An Introduction To Cosmos

Competition amongst the various Layer 1s has never been hotter. Ethereum, Solana, Avalanche and others have continued to see their token values appreciate as more applications come online and liquidity deepens within their respective ecosystems. Cosmos, a promising ecosystem of its own, has made major strides over the past year but it is often misunderstood. Why? Well, to put it simply, Cosmos is built differently. To understand how, let’s start with a basic comparison to Ethereum. Being the general purpose blockchain that it is, different types of applications are built directly on top of Ethereum. They all share the same security and they all compete for the same blockspace. This has its advantages, namely composability and strong security guarantees, but it also comes with drawbacks, such as high fees from network congestion.

In contrast to this, “Cosmos” is not a single blockchain where all of the applications exist. Rather, it is an ecosystem of many blockchains, all optimized for their specific application. Historically, one of the main things holding the Cosmos ecosystem back was the simple fact that these “App-Chains” couldn’t communicate with one another. The composability between applications, which played such a vital role in Ethereum’s success, was lacking. Importantly, however, this is no longer the case now that the Inter-Blockchain Communication Protocol (aka “IBC”) is live. Even though IBC was launched in February 2021, it hasn’t been implemented by all of the major App-Chains yet. Being such a new and important piece of technology, the hesitation from development teams has mostly centered around a desire to see it functioning as intended out in the wild, for a period of time, before plugging into it. But that is now finally starting to change and the Cosmos ecosystem seems poised to blossom as a result.

In this report, we’ll walk you through how Cosmos works, analyze its traction thus far, and speculate about what the future has in store for it. Before we jump into the more complex points, let’s start by clearly outlining a few key terms that you’ll see repeatedly throughout this post.

App-Chain: An independent blockchain optimized for a specific use case / application. They are built using Cosmos SDK, which allows developers to plug-and-play modules with different functionality (e.g. IBC) when constructing their blockchain. In the absence of Shared Staking, which we’ll cover later on in this post, App-Chains have t