Onomy Protocol
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Onomy Protocol

Understanding Cosmos & The Internet of Blockchains

As the global financial world undergoes radical change and the blockchain singularity expands outward into the world, it’s hard not to feel, at this pregnant moment of tech history, that the universe is speaking to you.

And with Cosmos, it does. In fact, the Cosmos goal is to speak to everything. It vows to become an internet of blockchains, the central sun around which thousands of parallel blockchains orbit, allowing them to talk and interact freely.

The goal is to break the monolithic architecture found in blockchain predecessors like Ethereum and change the siloed nature of distributed ledger technology from the ground up. By doing so, Cosmos will create a universe where blockchain stars can instantly reach their potential and join the consensus constellations illuminating our future skies.

At Onomy Protocol, we firmly believe the future of decentralized finance is cross-chain, and have hence chosen to base our layer-1 network on a system that allows seamless connections, granting retail and institutional users the freedom to quickly and fluidly transfer assets across prominent blockchain economies. Onomy’s cross-chain future entails bi-directional bridges to the market’s largest blockchain networks, but also plugging into the Cosmos IBC, an exciting system that we will cover later in the article, to access the entire liquidity of IBC-enabled blockchain networks and reach a highly competitive level of inter-connectivity.

This is the key to unlocking the crypto experience we all crave, one that isn’t siloed, riddled with fees, or downright slow upon increased usage trends like the recent JPEG minting phenomena.

Let’s take a deep dive into how Cosmos and its Tendermint consensus algorithm will set the blockchain standards of the future, and why we have chosen Cosmos as the base layer to building the Onomy Network.

How Does Cosmos Work?

To enable new stars to form, blockchains can be forged at the application layer using their software development kits (SDKs). Cosmos has created modular battle-tested open-source SDKs that allow blockchains to be created at the application layer and then interface seamlessly with its own network.

It achieves this while maintaining decentralization, the utopian core concept of blockchain technology. Communicating cross-chain in a decentralized manner with blockchains from the outside world is the key challenge that faces the crypto economy today. Yet with application-specific blockchains, SDKs become easy modular canvases that developers can build on using the programming languages they feel most comfortable with.

Then, they can be connected using Cosmos Tendermint, a round-robin protocol with instant finality that empowers them with the Byzantine Fault Tolerant consensus algorithm.

All blockchains on Cosmos have to be BFT, but it does not exclude chains from using other BFT mechanisms if they choose to. Cosmos is developing the Inter-Blockchain protocol to talk to other chains and ensure the network is open to all — even to ancient giants.

Cosmos is rebuilding blockchain technology in a way that takes a different approach, a network whose core concept is to enable other networks, and thus solve the scalability, usability and sovereignty trilemma that hurts traditional proof of work blockchains, and foster communicability cross-chain. With this, and by using the consensus and networking blueprint provided by Tendermint (that is still permissible to deviate from, although not entirely), blockchains can flourish on the application layer with their own sovereignty, scalability and usability. Then, they can plug into the main Cosmos network to communicate with all the other chains in the galaxy, who may rely on and help develop its services and use cases — all in a completely decentralized manner.

Why Blockchains Need to Talk

Blockchains do not, by nature, talk to each other very easily — and almost for good reason. The more communicable a blockchain is, and the quicker it scales due to fast approval processes, the more open it is to failure as a result of fraudulent transactions, as the validating mechanisms are not fit for purpose. Security is paramount, so restrictions are necessary to ensure a decentralized blockchain’s viability. That is the purpose of the exercise.

There are three layers to a blockchain. The application layer (what it does), the consensus layer (how it agrees) and the network layer (how it connects). When people talk in general about what “tech” a blockchain has, they are mainly discussing how effectively it achieves these three tasks. Traditionally, they are entirely unified; the way the blockchain works is hard-coded into how it achieves consensus and communication.

Thus, coding on an ancient blockchain network like Bitcoin is arduous in the extreme. The technology is not fit for that purpose. Forking it means moving away from the entire network itself and becoming an individual monolith. Ethereum was the next step, advancing on this by turning the application layer of a blockchain into a virtual machine which is then ratified by the network’s consensus and communication mechanisms.

How Monolithic Blockchain Architectures Rob Application Sovereignty

Although this works in Ethereum’s case, it’s still a single-system because applications on the network are robbed of sovereignty, as final consensus must be done by the underlying architecture — which can be slow, expensive, or both. The applications must also be written in a non-malleable way in prescribed code and templates so they can be integrated — so applications must adhere to standards which may limit or kill their potential, and thus use cases for blockchain technology cannot be properly explored.

These old proof-of-work blockchains do have security, but at enormous cost to their ability to function adequately as consensus and finalization mechanisms at the speed that institutions engaging, say, in the Forex market, need. There is no way sophisticated global financial operations are going to work effectively if you need to be wrapping tokens in order to transact effectively cross-chain, or if they are reliant on the throughput of a network prone to blockage because consensus is too slow to achieve. A network that communicates competitively using proof of work methods comes at great cost to the environment and common sense.

Why We Believe in an Open Blockchain Economy

At Onomy Protocol, we wish to expand the crypto-sphere beyond siloed networks that rely on asset wrapping, middleman assets, and centralization to become interoperable. We need our DEX and stablecoins to have total access to the wider blockchain economy, because for DeFi to evolve, users need the freedom to onramp, offramp, and bridge currency for maximum advantage when deploying capital. We want institutions with on-ramped Forex assets to engage in the supremely complex M markets across the multiple opportunities provided by the blockchain cosmos.

Understanding the Cosmos Network

The Cosmos Network acts as an arbiter Hub and plans to be an important player in helping funnel communication between different modular blockchain zones at the speeds required. The Cosmos Network itself is an entirely decentralized proof-of-stake blockchain, achieving 100x the efficiency of Ethereum.

Yet it goes further than that, and this is one of the core reasons Cosmos and its set of open-source protocols will reshape the blockchain landscape. Although currently the case, it’s not just the Cosmos Network, with its $ATOM token, that manages consensus and communication between different chains.

As the universe expands, other blockchains built on Cosmos are also eligible to become Hubs and act as independent pillars of the network. The Cosmos vision is a completely decentralized world where value and data can transact freely, and where ideas for blockchains can nova into being through any organization with a vision, and be kept from fraudulent activity due to the practical byzantine fault tolerant consensus algorithm Tendermint provides.

What is Tendermint’s Byzantine Fault Tolerance?

All Cosmos Network blockchains built with Tendermint have fast finality, where as long as 2/3rds of nodes agree, a block is settled completely. The process continues until 1/3rd of blocks become unresponsive. Should that extreme possibility happen, the network halts. Yet unless a threshold of failure is reached, the network is resistant to nodes either failing or acting maliciously.

BFT systems put emphasis on consistency, so that the veracity of the blockchains are completely assured, and essential transactions can take place securely upon them. It is a practical application of BFT, which means it also slashes the stake of any nodes caught acting fraudulently.

What Is the IBC?

However, crucially, you do not need to use Tendermint or build with the Cosmos SDK to connect to the network. It’s an essential part of the Cosmos ethos. Rather, by using the Inter Blockchain Communication protocol, a blockchain can connect through Tendermint and into the main Cosmos hub like any other. As long as that blockchain has fast-finality (along with a few other requirements), it can use the IBC to plug in and join the universe.

Although probabilistic finality is good enough for blockchains that don’t mind the occasional inaccurate transaction in exchange for faster processing — like for example payment processors using DAG technology to facilitate movements between two people — when it comes to more important or weighty transactions like smart contracts perhaps involving millions in funds, it’s essential that a system remains ironclad.

Connecting Up Distant Stars

Despite this huge obstacle, Cosmos is developing Tendermint peg zones to accommodate older solar systems of the blockchain cosmos. What these would do is wait until the these networks have reduced their probability of incorrectness to mathematically negligible, and then mint representations of these comet-like assets that could roam free through the Cosmos. However, when released, because the Peg Zone is using IBC, they could roam as far, freely and as fast as any other value-data in the network. They would have to be manually constructed, but newer blockchains have no need for proof-of-work, and — in blockchain terms — it would not be too difficult to create one for an established dinosaur like Ethereum eventually.

The Cosmos Network can then enjoy consistency through its whole universe of blockchains, and more importantly they can enjoy trust with each other, thus allowing them all to have fast finality and consistency, all without sacrificing scalability.

Birth of a Universe

Fast finality and consistency with completely decentralized trust is the goal, as that leads to instant settlement of transactions (thus overcoming a key currency market obstacle) and maximum cross-chain liquidity. These are essential parts of our vision to onramp the Forex market on-chain, so with Cosmos’s SDKs and their trailblazing application of PBFT, underpinned by the decentralized, it became the obvious choice for building Onomy Protocol.

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Onomy Protocol

Onomy Protocol

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Offering the infrastructure necessary to converge traditional finance with decentralized finance.