COSMOS thread

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I spent weeks learning about COSMOS They're trying to build a unique economy that is open, scalable, and interconnected. I think has massive potential once the market turns 📈 Here are 9 reasons outlining #COSMOS potential 👇 A deep thread🧵

1. The Philosophy The Cosmos blockchain network was constructed to support communication amidst shared ledgers without the need to rely on centralized servers.

Following the release of its whitepaper in 2016, the network was instantly considered to be the “Internet of blockchains”, who aimed to produce an interoperable network consisting of various open-source blockchains, which could also make transactional processes more efficient.

2. Interoperability Ever since blockchain was first introduced, interoperability has been a big hurdle for developers to overcome. Interoperability is what allows communication to take place between two or multiple systems.

To give a few examples, imagine a Gmail account emailing a Hotmail one. Or even an Android device that can exchange data with an iOS device.

Initially, single structures are constructed, such as in the instance of a blockchain that is specified. However, it is still necessary to enable systems that can communicate with each other.

They would be of little use otherwise, and could even be a barrier to technological adoption.

The Cosmos platform has established itself as the first to allow interoperability between various systems, such as the Binance Chain, Terra, and Crypo.org, for example, with more than 151 billion dollars’ worth of assets under management.

ATOM is the native token that secures and powers this entire ecosystem of blockchains that are made to be scalable and to interoperate with each other.

3. Ecosystem layout The Cosmos blockchain network is a constantly growing ecosystem of applications or services that are interconnected.

Furthermore, it utilizes hubs, the Inter-Blockchain Communication (IBC) protocol, and the Tendermint consensus mechanism to guarantee the secure communication of blockchains with one another.

There are some platforms that communicate with one another by using smart contracts. Through such a process, tokens are effectively locked in on a single platform, with the assets’ corresponding amount being minted on another.

Consequently, the wrapped tokens serve as an example of how this procedure works. Instead of transferring BTC from Bitcoin’s blockchain to another one such as Ethereum, the BTC stays locked within a working blockchain that offers the service.

The corresponding amount, like wrapped Bitcoin (wBTC), is then issued as pegged tokens on a different blockchain.

Contrastingly, Cosmos provides open-source tools that enable developers to construct sovereign, decentralized application-specific blockchains known as zones rather than being dependent on a single chain.

Hence, the team behind Cosmos has created the software development kit (SDK), which enables developers to construct zones quicker, cheaper, and simpler when compared to other blockchain networks, such as Ethereum.

It reduces complexity and provides basic blockchain functionalities like governance, staking, and tokens, all through popular and easy-to-use software development programs like GO. Developers have complete flexibility and freedom to produce plugins and add any desired features.

4. Hubs Every zone is linked to another one via hubs, with the Cosmos Hub being the primary hub. However, various other hubs are available too. Any hub or zone is not required to cooperate with another.

However, every new zone is connected to the Cosmos Hub, which is the first blockchain to be launched on Cosmos that maintains a record regarding the state of every zone.

Each zone has the capability to operate independently, doing tasks such as executing blockchain modifications, producing and distributing additional tokens, or even validating accounts and transactions.

5. Tendermint This is a protocol that consists of two primary pieces, which include an application interface and a blockchain consensus engine.

Tendermint Core serves as the blockchain consensus engine that makes the peer-to-peer network function while providing a proof-of-stake (PoS) consensus. It also ensures that all machines that record transactions can do so in the same order.

On the other hand, the Application BlockChain Interface (ABCI) serves as a mechanism for connecting blockchains to the Tendermint Core protocol.

The main goal of Tendermint is to function as a blockchain engine. It is supposed to be a way that developers can utilize to skip technical and time-consuming cryptography by jumping straight into the more advanced stages of application or blockchain development.

6. Inter-Blockchain Communication (IBC) This is a mechanism that links different blockchains or zones to the Cosmos hub and enables safe message transmissions between them.

Such an innovative mechanism also allows users to safely transfer assets or data across sovereign and decentralized blockchains. The Cosmos Hub can be viewed as a service provider for the chains that need to link to it to gain the benefits of interoperability.

Sovereign blockchains that have different applications, consensus protocols, and validators can still communicate with one another and trade data, regardless of how different their business goals or functions are.

A new whitepaper was recently released that highlights significant expansions to the utility already provided by the Cosmos Hub, most of it beginning with “interchain.”

Moreover, it has also laid out a new vision for its native token, ATOM, which entails proposing changes to its issuance model and utility.

7. Liquid Staking Holders of ATOM have the option to receive interest when they stake their coins with validators. However, by doing so, they are also locking up their assets within a blockchain address, rendering them unsellable for a period of time.

Third-party applications provide liquid staking alternatives that can free up users, meaning that they can then exchange their staked assets through a derivative token that represents their stake.

Soon, liquid staking will be baked into the network’s foundational code by the Cosmos Hub.

According to @buchmanster, co-founder of Cosmos, “With the native liquid staking module, it provides a better [user experience] for entering one of those liquid staking providers.”

And “Now that the [ATOM] token can start to become more liquid, even while it’s providing security, we can similarly start to offer new ways to connect the security and liquidity of the ATOM token to other tokens that are launching in the ecosystem.”

7. Interchain Security With the help of the interchain security technology, which Cosmos has recently announced, Dapp chains can now rent security from the Cosmos Hub.

A bit like Polkadot’s own shared security approach, this interchain security produces blocks on one chain while preserving the integrity of another blockchain.

However, where it differs from Polkadot is that its approach is more flexible, in the sense that there are no requirements that are mandatory on every IBC chain.

8. Tokenomics ATOM's tokenomics have gathered a bit of criticism because of their inflationary dynamics. Therefore, the recent whitepaper proposed a new monetary strategy for ATOM, consisting of two phases.

First, a transitional phase that is up to 36 months long would be launched, the start of which would see around 10 million ATOM being issued every month (which would also momentarily increase the rate of inflation to 41.03% should it launch now).

After that, the rate of issuance would gradually drop until reaching an emission of up to 300,000 ATOM each month, essentially lowering the inflation rate of ATOM to 0.1%. In the long run, ATOM issuance would thus become linear rather than exponential.

9. The Interchain Scheduler This will serve as an MEV solution, which is short for “Maximal Extractable Value.” MEV is also indicative of the profits that are likely made when transactions inside a block are reordered during its production.

On Ethereum, MEV extraction has already been made more efficient via off-chain services like Flashbots. There are relays used by extractors, also known as “searchers,” for negotiating with validators to carry out their MEV strategies.

The Interchain Scheduler of the Cosmos Hub plans to bring such negotiations on-chain, where its broader network could gain a lot from them. If a Cosmos blockchain is prepared to sell some block space to the Interchain Scheduler...

...it could then issue NFTs that represent the block space “reservations.” Such tokens might even be exchanged on secondary markets and occasionally auctioned off. The share of the revenues would then be given to the original blockchain.

The Interchain Allocator’s purpose is to facilitate economic coordination throughout the Cosmos ecosystem. It is expected to expedite user and liquidity acquisitions for Cosmos projects by forging multilateral agreements between certain entities and IBC blockchains.

But while also securing ATOM’s status as the reserve currency of the network. The Allocator can be utilized by protocols for mutual stake holding; growing ATOM’s liquid staking marketplaces; rebalancing reserves; and taking part in the governance of another blockchain.

Additionally, it would safeguard under-collateralized financing methods, provide the potential for Liquidity-as-a-Service providers, and lessen the likelihood of insolvency brought on by extreme market occurrences.