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Introduction to Cosmos Network and Its ATOM Token

UTC by José Oramas · 7 min read
Introduction to Cosmos Network and Its ATOM Token
Photo: Depositphotos

The guide provides an explanation of the Cosmos network that aims to solve the typical scalability issues, provide a marketplace for the outstanding number of networks in the space, and lay down a more beneficial protocol for the community with a unique and scalable network for blockchains.

Cosmos (ATOM) is a multi-asset distributed ledger. It could be best described as a network of many blockchains, each working independently with the Tendermint Byzantine fault tolerance (BFT) algorithm.

The Cosmos whitepaper dates back to 2016, but the protocol was first developed in 2014, when Tendermint, a core contributor to the network was founded. Since then, the main objective of Cosmos is to create solutions for problems such as scalability, usability, and sovereignty in the DeFi space. The ultimate goal of the protocol is to develop an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way.

How Does Cosmos Network Function?

Cosmos uses a wide set of protocols and mechanisms to function:

Cosmos Hub

The first blockchain launched on Cosmos is Cosmos Hub that aims to interconnect other blockchains in the ecosystem while retaining their security properties. It also allows interoperability and a new token economy. Every blockchain in the system works independently, in a parallel way, so that tokens can be swapped freely.

Tendermint BTF

Cosmos uses the Tendermint Core consensus protocol, which integrates the Tendermint Byzantine fault tolerance (BFT) algorithm. Tendermint BFT is a consensus engine that can turn black box testing systems into a distributedly replicated blockchain. In other words, the software takes a state transition machine written in any programming language and replicates it on other machines. The protocol is responsible for the Consensus on the Cosmos Hub.

Furthermore, the software requires a fixed number of validators to run. Each validator holds a public key that identifies it. Its security derives from the BFT through super-majority (more than two-thirds) voting and a locking consensus.

If the super-majority voting power is Byzantine, it causes a violation of safety by committing two values. If validators violate the protocol’s safety or at least attempt to do so, they are easily identified by their keys.

Application Blockchain Interface

Tendermint has two main components: a blockchain consensus machine and a generic application interface, called ABCI (Application Blockchain Interface), which Cosmos uses for its hub. The ABCI is a mechanism that defines the limit of the replicated blockchain and the state machine (the application).

Cosmos SDK

Cosmos SDK is a framework for developers powered by the Tendermint BFT algorithm. Its main task is to reduce the complexity of ABCI as well as allow developers to customize their decentralized applications (dApps).

Cosmos Hub and Zones

To understand how Cosmos operates, there are two main concepts to grasp: Hub and Zones. These concepts lay down a unique decentralized method with high scalability.

The Hub, as stated before, is the main blockchain of the protocol that manages several other blockchains working independently. These blockchains are called “Zones”. These zones can communicate with each other by providing Merkle-proofs as evidence of sent and received informational packages. This mechanism is known as inter-blockchain communication (IBC).

Likewise, the Hub is secured by a decentralized set of validators that can provide solutions to major attacks, such as network partitions or nation-state attacks.

In essence, every independent blockchain is a “zone”, a multi-asset network that can communicate with other zones using IBC packets. Besides, these zones can also be a source for tokens.

Governance

The Hub runs with a decentralized set of validators that govern the system. They coordinate and vote for the proposals in the protocol, such as software upgrades and constitutional amendments. Validators are responsible for their votes. If a validator fails to vote on a timed proposal, he gets deactivated for a period — the so-called Absenteeism Penalty Period that lasts one or more weeks.

To get a vote, validators need to bound their tokens. Delegators can inherit the vote from validators automatically. If a validator submits a proposal, he needs to make a deposit first using one or several tokens, which can include ATOMS. If a proposal is spam, voters can choose to take the deposit, resending it to the reserve pool.

When validators submit a proposal, voters have the following voting options:

  • Yea
  • YeaWithFore
  • Nay
  • NayWithForce
  • Abstain

The project will send proposals to the community to address zone failures. For instance, outbound tokens and outbound token transfers from certain zones may be throttled to allow a temporary halt of tokens when attacks are detected.

The Team Behind Cosmos (ATOM)

The protocol relies on two foundations: Interchain Foundation (ICF) and Tendermint, both founded by Jae Kwon, who first applied the BFT in a proof-of-stake (PoS) public blockchain and later founded Tendermint BFT. Kwon is currently the president of the Interchain Foundation.

Ethan Buchman joined Kwon in 2015. They met during a blockchain conference, later founding Cosmos. However, in 2020, Kwon stepped down as CEO of Tendermint. Peng Zhong, a blockchain architect and programmer, replaced him. According to Kwon, he still works with Cosmos and takes care of other initiatives in the project.

Several foundations are supporting Cosmos’ development:

  • Tendermint BFT (All in Bits inc).
  • Monax, a contract management platform that collaborated with All in Bits to implement the EVM (Ethereum Virtual Machine) on top of Tendermint BFT, creating Ethermint 1.0.
  • In 2016, Tendermint co-founders published Cosmos’ whitepaper named “A Network of Distributed Ledgers”.
  • Tendermint co-founders created the ICF at the same time in 2016 to support the launch and development of Cosmos.

Notably, the ICF raised $16.8 million in 30 minutes, making it a successful blockchain fundraising.

ATOM token

ATOM is the native token of the Cosmos protocol. In addition, it is the only staking token of the Cosmos Hub. ATOM tokens allow holders to vote, validate, and delegate to other validators.

How Does Atom Work?

Firstly, ATOMs allow holders to vote on protocol changes and proposals. Secondly, ATOMs can work to pay for transaction fees. Validators and delegators receive rewards with additional inflationary ATOMs and block transaction fees. To recover any proportionate number of tokens from the reserve pool, holders can use the BurnAtomTx transaction.

Meanwhile, validators can stake ATOMs if they are in a zone connected to the Hub. If double-spend attacks occur, Tendermint’s for-accountability will slash the tokens. A zone with the Byzantine majority of the voting power can commit an invalid state.

Distribution

The ICF distributed the Cosmos (ATOM) tokens in the following way:

  • 5% went to initial donors;
  • 10% reserved for the ICF;
  • 10% reserved for Tendermint;
  • 75% went to private and public fundraisers.

What Is Special About Cosmos?

The DeFi community has warmly welcomed the Cosmos Network. Being the “Internet of blockchains”, it aims to solve the typical scalability issues, provide a marketplace for the outstanding number of networks in the space, and lay down a more beneficial protocol for the community with a unique and scalable network for blockchains.

Cosmos Benefits and Risks

Like any other protocol, Cosmos has both pros and cons which you have to consider.

Its benefits include independent work of blockchains and keeping their sovereignty and security parameters. Interoperability between networks and scalability with Tendermint hybrid mining algorithm are also big advantages. In addition, with Cosmos (ATOM), blockchains work as sources for tokens, providing liquidity. Finally, Cosmos is a community-governance system, where users are identified by their keys.

Speaking of the protocol cons, the main one is that users are responsible for the tokens they send to other zones. The Cosmos Hub does not take responsibility for the failures of certain zones. In other words, it will not verify or execute transactions committed in other zones.

Conclusion

Many foundations support Cosmos with professional developers working on the project to ensure it is sustainable for its users. The decentralized finance ecosystem faces several challenges to date. Cosmos Network aims to solve those issues by implementing a framework where DeFi users can freely transact their tokens in a fast, efficient way, as well as providing high-security mechanisms.

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FAQ

What is Cosmos?

Cosmos (ATOM) is a multi-asset distributed ledger. It could be best described as a network of many blockchains, each working independently with the Tendermint Byzantine fault tolerance (BFT) algorithm. 

The Cosmos whitepaper dates back to 2016, but the protocol was first developed in 2014, when Tendermint, a core contributor to the network was founded. Since then, the main objective of Cosmos is to create solutions for problems such as scalability, usability, and sovereignty in the DeFi space. The ultimate goal of the protocol is to develop an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way.

Who is behind the project?

The protocol relies on two foundations: Interchain Foundation (ICF) and Tendermint, both founded by Jae Kwon, who first applied the BFT in a proof-of-stake (PoS) public blockchain and later founded Tendermint BFT. Kwon is currently the president of the Interchain Foundation.

Ethan Buchman joined Kwon in 2015. They met during a blockchain conference, later founding Cosmos. However, in 2020, Kwon stepped down as CEO of Tendermint. Peng Zhong, a blockchain architect and programmer, replaced him. According to Kwon, he still works with Cosmos and takes care of other initiatives in the project.

What are the key components of Cosmos Network?

Cosmos uses a wide set of protocols and mechanisms to function:

  • Cosmos Hub

The first blockchain launched on Cosmos is Cosmos Hub that aims to interconnect other blockchains in the ecosystem while retaining their security properties. It also allows interoperability and a new token economy. Every blockchain in the system works independently, in a parallel way, so that tokens can be swapped freely.

  • Tendermint BTF

Cosmos uses the Tendermint Core consensus protocol, which integrates the Tendermint Byzantine fault tolerance (BFT) algorithm. Tendermint BFT is a consensus engine that can turn black box testing systems into a distributedly replicated blockchain. In other words, the software takes a state transition machine written in any programming language and replicates it on other machines. The protocol is responsible for the Consensus on the Cosmos Hub.

Furthermore, the software requires a fixed number of validators to run. Each validator holds a public key that identifies it. Its security derives from the BFT through super-majority (more than two-thirds) voting and a locking consensus. 

If the super-majority voting power is Byzantine, it causes a violation of safety by committing two values. If validators violate the protocol’s safety or at least attempt to do so, they are easily identified by their keys.

  • Application Blockchain Interface

Tendermint has two main components: a blockchain consensus machine and a generic application interface, called ABCI (Application Blockchain Interface), which Cosmos uses for its hub. The ABCI is a mechanism that defines the limit of the replicated blockchain and the state machine (the application).

  • Cosmos SDK

Cosmos SDK is a framework for developers powered by the Tendermint BFT algorithm. Its main task is to reduce the complexity of ABCI as well as allow developers to customize their decentralized applications (dApps).

What is ATOM?

ATOM is the native token of the Cosmos protocol. In addition, it is the only staking token of the Cosmos Hub. ATOM tokens allow holders to vote, validate, and delegate to other validators.

Firstly, ATOMs allow holders to vote on protocol changes and proposals. Secondly, ATOMs can work to pay for transaction fees. Validators and delegators receive rewards with additional inflationary ATOMs and block transaction fees. To recover any proportionate number of tokens from the reserve pool, holders can use the BurnAtomTx transaction.

Meanwhile, validators can stake ATOMs if they are in a zone connected to the Hub. If double-spend attacks occur, Tendermint’s for-accountability will slash the tokens. A zone with the Byzantine majority of the voting power can commit an invalid state.

How is Cosmos network secured?

The Cosmos Hub is secured by a decentralized set of validators that can provide solutions to major attacks, such as network partitions or nation-state attacks. To avoid double-spend attacks, Tendermint’s for-accountability will slash the issued tokens.

What are the risks associated with Cosmos?

Users are responsible for the tokens they send to other zones. The Cosmos Hub does not take responsibility for the failures of certain zones. It will not verify or execute transactions committed in other zones.

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