Pantera Capital Partner: Cosmos Core Strengths and Ecological Status

Author: Paul Veradittakit, Managing Partner, Pantera Capital; Compiler: Leo, BlockBeats

Recently, Paul Veradittakit, managing partner of Pantera Capital, wrote an article on "Cosmos' Current Core Technology and Ecological Projects", explaining the core advantages of Cosmos in technology, the innovation mechanism in the application chain, and several important projects in Cosmos at present. BlockBeats compiles as follows:

The major challenge facing traditional blockchains today is the advancement of their widespread adoption and scalability. One of the challenges is the lack of interoperability between different chains, making communication and data transfer complex and inefficient. Additionally, because the design was focused on security rather than scalability, scalability has always been the primary challenge, resulting in slower communication speeds, more congested networks and thus increased costs.

Cosmos has introduced a solution to these challenges by introducing an interconnected blockchain paradigm, which leverages the Interchain Communication (IBC) protocol to enable seamless communication and secure transfer of assets between different chains. With a standardized framework for interoperability between chains, Cosmos facilitates efficient cross-chain interactions, expanding the possibilities and usefulness of blockchain technology. Furthermore, Cosmos solves the scalability problem through its modular architecture and consensus algorithm. Developers can use the Cosmos SDK to create application-specific blockchains, called "zones." Zones (independent blockchains, also called regions) can adopt different consensus mechanisms, allowing horizontal scaling and optimizing performance. By supporting parallel processing across multiple zones, Cosmos significantly improves the transaction capacity and scalability of the network, and also leverages the Comet consensus algorithm, providing fast block confirmation times, increased security, and the ability to resist malicious attacks. This class of consensus algorithms serves as a reliable foundation for interconnected blockchain networks, combining efficiency, finality, and robustness.

Core: Cosmos SDK, IBC and Comet

The Cosmos SDK provides developers with the ability to create custom blockchains or zones that meet specific needs and goals. Leveraging the interoperability features of Cosmos, these custom zones expand the boundaries of interchain interactions. The Comet consensus algorithm enhances this functionality, ensuring that the Cosmos network operates securely and efficiently. In addition, IBC also supports seamless communication across different chains.

Cosmos Highlights

Interoperability: The strength of Cosmos lies in its guarantee of interoperability, enabling easy connection between independent blockchains in the Cosmos network. This interoperability facilitates breakthroughs in cross-chain applications and collaboration, driving innovation and enhancing the utility of decentralization.

Scalability and performance: Cosmos addresses scalability issues by authorizing the creation of independent blockchains or zones that can customize their consensus mechanism and scalability based on user needs. This approach supports horizontal expansion by incorporating additional zones to accommodate increased transaction volume. Therefore, the Cosmos ecosystem has excellent performance and scalability.

Personal Sovereignty: The Cosmos ecosystem provides an ideal platform for creating chains focused on individual sovereignty. By leveraging the infrastructure provided by Cosmos, such as the Cosmos SDK, IBC, and the Comet BFT consensus algorithm, developers have the flexibility to customize any aspect of the technology stack to enhance performance, throughput, security, and other key factors of the chain. For example, EVM chains like Evmos are built using existing technology stacks. In addition, it is also possible to build chains running on different VMs, such as Move or SVM, by developing a dedicated application layer to support these specific virtual machines (VMs).

Developer friendly environment: Cosmos provides a friendly environment for blockchain developers. The Cosmos SDK is a feature-rich platform for building dApps. Utilizing the SDK's modular framework, developers can create their own unique blockchains outside of the SDK, simplifying the development process. This simplified approach allows developers to create custom chains that extend from the Cosmos SDK, thereby increasing the adoption and growth of the blockchain ecosystem.

Cosmos application chain

Lisk is an integral part of the Cosmos innovation ecosystem, representing specialized and application-specific blockchains for different use cases. Unlike traditional monolithic blockchains, a modular approach is adopted through the Cosmos SDK, enabling developers to customize consensus, storage, and network mechanisms to the specific requirements of their dApps. This gives Lisk a degree of autonomy, giving developers greater control over their applications and enhancing their ability to shape the user experience. In addition, the Cosmos application chain model provides attractive revenue opportunities, allowing dApp creators to explore unique monetization strategies and promote sustainable growth within their respective chains.

Additionally, the flexibility of Cosmos AppChains extends to the processing of MEVs. By providing developers with the tools to design MEV strategies that suit their needs, Cosmos incentivizes fair and transparent MEV extraction, promoting a fairer and more efficient ecosystem. Furthermore, the interconnectivity facilitated by the IBC protocol is a key advantage of the Cosmos application chain model. Support seamless communication and asset transfer between different application chains, support the development of advanced cross-chain DeFi applications, and expand possibilities for developers and users. In conclusion, Lisk in the Cosmos ecosystem offers a promising avenue for dApps development, offering sovereignty, revenue opportunities, flexibility on MEV, and seamless interoperability, thereby fostering a vibrant and thriving blockchain ecosystem.

Interchain Security

Interchain security is a breakthrough approach aimed at enhancing the security of new Cosmos chains and facilitating their smooth launch. It involves the concept of "renting" economic security from the already established security chain (Cosmos Hub) in the Cosmos ecosystem.

Key Advantages

Economic security leasing: In order to launch a new Cosmos chain, developers can take advantage of the security of Cosmos Hub or other security chains by locking a certain amount of new chain native tokens as collateral. This process helps to establish a financial link between the new chain and the security chain.

**Cross-chain security: **Gain economic security through inter-chain security. The new Cosmos chain is more resistant to attacks. It can rely on a large number of different validators in the security chain to protect its transactions and assets, reducing the risk of 51% attacks and other security threats.

Independent blockchains: Each Cosmos chain operates independently, with its own governance, tokens, and use cases. However, through interchain communication protocols like IBC, they can securely exchange data and value, promoting interoperability and synergy within the Cosmos ecosystem.

By adopting interchain security and cooperating within the Cosmos ecosystem, new chains can significantly lower the barrier to entry and gain a robust and proven security infrastructure. Fostering innovation and accelerating the progress of blockchain development brings a new era of secure, connected dApps.

Cosmos SDK

The Cosmos SDK supports modularity, creating an ecosystem with a large number of interchangeable modules. This approach frees developers from the previous task of building complex functionality from scratch. Instead, developers can seamlessly integrate pre-built modules into their applications, simplifying application-specific blockchain creation. The Cosmos SDK provides high flexibility in module customization, allowing developers to precisely customize these modules according to their application needs, opening up a possible field for fine-tuning chain applications. As the Cosmos Network grows, so will the ecosystem of SDK modules, providing developers with extensible choices and capabilities. In this dynamic environment, complex and highly specialized blockchain applications can be nurtured, fostering innovation and driving the development of the Cosmos ecosystem.

The Cosmos SDK also prioritizes security through its capability-based security concept. These functions act as "guardians", clearly defining the boundaries between modules and mitigating the risks posed by malicious or unforeseen interactions. By protecting creation, the Cosmos SDK focuses on security measures.

Inter-Blockchain Communication Protocol IBC

IBC is a protocol of the Cosmos ecosystem designed to facilitate secure and decentralized communication across the blockchain. It acts as a bridge, facilitating data transfer across the Cosmos network. Through the use of cryptographic proofs and consensus algorithms, IBC promotes the integrity and trustworthiness of inter-chain transactions, maintains data confidentiality, and prevents tampering or unauthorized access. The protocol not only enhances chain interoperability, but also fosters collaboration and innovation by allowing project-based systems to be leveraged on the network. With IBC, Cosmos has the potential to usher in a new era of blockchain connectivity, opening up new possibilities for dApps, cross-chain asset transfers, and the creation of interconnected blockchain networks.

Tracking: Chain B continuously receives data headers from Chain A, and vice versa. This allows each chain to keep track of the other chain's validator set, essentially each chain running a light client of the other chain.

Binding: When the IBC transfer starts, the token is bound.

Proof Relay: Then, 10 token binding proofs are relayed from chain a to chain B.

Verification: Verify the certificate on the B chain against the data header of the A chain. If the certificate is valid, create 10 certificates on the B chain.

Cosmos environment

Currently, the Cosmos ecosystem is doing well, attracting various projects and establishing influential partnerships. By leveraging Cosmos' robust infrastructure, these projects tap into a highly interoperable blockspace, potentially unleashing powerful network effects. This seamless collaboration and integration greatly enhances the overall ecosystem, fostering innovation and driving the adoption of Cosmos as a popular blockchain solution.

Cosmos based projects

Osmosis

Osmosis is an innovative crypto project built on the Cosmos ecosystem, providing a DEX platform that facilitates liquidity supply. With the support of the IBC protocol, Osmosis can realize seamless token swap between different chains within the Cosmos network. This unique feature enables users to access various assets and pools, facilitating an efficient and secure trading experience. By leveraging the interoperability and scalability of Cosmos, Osmosis creates an inclusive and interconnected ecosystem that enhances liquidity and enables cross-chain collaboration. With its focus on user-centricity and optimized liquidity management, Osmosis opens up new opportunities for DeFi participants to explore a wider universe of assets and realize their trading potential.

dYdX

dYdX is a DEX platform popular for its user-centric approach to encrypted transactions. Under the premise that users can fully control their own private keys and assets, dYdX eliminates the dependence on centralized institutions and promotes a more secure and transparent transaction experience. dYdX runs on the Cosmos chain, utilizing the Cosmos SDK to facilitate fast and efficient transactions, as well as seamless interoperability with other Cosmos-based applications. In addition to basic crypto trading, dYdX also offers margin trading and lending services, catering to traders looking for leverage and lending users looking to earn interest on idle assets. With its strong security, Cosmos has a bright future on dYdX, revolutionizing the way traders participate in cryptocurrencies, while promoting the growth of the DeFi ecosystem.

Akash Network

Akash Network provides a decentralized cloud computing marketplace. By leveraging the security of Cosmos, Akash Network provides a secure platform where users can send data to each other and develop. The network operates through a PoS consensus mechanism, which improves the security of transactions. The native token of Akash Network is AKT, which is a practical token for ecology. Through the integration with Cosmos, Akash Network benefits from the interoperability and scalability of the larger network, enabling seamless communication with other blockchain platforms. Thus, Akash Network enables developers and organizations to gain access to affordable decentralized cloud computing resources.

You are Network

Sei Network is a high-performance blockchain platform that operates as L1 on the Cosmos SDK blockchain platform, providing users with financial services and promoting the deployment of the DeFi ecosystem. The network is the founders' realization of the need for a decentralized financial system that prioritizes transaction speed and security while providing users with innovative financial tools. Sei leverages its proprietary PoS consensus algorithm to provide secure transaction confirmation through tokenization and ownership verification. The platform's three-tier architecture includes a client layer, a service layer, and a chain platform layer, supporting high throughput of up to 20,000 transactions per second. With built-in support for smart contracts in the Rust and Solidity programming languages, developers can easily build custom projects and DeFi applications on Sei. The network's native token SEI serves as an internal asset for rewards, staking, and project management, promoting a sustainable and prosperous ecology. Additionally, Sei's integration with Cosmos gives it interoperability and scalability, allowing seamless communication with other blockchain platforms and enabling wider adoption and easier access to decentralized DeFi services. Ultimately, Sei Network will become an affordable and powerful blockchain platform that promotes financial inclusion and supports the development of cutting-edge applications in various fields of blockchain.

Neutron

Neutron is a DeFi platform in the Cosmos ecosystem, introducing a shift in cross-chain communication. Neutron's positioning is to become the first consumer chain on Cosmos, operating with an open policy, and the ability to communicate between chains to promote seamless interaction between different blockchain networks. Smart contract support in multiple programming languages via CosmWasm provides flexibility and scalability. Its interoperability enables developers to access the feature sets of other blockchains, opening up a new realm of possibility and unlocking the true potential of blockchain technology. By adopting security from the Cosmos Hub, Neutron facilitates a secure and reliable infrastructure, laying the foundation for a mutually beneficial relationship with Economic Zones. The characteristics and strategic positioning of Neutron herald an era of change in the Cosmos ecology and have a profound impact on the future of DeFi and inter-chain cooperation.

Celestia

Celestia is a Cosmos ecosystem project that provides consensus and security on demand. It aims to significantly reduce overhead by eliminating the need to bootstrap a new consensus network to facilitate blockchain deployment. Unlike traditional blockchains, Celestia's throughput scales with the number of users due to the unique property of data availability sampling. What sets Celestia apart is that its blockchain does not rely on the honest majority assumption for state validity, ensuring the highest standards of security. Additionally, Celestia's flexible design allows developers to define their own execution environment, giving them freedom and creativity. Celestia supports various types of Rollups, including EVM and Cosmos SDK, providing a solution for building a secure and scalable interconnected blockchain network.

Stride

Stride is a liquid staking platform built on the Cosmos blockchain that revolutionizes token staking and DeFi. By allowing users to stake any IBC-compatible token and earn stTokens in return, Stride unlocks liquidity and enables users to increase their yield through DeFi transactions. This innovative approach enables users to remain flexible while being rewarded, fostering a more vibrant and productive ecosystem. The platform attaches great importance to security and has passed multiple audits to ensure the safety of user assets. Stride is important because it reshapes the staking landscape, brings enhanced liquidity and yield opportunities to the Cosmos ecosystem, and drives growth in the broader DeFi space through seamless integration and user-centric governance.

Leap Wallet

Leap Wallet launches an innovative mobile browser extension and app dedicated to optimizing Web3 interactions with simplicity and security. Leap emphasizes user autonomy, ensures that all assets are under user control, and adheres to the concept of decentralization. Fast and cost-effective asset swaps facilitate DeFi investment and NFT exploration. Leap's extensive network of partnerships with dApps, Aggregators, DEXs, and Marketplaces creates a premium Web3 experience. The platform is rigorously vetted, creating a safe environment for users that fosters trust and confidence. Offering multi-platform support across a variety of devices, including mobile, tablet, laptop and desktop, Leap Wallet is a versatile tool that enables individuals to explore the limitless potential of Web3 while protecting their financial future.

in conclusion

Cosmos' own flexible architecture supports secure asset transfers between different chains and unleashes the full potential of blockchain technology. Notably, the flourishing of key projects such as Terra, Polygon, and Cronos on earlier versions of Cosmos underscores its versatility in supporting a diverse ecosystem. With the cooperation between Noble Chain and Circle, USDC has been seamlessly introduced into the Cosmos ecosystem, opening a new chapter in DeFi, and users are becoming more and more optimistic about Cosmos. Tether's launch of its USDT stablecoin on Kava, an L1 chain built on top of Cosmos, further strengthens Cosmos' multi-chain presence and brings a vibrant and connected future to the entire crypto community.