Cosmos: The Future of Blockchain Interoperability

Expert Jan 3, 2022 · 6 min read

Key Takeaways:
— Lack of scalability and interoperability of blockchains has long been a concern for blockchains. 
— Low scalability results in apps and platforms being unable to handle large inflow of user traffic and high cost of usage.
— Lack of interoperability, on the other hand, results in users being segregated across different networks that do not permit the transfer of assets and information across each other.
— Cosmos is a blockchain network and a suite of tools and kits that aims to create an internet of scalable, interoperable blockchains and decentralized applications.
— In this article, we dive into blockchain interoperability, its importance, and how Cosmos is bringing interoperability and scalability to blockchains.

In just a decade since their inception, we have seen three generations of blockchains come to life, each adding more utility to this technology. Speaks of the rapid innovation in the blockchain space! 

The first generation of blockchains (think Bitcoin and Litecoin) offered people a way to transact worldwide without relying on an intermediary. The second-generation (think Ethereum) introduced the ability to build decentralized apps and platforms. But these blockchains struggled with speed and scalability, and they worked within their own bounds, unable to interact with other blockchains. 

Thus came the third generation of networks, promising scalability and blockchain interoperability of all existing and new blockchains. One of the projects that achieve this in the most effective way is Cosmos.

Umm… Interoperability?

Interoperability is the ability of a digital system — in this case, a blockchain — to interact and communicate data with other similar digital systems despite their slight differences. It is the one thing whose importance most of us didn’t realize until we stepped into the crypto and blockchain space.

It never happened, did it, that you tried sending a photo from your WhatsApp Android to your friend’s WhatsApp iOS and it didn’t go through. Or, you tried sending an email from your Gmail account to a colleague’s Yahoo mail and it failed. That’s because these systems are built to smoothly communicate data with each other. Heck, even your bank allows you to transfer funds to accounts of any other bank. That’s interoperability.

We can’t say the same for blockchains!

Why Blockchain Interoperability Matters

Blockchains and blockchain-based applications have had a hard time achieving interoperability. Initially, we only had the Bitcoin network and interoperability wasn’t needed. Then, one good day, Ethereum tagged along and allowed people to build applications on top of a blockchain network. But its scalability and flexibility concerns led to the creation of multiple other blockchains, each having a unique value proposition such as high scalability, gaming and NFT-focused design, low fees, and so on. 

Similar to Ethereum, the other blockchains also attracted wide user bases because of their unique benefits. And now, sadly, all these blockchains exist like separate islands spread throughout an ocean in some pre-internet era. Communication between them is extremely complicated and scarce.

If you’re using multiple blockchains, it’s like living different lives on all of these islands. Going from one to the other and taking your funds together is a whole ordeal as these blockchains cannot communicate with each other. There are third-party apps that offer some level of interoperability but even for experienced users, it’s a painstaking process. For new users, it can be rocket science, and it’s surely not encouraging mass adoption.

There’s more…

What we discussed was just one aspect of why blockchain interoperability matters. Considering that blockchains are shaping the new internet age, i.e. Web3, it’s even more important to attain blockchain interoperability. 

The very idea of Web3 is to offer decentralization and freedom from central entities’ grip over the internet. And if one specific blockchain cut off from all others powers a majority of the Web3 infrastructure, it may yet again allow power, access and control to center in just one place. For instance, you may not be able to use your identity or metaverse assets from one blockchain across other blockchain platforms, 

So, a framework that enables the interoperability of blockchains is the one thing that can ensure that Web3 exists as one cohesive, decentralized internet infrastructure rather than a fragmented one.

To aid that vision, we have the Cosmos network, whose goal is to help build an internet of blockchains. What is Cosmos exactly and how does it achieve this? Let’s find out.

Cosmos: Creating One Cohesive Blockchain Ecosystem

Cosmos was founded way back in 2014, when most of us didn’t even know blockchains or cryptocurrencies were a thing. Behind this project was Jae Kwon, who laid the groundwork for Cosmos through his years of detailed research; his objective was to build a blockchain that was not as energy-intensive as Bitcoin. 

This research eventually led to the creation of what is today called Cosmos — a blockchain network with a complete set of tools that serve two primary purposes:

— Enabling blockchains to communicate data with each other and create an internet of blockchains

— Making it less complex and time-consuming to create scalable and efficient blockchains and decentralized applications (dApps)

And the unique part about Cosmos is that while it allows blockchains to interoperate, it still lets them maintain their sovereignty and governance.  For users, that means even though they are using a blockchain within the Cosmos ecosystem, they can individually participate in the governance of that blockchain and use its native token as it has its own system independent of Cosmos. 

The aim is to enable blockchains and dApps to seamlessly communicate data across blockchains. Doing so will help all blockchains work in unison rather than as separate networks with their own dedicated set of users. You know, how in a food court, no one has to pick one specific outlet. Instead, you get all your favorite food brands in the same place and you can order from either one or multiple of those in one go. In a way, Cosmos is like that food court but instead of food outlets, we have blockchains in there.

How does Cosmos Achieve this?

As mentioned earlier, Cosmos isn’t just a blockchain network. It is a complete package of tools that simplifies blockchain development and allows different networks to communicate with each other. Three of the main pillars of Cosmos are Tendermint Core, the Cosmos SDK, and IBC.

Tendermint

If you could visualize a blockchain, you’d see it as a sort of “stack” of three different layers, each handling one element of the job: networking, consensus and governance, and application. In basic terms, Tendermint integrates the consensus and networking layer of Cosmos into one, separating out the application layer. This means that a dev can create a new blockchain to integrate with the existing Cosmos ecosystem by using Tendermint Core (the two integrated layers) as a base, and only altering the application layer. 

What is that even supposed to mean?

In simple terms, it means that any developer can build new blockchains on Cosmos without wasting hundreds of hours building everything from scratch. 

Meanwhile, ABCI allows apps to be developed using any programming language to operate within the Cosmos ecosystem. This makes Cosmos a highly flexible network, unlike most other blockchains.

Cosmos SDK

Cosmos SDK (software development kit) is a set of tools that allows you to build Cosmos-compatible decentralized applications without having to write every line of code from scratch. How? Well, if you want to develop apps on Cosmos, the Cosmos SDK offers many open-source modules, a.k.a. pre-written lines of codes that make one or multiple components of an application, that you can directly plug into your applications.

It’s like getting a prefabricated home. Most of the things you need are already there and you can further add more items to customize your place to suit your needs. That way, you don’t have to work from scratch and you save a lot of time.

Fine, but when do we talk about the “internet of blockchains” thing? How does Cosmos build that? 

Inter-blockchain Communication Protocol

As the name suggests, IBC is the protocol that sits in the center and allows every blockchain in the Cosmos ecosystem to communicate with each other. IBC is designed to help connect all kinds of blockchains, regardless of their consensus mechanism.

To achieve this, IBC relies on the concept of Hubs and Zones. Zones are all the different blockchains in the Cosmos ecosystem while hubs are specialized middleware blockchains designed to connect Zones.

So, imagine this: you are trying to send some tokens between two blockchains, or Zones. These Zones must be connected by a common Hub for the tokens from one chain to be passed on to the other.

The first Hub of the Cosmos ecosystem is the Cosmos Hub — a proof-of-stake blockchain, powered by its native token ATOM.

Why is Atom Essential to Cosmos?

ATOM is the native token of the Cosmos blockchain. Since the blockchain uses a variation of the proof-of-stake algorithm, a network participant would need to stake ATOM tokens to become a network validator. So in this sense, ATOM is the oil that keeps the wheels of Cosmos turning.

Even if you don’t want to become a validator, you may still want to stake your ATOM to secure the network – for users, this means the benefit of earning interest on their staked amount, which incentivizes the security of the Cosmos blockchain.

Although you can do this using a number of platforms ranging from centralized exchanges to software wallets and decentralized protocols, the best way to stake AtOM is through a hardware wallet.

Manage Atom within the Ledger Live Ecosystem

At Ledger, we’re proud to offer a platform that makes it easy to interact with the options of Cosmos network. 

Ledger hardware wallets allow you to store your ATOM tokens in the most secure way by keeping your private keys offline at all times. And you can even stake your ATOM tokens directly from within the security of the Ledger Live ecosystem; so not only do you ensure the utmost security of your tokens, but you also help in the operation of the Cosmos network and earn interest on your staked amount.

The Future depends on Blockchain interoperability

Cosmos has a central vision of creating an “internet of blockchains”, and it seems this might not be a dream for long. The CEO of Tendermint – the central developer behind Cosmos – recently gave an exciting glance into the future, suggesting we’ll be seeing around 200 different chains connected through Cosmos by 2022. That’s something to get excited about.

In its quest to enable communication between networks, Cosmos offers a broader scope for blockchains to create a Web3 infrastructure – edging closer to the internet of blockchains that catalyzed the project. In doing so, Cosmos allows individuals to harness the freedom of decentralized networks, ensuring our trajectory is always forwards, and not back.

Knowledge is power.

Trust yourself and keep on learning. If you want to know about the innovative solutions pushing blockchain forward, you’re in the right place. Check out our School of Block episode where we delve into that.

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