraging the security of Cosmos, Akash Network offers a secure platform where users can send data to each other and develop applications. The network operates using a PoS consensus mechanism, enhancing transaction security. Akash Network's native token is AKT, serving as the utility token of the ecosystem. Through integration with Cosmos, Akash Network benefits from the interoperability and scalability of a larger network, enabling seamless communication with other blockchain platforms. As a result, Akash Network enables developers and organizations to access affordable decentralized cloud computing resources.
Sei Network
Sei Network is a high-performance blockchain platform that runs on the Cosmos SDK blockchain platform as L1. It provides financial services to users and promotes the deployment of DeFi ecosystems. The network was created by founders who realized the need for a decentralized financial system that prioritizes transaction speed and security while providing innovative financial tools for users. Sei utilizes its proprietary PoS consensus algorithm to provide secure transaction confirmations through marking and ownership verification. The platform's three-layer architecture includes the client layer, service layer, and chain platform layer, supporting high throughput with the ability to process up to 20,000 transactions per second. With built-in support for smart contracts using Rust and Solidity programming languages, developers can easily build custom projects and DeFi applications on Sei. The network's native token, SEI, serves as an internal asset for rewards, staking, and project management, fostering a sustainable and thriving ecosystem. Additionally, Sei's integration with Cosmos grants it interoperability and scalability, allowing seamless communication with other blockchain platforms and providing support for wider adoption and convenient access to decentralized finance services. Ultimately, Sei Network will become an affordable and powerful blockchain platform, driving financial inclusion and supporting the development of cutting-edge applications in various blockchain domains.
Neutron
Neutron is a DeFi platform within the Cosmos ecosystem that introduces a paradigm shift in cross-chain communication. Positioned as the first consumer chain on Cosmos, Neutron operates with an open policy and enables seamless interaction between different blockchain networks through interchain communication capabilities. With support for smart contracts in multiple programming languages through CosmWasm, it provides flexibility and scalability. Its interoperability enables developers to access the feature sets of other blockchains, opening up new possibilities and unlocking the true potential of blockchain technology. By adopting security from the Cosmos Hub, Neutron facilitates a secure and reliable infrastructure, laying the foundation for mutually beneficial relationships in Economic Zones. The features and strategic positioning of Neutron herald a transformative era for the Cosmos ecosystem, with profound implications for the future of DeFi and inter-chain collaboration.
Celestia
Celestia is a project in the Cosmos ecosystem that provides consensus and security on demand. It aims to advance blockchain deployments by eliminating the need to bootstrap new consensus networks, resulting in significant cost savings. Unlike traditional blockchains, Celestia's throughput scales with the number of users due to the unique property of data availability sampling. What sets Celestia apart is that its blockchain does not rely on the honest majority assumption to guarantee state validity, ensuring the highest level of security. Additionally, Celestia's flexible design allows developers to define their own execution environments, granting them freedom and creativity. Celestia supports various types of rollups, including EVM and Cosmos SDK, providing a solution for building interconnected blockchain networks with security and scalability.
Stride
Stride is a liquidity staking platform built on the Cosmos blockchain, revolutionizing token staking and DeFi. By enabling users to stake any IBC-compatible token and receive stTokens as rewards, Stride unlocks liquidity and allows users to increase their yield through DeFi trading. This innovative approach allows users to maintain flexibility while earning rewards, fostering a more vibrant and productive ecosystem. The platform places a strong emphasis on security, having undergone multiple audits to ensure the safety of user assets. Stride's significance lies in reshaping the staking landscape, bringing enhanced liquidity and earning opportunities to the Cosmos ecosystem, and driving growth in the broader DeFi space through seamless integration and user-centric governance.
Leap Wallet
Leap Wallet has launched an innovative mobile browser extension and application that aims to optimize Web3 interactions while simplifying and ensuring security. Leap emphasizes user autonomy and ensures that all assets are under user control, adhering to the decentralized philosophy. Fast and cost-effective asset swaps facilitate DeFi investments and NFT exploration. Leap's extensive network of collaborations with dApps, Aggregators, DEXs, and Marketplaces creates a high-quality Web3 experience. The platform undergoes rigorous audits to provide users with a secure environment and foster trust and confidence. Leap Wallet provides multi-platform support across various devices, including mobile devices, tablets, laptops, and desktops. It is a versatile tool that allows individuals to explore the unlimited potential of Web3 while protecting their financial future.
Conclusion
Cosmos' flexible architecture supports secure asset transfers between different chains and unleashes the full potential of blockchain technology. It is worth noting the thriving development of key projects such as Terra, Polygon, and Cronos on early versions of Cosmos, highlighting its versatility in supporting diverse ecosystems. With the collaboration between Noble Chain and Circle, the seamless integration of USDC into the Cosmos ecosystem has opened a new chapter for DeFi, garnering increasing optimism from users. Tether's launch of its USDT stablecoin on Kava, an L1 chain built on Cosmos, further strengthens Cosmos' multi-chain presence and brings a vibrant and interconnected future to the entire crypto community.
