Deep Dive into Cosmos - 24/09/2021
By Marcus Sotiriou
Today’s CryptoInsight will include a deep dive will into Cosmos – a rapidly growing ecosystem of interconnected blockchains, aiming to be the internet of blockchains!
Most blockchains operate in isolation, which means that their economies are confined to their own chains. This is why the liquidity of defi is mainly limited to just Ethereum. Moving between blockchains proves to be a very frustrating process and currently there many immature solutions. Therefore, standardising cross-chain value transfer is one of the largest opportunities in the crypto industry. Cosmos attempts to do exactly that – connecting blockchains to achieve the full potential of different cryptos.
What is Cosmos?
Cosmos is an ecosystem of independent blockchains that connect to each other. Cosmos uses a Proof-of-Stake mechanism that allows transactions of 7 seconds, with fees of around a cent. There are currently more than 250 blockchain apps in the Cosmos network. Some of the biggest cryptocurrencies were built using Cosmos, including:
· Terra (LUNA,) Binance Chain (BNB), Crypto.com (CRO), OKEx Chain (OKEx)and Thorchain (RUNE).
Cosmos has over $100 billion of digital assets under management.
What makes Cosmos different to other blockchain ecosystems?
Interoperability!
This crypto buzzword refers to the ability of a blockchain to connect to other blockchains. Instead of using bridges, which is the solution for some, Cosmos uses hubs. This allows one to transfer tokens between blockchains frictionlessly – normally you can’t move tokens between more than 2 blockchains at a time.
The IBC (inter blockchain communication) is the Cosmos protocol for blockchain interoperability, which went live earlier this year.
With IBC enabled, people can travel back and forth between blockchains on Cosmos seamlessly to utilise the best aspects of each one!
Cosmos are working on ‘cross-chain composability’.
Beyond interoperability within the Cosmos ecosystem, work is being done to connect other blockchain ecosystems like Ethereum and Bitcoin. This will allow you to, as an example, borrow from Aave and then lead it on Solana.
Autonomy
When building on Cosmos, projects can launch their own sovereign blockchains – they are not subject to the rules of any layer 1 protocol (which is the case with applications built on top of a blockchain like Ethereum, which is like being a tenant in someone else’s building).
This means that blockchains can transfer value without experiencing the issues with some of the largest blockchains, such as Ethereum and its high fees.
Projects built on Cosmos can grow at their own pace and design their own economic model with low transaction fees.
What role does ATOM play in the Cosmos ecosystem?
ATOM is used to pay for Cosmos Hub fees to enable swaps to other chains. The Cosmos Hub is the economic centre of Cosmos. However, other currencies can be used to pay for these fees.
ATOM holders secure the Cosmos Hub by staking ATOM, and staking rewards are distributed to them in return.
Governance rights - Holding ATOM also gives one the right to vote on proposals that can change how the Cosmos Hub operates. Owning staked ATOM is similar in this sense to owning shares in the Cosmos Hub.
Holders also receive a percentage of the transaction fees of exchanges that take place on the Hub.
Upcoming Catalysts
Most of Cosmos’s game changing features are scheduled for launch in early 2022 including:
NFTs.
Staking derivatives – validators can tokenise their staked ATOM and use it in applications on the Cosmos Hub and therefore attract more users.
Tokenisation
Gravity DEX
The Gravity DEX is a cross chain decentralised exchange that will bring great liquidity and utility to Cosmos.
What makes the Gravity DEX different to other decentralised exchanges is that it allows for token swaps and transfers between different blockchains within the Cosmos ecosystem, by using the IBC (mentioned above).
The Cosmos team are working on connecting the Gravity DEX to major chains like Bitcoin and Ethereum.
Developers will be able to easily build a blockchain on the Cosmos Hub and permissionlessly list it on the Gravity DEX.
The Gravity DEX differs from Uniswap, which at the moment allows traders to have their orders processed first by paying a higher gas fee, creating an unfair advantage. The Gravity DEX will provide an order book so you can follow the market more easily and front running will not be possible.
Challenges
Cosmos have not invested much in marketing – one of Cosmos’s core developers explained that they have not put in effort to list on tier 1 exchanges.
This is part of Cosmos’ effort to commit to decentralisation, which may be helpful in being immune to regulatory crackdown, as SEC commissioner Hester Pierce claims that true decentralisation is the only way cryptos will survive upcoming regulatory scrutiny.
Competition
Polkadot is another blockchain ecosystem that provides interoperability (the ability to connect blockchains).
Polkadot differs in its technological architecture but has a similar goal to Cosmos. Polkadot raised $250 million in its ICO and invested heavily into marketing and branding, whilst Cosmos raised £15 million in its ICO and lacked marketing investment. Polkadot (DOT) has a market cap around 4x that of Cosmos (ATOM) yet delivering less so far in terms of network adoption, which indicates that Cosmos may be more undervalued. Nevertheless Polkadot has a greater brand awareness.
Capturing value for the ATOM token
ATOM’s main utility is staking and governance on the Cosmos Hub – but If blockchains decide to use other Hubs on Cosmos other than the Cosmos Hub (e.g. IRIS Hub), then other cryptocurrencies will be used for governance (e.g. IRIS token for the IRIS Hub).
Therefore, increasing the utility of the Cosmos Hub is important for the ATOM token to increase in value.
Cosmos are working on multiple things to increase the utility of the Cosmos Hub, including shared security, staking derivatives, bridges to Bitcoin and Ethereum, and most notable the Gravity DEX mentioned above.
ATOM Price – ATOM has recently broken its all-time high of $32 from May 2021, as the Cosmos ecosystem has got more and more attention. It is currently $37.47 with a market cap of approximately $8.4bn.
There are many strong projects in the cosmos ecosystem, besides established cryptocurrencies mentioned above. One being Akash Network:
Akash Network (AKT) - Market cap - $360mill, Price - $4.41
Akash Network is a decentralised cloud computing marketplace.
It connects those who need computing resources with those that have the capacity to sell.
The cloud computing industry is projected to be $370 billion by 2022.
Benefits:
Clients can be drawn into Akash due to being able to compute for a fraction of the cost benefits and the flexibility to move between various providers – currently, Google, Microsoft and Amazon dominate cloud computing, but using Akash Network you are able to save up to 10x.
Computing resource providers can benefit from selling unused capacity.
Currently, products offered by cloud providers are expensive and constrain clients into limited ecosystems.
Akash is also politically decentralised, as no single entity controls the network.
Concerns:
There is an element of centralisation as Akash owns 65% of the total supply, and control the ability to become a validator.
The graph above shows the deployment count on Akash Network growing at a phenomenal rate, recently overtaking 500.
Crypto partnerships: Solana, Kava Chainlink, Tendermint
Data Centre Partnerships: OrionVM, Packet (acquired by Equinix, largest data centre provider in the world)
Investors: Solana, Digital Asset Capital Management, Infinite Capital (3 of 19 investors)
What gives the AKT token value?
Owning AKT is the primary way to govern, secure and exchange on the Akash Network.
You can currently stake AKT for an impressive 70% APY approximately – don’t hesitate to contact GlobalBlock on how to do so.