What is the Cosmos Ecosystem?

Published in

Pundi AIFX

6 min readMay 27, 2023

A high-level summary of the Cosmos ecosystem and some of its projects (Part 1)

The Cosmos ecosystem is a decentralized network of independent blockchains that can scale and interoperate with one another. Each blockchain in the Cosmos ecosystem is built using the Cosmos software development kit (SDK) and is powered by BFT consensus algorithms such as the Tendermint (a.k.a Ignite) consensus. With the release of its whitepaper in 2016, Cosmos was soon referred to as the Internet of blockchains by its founders who wanted to create a platform home to interoperable blockchains.

Before the advent of Cosmos, blockchains were unable to communicate with one another, rendering them isolated and poor in utility; and users had their digital assets confined to the network which they originated from. On top of that, blockchains could only handle a small amount of transactions per second. Cosmos addresses these challenges with its vision to allow developers to build blockchains easily and to allow these heterogeneous blockchains to transact with one another.

Source: https://v1.cosmos.network/assets

With Cosmos, blockchains can maintain sovereignty, handle large amounts of transactions quickly, and communicate with other blockchains in the ecosystem. To achieve their technical vision, Cosmos uses a very unique architecture and the following building blocks: the Tendermint consensus algorithm, the Cosmos SDK, and the Inter-Blockchain Communication protocol (IBC), to let builders build their blockchain projects and grow the Cosmos ecosystem.

In the first of a two-part article, we will explore these building blocks, along with the unique architecture of Cosmos, and ecosystem wallets. And in the second part, we will explore and highlight a number of notable and very exciting Cosmos-based projects.

Tendermint Consensus Algorithm

Building a blockchain used to require building the networking, consensus, and application layer from scratch. Ethereum simplified the development of decentralized applications (dApps) by offering the Ethereum Virtual Machine, on which developers can deploy custom logic through smart contracts. However, it did not simplify the process of building blockchains themselves. This is where Tendermint makes a difference.

Tendermint is a Byzantine Fault Tolerant (BFT) system that bundles the networking and consensus layers of blockchains into an engine known as the Tendermint Core. The Tendermint Core guarantees that transactions are recorded the same — chronologically, on every machine, and it is connected to the application layer by the Application Blockchain Interface (ABCI). The ABCI supports state machines written in any programming language, allowing complete versatility in application development.

Blockchains built on top of Tendermint are secure, high performing (handling up to thousands of transactions per second), and can reach a consensus when at least two-thirds of the network’s participating nodes do not fail in arbitrary ways. Tendermint also provides instant finality, which means that a transaction is considered valid once it is included in a block and the block is added to the chain.

Cosmos SDK

The Cosmos SDK helps developers build their own custom and interoperable blockchains on top of Tendermint by providing a generalized framework based on modularity and capabilities-based security. The SDK contains composable modules that allows developers to build without having to code each bit of functionality of their application from the ground up — including creating new modules for their specific use-cases. The Cosmos SDK also provides tools for building command line interfaces, REST servers, and other utility libraries. The modularity of the Cosmos SDK allows developers to port any blockchain codebase written in Golang on top of it, and a great example of this is Ethermint. Ethermint functions identically to Ethereum, but it also reaps the benefits of the Tendermint consensus algorithm.

Inter-Blockchain Communication Protocol

The connection between Cosmos-based blockchains is achieved through the IBC. IBC is a software protocol that aims to provide a solution to cross-chain communication in the Cosmos ecosystem. It leverages on the instant finality property of Tendermint to allow heterogenous blockchains to authenticate and transport data and assets between one another. This means that blockchains with different layer implementations, tokens, validators, even rules, can interoperate with one another, thereby eliminating the need for an intermediary such as a cross-chain bridge for transfers between different blockchains. The IBC is a critical component of the Cosmos ecosystem, and it allows blockchains that are IBC-enabled to interact securely with each other. IBC is not only limited to Cosmos-based blockchains, and any blockchain that uses a fast-finality consensus algorithm can adapt to IBC and connect with Cosmos. To get a more in-depth understanding of the IBC protocol, click here.

Architecture: Hubs and Zones

While IBC enables two different blockchains to communicate with each other, Cosmos aims to create an entire network of communicating blockchains. Connecting all blockchains on Cosmos via direct IBC connections is not feasible as the number of required connections to do so increases quadratically with the number of blockchains in the ecosystem. Cosmos solves this challenge with a modular architecture composed of two blockchain classes: Hubs and Zones.

A Zone is simply a heterogeneous blockchain built on the Cosmos ecosystem, and a Hub is a specialized blockchain whose sole purpose is to connect Zones together. Zones only need to establish an IBC connection to a Hub and they will be able to communicate with every other Zone connected to the same Hub. Hubs, which serve as routers for Zones, can also be connected to other Hubs in the ecosystem. This network of Zones and Hubs is what makes up the Cosmos ecosystem. It is also worth noting that the Cosmos ecosystem is permissionless and anyone can create a Zone or Hub; and blockchains are free to decide who they want to connect with.

The Cosmos Hub is the first Hub to be launched on the Cosmos ecosystem and it is the most important blockchain in the entire ecosystem. It is a Proof-of-Stake blockchain whose network is governed and powered by the ATOM — its native cryptocurrency. Every blockchain created on the ecosystem is connected to the Cosmos Hub, and the Hub unifies every blockchain and keeps a record of its state.

Ecosystem Wallets

There are more than 30 wallets supported in the Cosmos ecosystem; and the major wallet in the ecosystem is Keplr. Keplr wallet is an open-source IBC-enabled wallet for the Cosmos ecosystem that integrates with more than 40 chains at the time of writing. It provides transactional functionalities between all blockchains in the Cosmos ecosystem, as well as any other IBC-enabled blockchain. Users can simply manage all of their assets on these IBC-enabled blockchains from a single interface, and even move them around a repertoire of interoperable networks and dApps.

Closing Thoughts

The Cosmos ecosystem is built on a set of modular, transposable, and versatile tools to help developers and teams create highly interoperable blockchain projects that can scale horizontally and vertically to reach the next billion blockchain users. By providing developers and teams with the framework and tools needed for them to easily launch their own blockchains, Cosmos offers a service unlike any other blockchain and it paves the way to build a truly decentralized internet and financial system of the future.

If you’d like to know more about Function X, check out one of the links below. This is the first of a two-part article, so stay tuned for the second one!