Atom, the cryptocurrency token based on the Cosmos blockchain, has surged over 8 percent in the past 24 hours to trade at $27. The coin has a market capitalisation of $5.72 billion and has risen over 20 percent in the past week. Since the Cosmos network can only grow, experts believe that Atom could become more valuable in the future. In 2021 alone, its price has jumped over 295 percent to over $25 from $6.4.
But what is Cosmos and why are analysts bullish on it? Let’s find out.
What is Cosmos?
Cosmos sets itself apart from the rest of the crypto blockchains by focusing on two key aspects – interoperability and customisation (more on these terms later).
Cosmos' end goal is to create an optimised ecosystem that is a decentralised 'network of networks'. Now, what does that mean? Cosmos creates independent blockchains called 'zones' which connects to the main blockchain called the Cosmos Hub. The hub monitors the state of each zone and maintains a record of the same. The zones do the same for the hub.
The Cosmos Hub is powered by a Proof-of-Stake consensus mechanism and uses ATOM as its native cryptocurrency. This means that transaction validators across the network are decided based on the amount of ATOM they pledge to the operation of the Cosmos network. The process of dedicating currency to the operation of the blockchain is called staking.
Also Read | Explained: Proof-of-work vs Proof-of-stake mining and why Ethereum is transitioning to latter
How does the Cosmos network function?
The Cosmos network consists of three layers:
Applications: They process transactions and keep updating the state of the network
Networking: Facilitates communication between the zones and the hub
Consensus Mechanism: The Proof-of-Stake mechanism which executes the authentication of transactions
These three layers need to be connected with each other for the entire web of chains and layers to function in tandem. This is achieved with some open-source tools, which can be improved upon by incorporating user feedback.
What are the tools that enable the functioning of the Cosmos network?
Inter-Blockchain Communication (IBC) Protocol: As mentioned earlier, the Cosmos network comprises independent blockchains called 'zones' that are connected to the main chain or the Cosmos Hub. The IBC Protocol is what connects each zone to the hub.
Each zone individually validates user accounts, executes transactions, mints new Atom tokens, and dispenses rewards. Moreover, each zone can also modify itself to incorporate performance improvements. Every zone operates autonomously and requires no intervention.
Since each zone oversees different validators, transactions, and token creation as well as distribution, the IBC Protocol allows the zones to interface seamlessly with the Cosmos Hub, or they are interoperable. As the hub is the common link to all zones, the protocol also ensures that the connection and communication are highly secure and fast.
Tendermint Byzantine Fault Tolerance (BFT) Engine: This is the most salient feature of the Cosmos network. The Tendermint BFT Engine is an algorithm that allows blockchain developers to keep creating and adding new zones to the network without having to code them from scratch. It is also responsible for maintaining robust security and adding new blocks to the chain.
At the heart of this powerful blockchain is the Tendermint Core – the Proof-of-Stake consensus mechanism that governs the massive network of transaction validators (or nodes). These validator nodes must all agree to a vote when a change or upgrade is proposed. The likelihood of becoming a validator on Cosmos depends on how many Atom tokens you stake.
Cosmos Software Development Kit (SDK): The creation of new blockchains must be facilitated by a software development platform. The Cosmos SDK assists developers by providing all the common essential tools like the Tendermint BFT Engine and the Tendermint Core. The staking, minting, and distribution of Atom are ensured by these tools offered in the kit, thus making it very easy for coders to make additions/changes to the Cosmos network. It basically allows customisation.
Why is Cosmos called the 'Internet of Blockchains'?
The Cosmos network allows developers to keep adding more and more chains to the hub with added functionalities. This creates a massive network of chains that constantly communicate with each other and exchange data in real-time.
This resembles the concept 'Internet-of-Things (IoT)', wherein all devices in a network are connected and autonomously make changes to improve the system's overall performance. Therefore, Cosmos has earned the title 'Internet of Blockchains.'
(Edited by : Yashi Gupta)
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