Overview of Cosmos

TL:DR; Cosmos is a blockchain network of many independent blockchains (called zones). Cosmos allows multiple blockchains to interoperate while retaining their own security properties.

What is meant by security properties?

Today, blockchain applications share the same underlying blockchain (eg. Ethereum). This creates two layers of governance: that of the application, and that of the underlying blockchain. The former is limited by the latter.

With Cosmos, developers can easily develop entire application-specific blockchains or make their current blockchains compatible with Cosmos.

The core components of Cosmos are: i) Tendermint, ii) Cosmos SDK, and iii) Interblockchain Communication Protocol (IBC)

i) Tendermint

Tendermint BFT is a solution that packages the networking and consensus layers of a blockchain into a generic engine. This allows developers to focus on application development as opposed to the complex underlying protocol.

ii) Cosmos SDK

The Cosmos SDK is a modular framework for building applications. It simplifies the process of building secure blockchain applications on top of Tendermint.

iii) IBC

IBC is the communication protocol that can be thought of as the TCP/IP for blockchains. It allows heterogeneous blockchains to transfer tokens and data to each other (think of standard adapter).

Cosmos’ architecture

Cosmos’ architecture includes two types of blockchains: Hubs and Zones. Zones are regular heterogenous blockchains and Hubs are blockchains specifically designed to connect Zones together. (in Ethereum: Hub = Beacon chain, and Zone = Shard chain)

The first blockchain launched in the Cosmos Network is the Cosmos Hub.

Cosmos Hub is a public Proof-of-Stake blockchain whose native staking token is called the ATOM. Transaction fees can be paid in multiple tokens.

The max number of validators in Cosmos Hub is set to 100 — this number will increase at a rate of 13% for 10 years (will eventually settle at 300 validators). Anyone can become a validator — except when the size of the validator set is greater than the max number allowed.

Token model

ATOMs are the staking token of the Cosmos Hub, and can also be used to pay for transaction fees. Additional inflationary ATOMs and block transaction fees are rewarded to validators and delegators who delegate to validators.

The targeted annual inflation rate of ATOMs is recalculated each block towards a desired staking participation ratio (currently 67%). Annual inflation is capped between 7% — 20% (current inflation rate is 7%).

Of the collected transaction fees, 2% will go toward a reserve pool to increase the reserve pool. These funds are used in accordance with the decisions made by the governance system.

Governance

Only staked tokens can participate in governance through proposals, meaning that voting power is measured by stake. All validators are responsible for voting on all proposals. Failing to vote on a proposal will result in the validator being deactivated (for 1 week).

Anyone can submit a proposal on protocol parameters and upgrades, BUT for a proposal to be considered for voting, a minimum deposit of 512 Atoms needs to be deposited for 2 weeks. The deposit is required as spam protection.

Validators inherit votes of the delegators, but delegators can overwrite validator votes. This means that Cosmos has a default proxy voting mechanism, which can be overturned by a tokenholder who wants to directly engage in a governance decision.

Ecosystem

Top projects built on Cosmos SDK at the moment include:

i)@irisnet (business applications)

ii)@kava_labs (collateralized stablecoin)

iii)Binance Dex

There are currently approx. 100 active projects in the Cosmos ecosystem.

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