Cosmos, which aspires to be the “internet of blockchains,” has seen massive growth, with over 260 blockchain projects — including prominent ones such as Binance Coin, Terra’s LUNA token and Crypto.com’s CRO Coin — built using the Cosmos software development kit (SDK). More than US$170 billion is now secured by the Cosmos ecosystem, according to Cosmos.
The Cosmos ecosystem saw a major upgrade in March with the launch of the Inter-Blockchain Communication (IBC) protocol, which allows independent blockchains to connect to each other permissionlessly to exchange data and value. Over 1.7 million cross-chain transactions have occurred between the more than 20 — and growing — IBC-enabled blockchains such as Osmosis, Cosmos Hub and Terra in the last 30 days, according to Map of Zones.
IBC has allowed for the creation of an entirely new cross-chain industry, said Peng Zhong, CEO of Tendermint, a core contributor to the Cosmos ecosystem, in a recent interview with Forkast.News. “We should see probably 30 chains with IBC enabled by the end of this year. I might predict over 200 by end of next year. That’s where innovation is going to be happening.”
Ethereum, the smart contract platform that hosts the majority of stablecoins, decentralized finance (DeFi) and non-fungible token (NFT) protocols, currently has US$170 billion in total value locked, according to DeFi Llama data.
“It’s a dizzying amount of complexity that’s beyond what Ethereum even has with a smart contract framework,” Zhong said. “Ethereum has smart contracts, there’s like tens of thousands of smart contracts, but in Cosmos, there can be tens of thousands of Ethereums and each one of those have tens of thousands of contracts.”
Formerly a web developer, Zhong joined Tendermint in late 2015 as the company’s chief design officer. Since then, Tendermint has gone on to develop Cosmos infrastructure and tools such as the Tendermint Core engine, Cosmos SDK and IBC protocol to help developers and projects build their own blockchains quickly and enable the exchange of data and tokens across blockchains.
The following Forkast.News interview with Zhong has been edited and condensed.
See related article: What is Cosmos — the ‘internet of blockchains’?
Why is Cosmos called the “internet of blockchains”?
Cosmos is an ecosystem of interoperable yet autonomous blockchains that are able to exchange information and tokens between each other permissionlessly.
Cosmos was an idea created by the founders Jae Kwon and Ethan Buchman in 2016, with a white paper that outlined what the Internet of blockchains is. A fundraiser in 2017 was launched by the Interchain Foundation and the first blockchain in the Cosmos ecosystem, the Cosmos Hub, launched in early 2019.
As of 2021, the framework that’s used to build Cosmos blockchains has become quite popular and there are over 250 blockchain projects built with the Cosmos software development kit (SDK). There is a lot of value being built with the Cosmos SDK, but at the same time, up until this year, it’s been value that hasn’t been able to transfer assets to each other since the white paper was written in 2016.
It’s only now, five years later, that Inter-Blockchain Communication (IBC) has been enabled. This was launched on the Cosmos Hub, the first blockchain in Cosmos, in March this year. There are over 20 blockchains built on the Cosmos SDK with IBC enabled and there’s been quite a lot of traffic flowing between these blockchains already.
How does Cosmos compare with Polkadot, a multi-chain ecosystem that has also generated a lot of excitement? Do you see Polkadot as a competitor to Cosmos?
Right now, Cosmos and Polkadot don’t compete, and I don’t see projects that improve on interoperability between blockchains ever really competing.
The main difference between Polkadot and Cosmos is the initial direction that each project took. Cosmos decided to focus on the idea of permissionless cross-chain exchange of data, which allows any Cosmos team to send data to any Cosmos chain. It allows developers to build a new chain today and launch it and send its tokens to the Cosmos Hub, and for the Cosmos Hub to send things like ATOM tokens to this new chain that just got created, that’s all possible in Cosmos today.
What Polkadot started building first was this idea of shared security, which means that it’s not a permissionless ecosystem where anyone can build a new chain and send tokens back and forth between these chains. Instead, it’s a system that has a little bit more order to it, and it does allow with the relay chain, the ability to connect to up to 100 other parachains, but to become a parachain generally, you’re going to need a lot of DOT tokens and to be able to win an auction to become a parachain. That means that in the Polkadot ecosystem as a DOT holder, you have a lot of power in which projects you want to allow to become a parachain and these projects bring a lot of value to Polkadot because it uses the same security. Whereas in Cosmos, people on the Cosmos Hub, ATOM holders, for example, currently have no say in what chains are able to connect to it. So the moment they launch, they’re able to connect to the Hub and back and forth.
With Polkadot of course, there is more value in being part of the relay chain and in being a DOT holder because you are securing all of these other chains. But in Cosmos, we believe that the freedom and the ability for people to build whatever they want and connect it to the network anytime they want will allow for a lot more innovation and growth.
How is security managed in the Cosmos ecosystem?
Right now, every chain has its own security with a set of proof-of-stake validators. On the Cosmos Hub, there are 150 validators that are generally small to medium businesses that run infrastructure for a particular blockchain. Each validator runs the exact same software to ensure that the blocks being created are valid blocks.
There are innovations happening right now, there’s technology being built that will allow for shared security similar to Polkadot, but not exactly the same. For Cosmos Hub, research is being worked on to develop interchain security, which is a protocol that will allow the Cosmos Hub validators to also simultaneously validate another chain or multiple chains.
What is Tendermint and how does it fit into the Cosmos ecosystem?
Tendermint is essentially the oldest company in the Cosmos ecosystem. The co-founders of Cosmos, Jae Kwon and Ethan Buchman, also were the co-founders of Tendermint Inc., and Tendermint was formed in 2014 even before Cosmos was an idea.
I joined Tendermint as its first employee in late 2015, and when I joined, we were focusing on the Tendermint consensus protocol for enterprise blockchain. But after we decided to focus on the idea of Cosmos and launching the Cosmos, the “internet of blockchains,” our mission changed to building out the network, creating as much sovereign blockchains as possible and allowing people to control their own network with on-chain governance, but at the same time, be allowed to transfer assets between each other. There is a lot of potential in blockchain to really reshape collaboration and connectivity and decision-making across the world. We’ve seen a lot of examples of this with the chains that are IBC-enabled right now and we see a future where there will be hundreds, thousands, tens of thousands and a million blockchains further in the future and that’s what we’re building towards.
Cosmos was an idea created by the founders of Tendermint, but at the same time, Cosmos is a much bigger idea than can fit in any one company and because of the permissionless nature of our tools and also the open-source licenses that the tools have, there are many companies now that that build with Cosmos technologies that contribute to Cosmos.
What are some of the key features of the Cosmos ecosystem?
At a high level, Cosmos is all about autonomy, sovereignty and scalability. The ability for people to launch a blockchain in Cosmos and also be able to send tokens of the chains permissionlessly is really entirely unique. It means that developers and development teams that are low in capital, who don’t have a lot of money to buy a bunch of tokens of a particular project, can build with Cosmos. I am really passionate about keeping this core value because I’m formerly a web developer and to develop things on the web generally, you can do almost everything for free. This entirely free and permissionless nature of Cosmos is where we see Web 3.0 going.
There are risks in DeFi whether it is in one ecosystem or across chains, as we have seen through the exploitation of a bug in a smart contract or the manipulation of an oracle. Cosmos has been working on IBC for 5 years now and our technology is well-known in the industry for its high standards. Many of the top blockchain projects have been built with Cosmos technology including Crypto.org, Terra, and Binance Smart Chain. Everything we do is fully audited to ensure additional security.
IBC is meant to be a framework-agnostic standard similar to TCP/IP. So just as today, there are many different web development frameworks out there, Cosmos SDK is not meant to be the end-all solution either. As long as a blockchain framework will support IBC, it will allow it to connect to every other IBC-connected chain.
There is a lot of development and research happening with other blockchain ecosystems that may want to adopt IBC as well. So you can consider what sort of potential future is possible if, let’s say, Polkadot adopts IBC. Polkadot uses a substrate framework and if substrate has support for IBC, that means every single Polkadot parachain or even the relay chain are going to send tokens permissionlessly to Cosmos and back and forth. You can even see a future where Polkadot chains can talk to Kusama chains through IBC. And as more blockchains decide to support IBC, it’s a very strong networking effect. Instead of just connecting to Cosmos chains, the next network might be like be, “Oh, if I support IBC, I can connect to Cosmos and Polkadot chains,” and the following network might be like, “Oh, I can connect to Cosmos chains, Polkadot chains and Avalanche chains.” It becomes a no-brainer to support IBC.
What would you say are some of the factors driving Cosmos’ growth?
The main reason Cosmos is getting more visibility is that this year has been the year of the rise of the multi-chain narrative — the rise of the idea of bridges that need to exist between popular ecosystems. We believed in 2016 that we will reach this future, where there will be many blockchains of value and that they will be able to send assets with each other. So when we decided to design IBC, this protocol is meant to be one that can be used by every single blockchain project for purposes of permissionless connectivity. We saw the rise of DEXes, and we’re seeing the decline of centralized exchanges, and that can all be attributed to the development of cross-chain bridges.
With so many blockchains that have been developed, do you see consolidation in the industry?
A lot of specialization is how we see it unfolding. I believe Web3 in general and especially the Cosmos network and the Cosmos SDK, makes it very easy for small teams to create new features and make them accessible by every other blockchain in the Cosmos ecosystem. On a technical level, that’s one of the upcoming things that people really want to work on. They want to be able to use multiple protocols in different Cosmos blockchains and connect them all together in a way that would solve people’s problems. If they want to make some sort of automated investment, there are ways for multiple Cosmos chains to do things to your tokens and send them back to you in a way similar to Ethereum smart contracts.
But on the user level, I would expect that a lot of users are uncomfortable with the idea of managing tokens on, let’s say, thousands of blockchains. How can they keep track of where their assets are? So there will be some consolidation, but a lot of the consolidation can happen on the UI level, in the wallet level. The wallets have a lot of opportunities to potentially even hide away the blockchain backend and abstract away blockchains completely.
What are your thoughts on the highlights of 2021 and predictions for 2022?
Cosmos the ecosystem has finished its whitepaper that’s enabled IBC, and it’s allowed for this creation of an entirely new cross-chain industry. We should see probably 30 chains with IBC enabled by the end of this year. I might predict over 200 by end of next year. That’s where innovation is going to be happening.
Cross-chain decentralized exchanges DEXs like Gravity DEX and Osmosis have made people understand the value of a multichain world, and I want to give props to these projects for really bringing in a lot of users to Cosmos.
The NFT industry has a lot of maturing to do. I’m a little bit concerned about speculation happening over NFTs. Concerns have been raised quite often about the ability of anonymous addresses to buy, sell and inflate the value of NFTs beyond what a person might actually pay for. and that’s going to attract the attention of regulators. But at the same time, regulation is something that is there to protect consumers. We’re happy to work with regulators to ensure that what we’re building is something that is really for everyone and not rife with scams potentially.