Partner of Pantera Capital: The core advantages and ecological status of Cosmos

By Paul Veradittakit, Managing Partner, Pantera Capital

Compilation: Leo, BlockBeats

Recently, Paul Veradittakit, Managing Partner of Pantera Capital, wrote an article on “Cosmos’ Current Core Technology and Ecological Projects”, explaining the core advantages of Cosmos in technology, the innovation mechanism on the application chain and several important projects on Cosmos. BlockBeats compiles as follows:

One of the major challenges facing traditional blockchains today is their widespread adoption and scalability. One of the challenges is the lack of interoperability between different chains, resulting in complex and inefficient communication and data transfer. In addition, scalability has been a top challenge because the focus is on security rather than scalability, resulting in slower communication speeds, more congested networks, and increased costs.

By introducing a connected blockchain paradigm, Cosmos has launched a solution to these challenges that leverages the Interchain Communication (IBC) protocol to enable seamless communication and secure transfer of assets between different chains. With a standardized framework for inter-chain interoperability, Cosmos facilitates efficient cross-chain interactions, expanding the possibilities and utility of blockchain technology. In addition, Cosmos solves the scalability problem with 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 zones) can employ different consensus mechanisms, allowing for horizontal scaling and optimized performance. By supporting parallel processing across multiple zones, Cosmos significantly improves the network’s transaction power and scalability, and also leverages the Comet consensus algorithm to provide fast block confirmation times, increased security, and the ability to defend against malicious attacks. This type of consensus algorithm serves 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 custom blockchains or zones that meet specific needs and goals. Taking advantage of the interoperability of Cosmos, these custom zones extend the boundaries of inter-chain interactions. This capability is enhanced by the Comet consensus algorithm, which ensures that the Cosmos network runs efficiently and securely. In addition, IBC supports seamless communication across different chains.

Cosmos Highlights

Interoperability: The strength of Cosmos lies in its guarantee of interoperability, enabling easy connectivity between independent blockchains in the Cosmos network. This interoperability fosters breakthroughs in cross-chain applications and collaboration, driving innovation and enhancing the utility of decentralization.

Scalability and performance: Cosmos addresses scalability issues by authorizing the creation of independent blockchains or zones that can tailor their consensus mechanisms and scalability to the needs of users, a path that supports horizontal scaling, by incorporating additional zones to accommodate increased transaction volumes. As a result, the Cosmos ecosystem has excellent performance and scalability.

Personal sovereignty: The Cosmos ecosystem provides an ideal platform for creating chains focused on individual sovereignty. By leveraging the infrastructure provided by Cosmos, such as the Cosmos SDK, IBC, and the Comet BFT consensus algorithm, developers have the flexibility to tailor 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 existing technology stacks. In addition, these specific virtual machines (VMs) can be supported by developing a dedicated application layer to build chains running on different VMs, such as Move or SVM.

Developer-friendly environment: Cosmos provides a friendly environment for blockchain developers. The Cosmos SDK is a feature-rich platform for building dApps. The SDK’s modular framework allows developers to create their own unique blockchains outside of the SDK, streamlining the development process. This simplified approach allows developers to create custom chains that extend beyond the Cosmos SDK, increasing the adoption and growth of the blockchain ecosystem.

Cosmos appchain

Appchains are an integral part of the Cosmos innovation ecosystem and represent specialized and application-specific blockchains that meet different use cases. Unlike traditional monolithic blockchains, a modular approach is adopted through the Cosmos SDK, enabling developers to tailor consensus, storage, and networking mechanisms to the specific requirements of their dApps. This gives appchains a degree of autonomy, giving developers more control over their apps and enhancing their ability to shape the user experience. In addition, the Cosmos appchain model offers attractive monetization 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 the tools to design MEV strategies that fit their needs, Cosmos incentivizes fair and transparent MEV extraction, promoting a fairer and more efficient ecosystem. In addition, the interconnectivity facilitated by the IBC protocol is a key benefit of the Cosmos appchain model. It supports seamless communication and asset transfer between different application chains, supports the development of advanced cross-chain DeFi applications, and expands possibilities for developers and users alike. In conclusion, appchains in the Cosmos ecosystem provide a promising avenue for dApps development, providing sovereignty, revenue opportunities, flexibility on MEV, and seamless interoperability, thus fostering a vibrant and thriving blockchain ecosystem.

Interchain security

Interchain security is a breakthrough approach designed to enhance the security and launch of a new Cosmos chain, and it involves the concept of “renting” economic security from the already established security chain (Cosmos Hub) in the Cosmos ecosystem.

Key Benefits

Economic Security Leasing: In order to launch a new Cosmos chain, developers can leverage the security of the Cosmos Hub or other secure chains by staking a certain amount of the new chain’s native token as collateral, a process that helps establish a financial connection between the new chain and the security chain.

Cross-chain security: Gaining economic security through inter-chain security, the new Cosmos chain is more resilient to attacks, and it can rely on a large number of different validators in the security chain to protect its transactions and assets, reducing the risk of 51% attacks and other security threats.

Standalone blockchains: Each Cosmos chain operates independently, with its own governance, tokens, and use cases. However, through interchain communication protocols like IBC, they can securely exchange data and value, facilitating interoperability and synergies within the Cosmos ecosystem.

By adopting interchain security and collaborating within the Cosmos ecosystem, new chains can significantly lower barriers to entry and gain access to a robust and proven security infrastructure. It fosters innovation and accelerates the development of blockchain, leading to a new era of secure, connected dApps.

Cosmos SDK

The Cosmos SDK supports modularity, creating 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 application-specific blockchain creation. The Cosmos SDK provides a high degree of flexibility in module customization, allowing developers to tailor these modules precisely to their application needs, opening up a realm of possibilities for fine-tuning chain applications. As the Cosmos Network grows, so will the ecosystem of SDK modules, providing developers with scalable options and functionality. In this dynamic environment, complex and highly specialized blockchain applications can be nurtured, fostering innovation and driving the growth of the Cosmos ecosystem.

The Cosmos SDK also prioritizes security through its competency-based security concept. These features act as “guardians”, clearly defining the boundaries between modules and mitigating the risks posed by malicious or unforeseen interactions. By protecting authoring, the Cosmos SDK focuses on security measures.

Inter-blockchain communication protocol IBC

IBC is a protocol of the Cosmos ecosystem that aims to facilitate secure and decentralized communication across the blockchain. It acts as a bridge and facilitates the transfer of data throughout the Cosmos network. Through the use of cryptographic proofs and consensus algorithms, IBC promotes the integrity and trustworthiness of inter-chain transactions, maintains data confidentiality, and prevents tampering or unauthorized access. The protocol not only enhances the interoperability of the chain, but also fosters collaboration and innovation by allowing project-based systems to be leveraged on the network. With IBC, Cosmos has the potential to usher in a new era of blockchain interconnection, opening up new possibilities for dApps, cross-chain asset transfers, and the creation of interconnected blockchain networks.

Tracking: Chain B continuously receives headers from chain A and vice versa. This allows each chain to keep track of the other chain’s set of validators, which essentially each chain runs the other chain’s light client.

Binding: When the IBC transfer starts, the token is bound.

Proof Relay: Then, 10 token binding proofs are relayed from chain A to chain B.

Validation: Validate the credential against the data header of Chain A on Chain B, and if the credential is valid, create 10 credentials on Chain B.

Cosmos environment

At the moment, Cosmos has a good ecosystem, attracting a wide variety of projects and establishing influential partnerships. By leveraging Cosmos’ robust infrastructure, these projects move into a highly interoperable block space with the potential to unleash powerful network effects. This seamless collaboration and integration greatly enhances the overall ecosystem, fosters innovation, and drives the adoption of Cosmos as a popular blockchain solution.

Cosmos-based projects

Osmosis

Osmosis is an innovative crypto project built on the Cosmos ecosystem, providing a DEX platform that facilitates liquidity supply. Powered by the IBC protocol, Osmosis enables seamless token swaps between different chains within the Cosmos network. This unique feature gives users access to a variety of assets and pools, facilitating an efficient and secure trading experience. By leveraging Cosmos’ interoperability and scalability, Osmosis creates an inclusive and connected ecosystem that enhances liquidity and enables cross-chain collaboration. With its focus on user-centricity and optimized liquidity management, Osmosis opens up new opportunities for DeFi participants to explore the broader asset universe and realize their trading potential.

dYdX

dYdX is a DEX platform that is popular for its user-centric approach to crypto trading, where users have full control over their private keys and assets, eliminating reliance on centralized institutions and promoting a more secure and transparent trading experience. Running on the Cosmos chain, dYdX leverages the Cosmos SDK to facilitate fast and efficient transactions, as well as seamless interoperability with other Cosmos-based applications. In addition to basic crypto trading, dYdX also offers margin trading and lending services, catering to traders looking to open leverage and lending users who want to earn interest on idle assets. With its robust security, Cosmos holds great promise on dYdX, revolutionizing the way traders engage with cryptocurrencies while facilitating the growth of the DeFi ecosystem.

Akash Network

Akash Network offers a decentralized cloud computing marketplace. By leveraging the security of Cosmos, Akash Network provides a secure platform where users can send data to each other and develop. The network operates through a consensus mechanism of PoS, which improves the security of transactions. The native token of Akash Network is AKT, which serves as a utility token for the ecosystem. Through its 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 gives developers and organizations access to affordable decentralized cloud computing resources.

Sei Network

Sei Network is a high-performance blockchain platform that operates as an L1 on the Cosmos SDK blockchain platform, providing users with financial services and facilitating the deployment of the DeFi ecosystem. The network was the result of the founders’ realization of the need for a decentralized financial system that prioritizes transaction speed and security while providing users with innovative financial tools. Sei leverages its proprietary PoS consensus algorithm to provide secure transaction confirmations through tokenization and ownership verification. The platform’s three-tier architecture includes a client-side layer, a service layer, and a chain platform layer, supporting high throughput and processing up to 20,000 transactions per second. With built-in support for smart contracts in the Rust and Solidity programming languages, developers can easily build custom projects and DeFi applications on Sei. The network’s native token, SEI, promotes a sustainable and thriving ecosystem as an internal asset for rewards, staking, and project management. In addition, Sei’s integration with Cosmos gives it interoperability and scalability, allowing for seamless communication with other blockchain platforms and supporting wider adoption and easier access to decentralized DeFi services. Ultimately, Sei Network will become an affordable, powerful blockchain platform that drives financial inclusion and supports the development of cutting-edge applications in all areas of blockchain.

Neutron

Neutron is a DeFi platform in the Cosmos ecosystem that introduces a shift in cross-chain communication. Neutron is positioned to be the first consumer chain on Cosmos, operating with an open policy, the ability to communicate between chains, and facilitate seamless interaction between different blockchain networks. Smart contract support in multiple programming languages through CosmWasm provides flexibility and scalability. Its interoperability gives developers access to the feature set of other blockchains, opening up a new realm of possibilities and unlocking the true potential of blockchain technology. By adopting security from the Cosmos Hub, Neutron promotes a secure and reliable infrastructure that lays the foundation for a mutually beneficial relationship for Economic Zones. Neutron’s characteristics and strategic positioning herald an era of change in the Cosmos ecosystem, with far-reaching implications for the future of DeFi and inter-chain collaboration.

Celestia

Celestia is a project of the Cosmos ecosystem that provides consensus and security on demand. It aims to advance blockchain deployment by eliminating the need to bootstrap a new consensus network, thereby significantly reducing overhead. Unlike traditional blockchains, Celestia’s throughput scales with the number of users due to the unique nature of data availability sampling. What sets Celestia apart is that its blockchain does not rely on an honest majority assumption to guarantee state validity, ensuring the highest security standards. In addition, Celestia’s flexible design allows developers to define their own execution environment, giving them freedom and creativity. Celestia supports various types of rollups, including the EVM and Cosmos SDK, providing a solution for building interconnected blockchain networks with security and scalability.

Stride

Stride is a liquid staking platform built on the Cosmos blockchain that revolutionizes token staking and DeFi. By allowing users to stake any IBC-compatible token and earn stTokens in return, Stride unlocks liquidity and enables users to increase their yield through DeFi trading. This innovative approach enables users to reap the rewards while remaining flexible, fostering a more vibrant and productive ecosystem. The platform’s emphasis on security has passed multiple audits to ensure the safety of users’ assets. Stride’s importance lies in the fact that it reshapes the staking landscape, brings enhanced liquidity and yield opportunities to the Cosmos ecosystem, and drives 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 app dedicated to optimizing Web3 interactions on a simplified and secure basis. Leap emphasizes user autonomy, ensures that all assets are under user control, and adheres to the concept of decentralization. Fast and cost-effective asset swaps facilitate DeFi investment and NFT exploration. Leap’s extensive network of partnerships with dApps, Aggregators, DEXs, and Marketplaces creates a premium Web3 experience. The platform is rigorously vetted to foster a safe environment for users that fosters trust and confidence. Offering multi-platform support across a variety of devices, including mobile, tablet, laptop, and desktop, Leap Wallet is a versatile tool that enables individuals to explore the limitless potential of Web3 while protecting their financial future.

Conclusion

Cosmos’ own flexible architecture supports secure asset transfers between different chains and unlocks the full potential of blockchain technology. Notably, the thriving of key projects such as Terra, Polygon, and Cronos on earlier versions of Cosmos highlights its versatility in supporting diverse ecosystems. With the cooperation between Noble Chain and Circle, USDC has been seamlessly introduced into the Cosmos ecosystem, opening a new chapter in DeFi, and users are becoming more and more optimistic about Cosmos. Tether launched its USDT stablecoin on Kava, an L1 chain built on Cosmos, further strengthening Cosmos’ multi-chain presence and bringing a vibrant and interconnected future to the entire crypto community.