2023: The Year Cosmos Goes Mainstream

Introduction

When we look at the landscape of blockchains today, it can appear quite fractured. Many Layer 1 networks exist, but not all of them work seamlessly together.

There are EVM chains like Ethereum, Binance Smart Chain, Fantom, Polygon, Arbitrum, Avalanche etc. All of these chains, whether they are Layer 1’s or Layer 2’s that help to scale Ethereum, benefit from using the EVM to easily create interoperable smart contracts.

Other chains like Solana and Aptos have built great general purpose Layer 1’s with high scalability and low transaction fees. But they are lacking in interoperability and communication to other chains.

In a world with so many blockchains all competing for future dominance, it is incredibly important to choose which features to focus on to attract users to your chain. Building on a Layer 0 blockchain, helps developers make these decisions.

Cosmos Brief

Cosmos is a Layer 0 chain. The Cosmos blockchain is an open-source distributed ledger technology that utilizes a modular architecture for scalability, interoperability, and security. It is powered by a native token called Atom (ATOM) and is built on the Tendermint consensus protocol, which uses a combination of Proof of Stake (PoS) and Byzantine Fault Tolerance (BFT) to ensure secure and reliable transactions.

Cosmos is designed to be what’s known as a “blockchain of blockchains” — it connects different blockchains together in a single system. It does this by utilizing what are known as “zones”. Zones are essentially blocks of data which contain information about a particular blockchain, such as the number of transactions on the network, as well as any token balances. These zones are connected to each other via a central hub, known as the Cosmos Hub, which acts as a gateway between the different blockchains.

Cosmos has been around for a few years now, and has dozens of blockchains building on it using the Cosmos SDK. You may remember that the once mighty Terra Luna is an IBC chain as well. But even with the crash of one of the biggest Layer 1 chains, builders from all over the cosmos (pardon the pun) are flocking to Cosmos to take advantage of its underlying protocol.

The Future of Cosmos

There are currently 3 types of blockchains being built on Cosmos:

• General Purpose Blockchains
• Sector Specific Blockchains
• App-chains

There are currently over 20 general purpose blockchains on Cosmos including big names like Injective and Terra.

But even with dozens of teams building here, huge money is still flowing from VC’s to teams building on Cosmos. Archway is a Layer 1 blockchain that will be going to mainnet in 2023 after raising a $21 million seed round in late 2021. Archway is designed to automatically reward developers of applications on their chain by providing them with a percentage of validator rewards. I am betting on them to be a winner as a general purpose chain on Cosmos.

Some chains are taking the sector specific approach. Instead of trying to cater to every type of builder, these chains are only focused on optimizing their chain for certain applications. Sei Network has been very focal about their decision to become a sector specific chain. Sei is targeting DEX’s as their customer base. They can attract builders by giving exchanges the upper hand with a native order matching engine, frontrunning protection, and multiple levels of order bundling. I think this strategy will work very well for the Sei team.

And finally, we have app-chains. These are applications that want to run their own blockchain so they can optimize it exactly how they’d like. The obvious downside is that you need the users to support it, but for an application like dYdX with a huge user base this makes sense. Their decision to move to Cosmos as an app-chain definitely caused a lot of investors to take note on what is happening in the land of IBC. dYdX V4 marks the full decentralization of the dYdX protocol, and will employ the unique combination of decentralization, scalability, and customizability that Cosmos offers.

In conclusion

When looking at the Layer 1 war that is happening before our eyes, it’s important to remember that it may not be a couple chains that win, it may be a couple of ecosystems. I can see a world in the not so distant future where EVM and Cosmos chains outlast the rest. Possibly, they were able to accomplish this because of the piggybacking effect of new chains joining an ecosystem with established tooling and developer activity.

What’s abundantly clear is that huge swaths of capital are being injected into the Cosmos ecosystem, and it’s only a matter of time until retail interest catches up to it. Keep your eye out, as Cosmos chains could easily become the newest shiny thing investors start bidding in the next bull run.