Cosmos

  • Cryptoasset Report
  • October 2, 2018

Cosmos Hub is a Tendermint-based proof-of-stake blockchain that aims to be interoperable with any blockchain, communicate with any programming language, and support any tokenized asset.

Overview

Cosmos Hub is a Proof of Stake blockchain that aims to be interoperable with any blockchain, communicate with any programming language, and support any tokenized asset. If Cosmos’ ambitions come true, then Cosmos Hub will be just one of many blockchains within the broader Cosmos Network. Cosmos Network aims to enable data and value transfers between different blockchains, meaning a user could exchange Bitcoin for Ether via a Cosmos bridge. Cosmos blockchains can be built on an open-source codebase called Tendermint, which specifies the consensus process and makes use of Cosmos’ wider development stack. Cosmos Hub and the core services that other Cosmos blockchains use have been in development since 2014 while Cosmos Hub progressed to mainnet in March 2019

Cosmos blockchains can use the Cosmos Software Development Kit (SDK) to streamline the process of building out application-specific blockchains. Significant features of Cosmos Hub and the Cosmos stack include a byzantine fault consensus algorithm, a variation of proof-of-stake, cross-blockchain bridges capable of validating inter-chain transactions between incompatible blockchains, scalable transaction capacity through fast block times, an Application Blockchain Interface (ABCI) allowing developers to write dApps in any programming language, and on-chain governance. Blockchain architects can also opt for alternative Sybil-attack prevention schemes, such as Proof of Work. Cosmos Network is well-known for its interoperability functionality. Its Inter-Blockchain Communication (IBC) protocol is currently in development and promises to enable any network with the same finality guarantees to communicate and transfer value between them, offering the ability for networks to move towards a multi-chain world. As an example, Cosmos launched ‘Ethermint’ in 2018, which replicates Ethereum’s virtual machine functionality but uses the Tendermint consensus process.

Tendermint and other aspects of the Cosmos stack were invented and first developed by Jae Kwon, who has since stepped back from the project. Cosmos raised $17 million in an April 2017 token sale for Atom and was put under the control of the Interchain Foundation, with Jae Kwon as president. Tendermint, Inc., a for-profit Delaware company headed by Jae Kwon and contracted by the Interchain Foundation to deliver the Cosmos Network, also raised $9 million in a Series A in March 2019.

Protocol Details

Cosmos Network operates by connecting blockchains known as “zones” to other blockchains called “hubs” in a hub and spoke architecture that ensures global in-variance by tracking the total amount of a token and approving transactions between senders and receivers— since there are many blockchains running concurrently there is a need to keep track of the total amount of tokens moving between users and zones. “Zones” are blockchains, built using the Tendermint consensus protocol, that are written in any coding language and which have unique governance and consensus structures. A “hub”, in turn, is a blockchain that acts as an intermediary between otherwise incommunicable blockchain zones.

The Tendermint consensus mechanism builds on research around Practical Byzantine Fault Tolerance (PBFT). Through decoupling the consensus engine and actual blockchain application (via a simple API), Tendermint Core is designed such that applications can be built on the blockchain in any language regardless of the language used to write the underlying consensus mechanism. This is in contrast to, for example, Ethereum’s reliance on a relatively small number of languages for writing applications that are compatible with the blockchain. Tendermint requires deterministic finality (total commitment to the new chain implied by a block’s creation) at the time of block creation meaning that the time taken to process blocks ought to be short. In order to achieve this, Tendermint can only facilitate a limited number of validators, presenting a possible centralization attack vector.

Cosmos Hub is secured through a mechanism known as “Bonded Proof of Stake,” in which Atom holders can effectively delegate their tokens to a Validator. This is distinguished from a delegated proof of stake model because those who bond Atom can lose them if the Validator they are bonding to is caught cheating, whether through trying to submit invalid transactions or being accused of participating in a fork. Validators themselves can lose their Atoms if enough other Validators can submit a proof that s/he was trying to bond Atom on a fork of Cosmos: this is designed to mitigate the ‘nothing at stake’ attack to which proof-of-stake models are vulnerable.

Asset Details: Atom and Photon

Cosmos’ token, Atom, is used for staking to serve as a Validator in the main Cosmos hub. Although Atom was initially intended to be used for transaction fees as well, as is the case with most Proof-of-stake implementations, the team decided to introduce a separate fee token called Photons with a separate distribution and inflation mechanism. Such an architecture is similar to NEO’s two-token model. Validator nodes vote on new blocks with influence proportional to their staked atoms. Atom holders can delegate their Atoms to Validators and earn a commission on the Validator’s reward, which is denominated in both newly minted Atoms and collected transaction fees in Photons. Delegators can also lose their delegated Atoms if the Validator produces an invalid block.

Atoms also entitle holders to participate in Cosmos Hub’s governance, which is distinct from that of the zones to which it is connected. Validators and delegators can vote on various system parameters such as the block gas limit and generally coordinate system upgrades. There is also a written constitution which will hopefully align stakeholders, with an emphasis on action to be taken in the event of bugs or other similarly unforeseen issues.

The inflation mechanism for Atoms is as follows:

  • The yearly inflation rate is dynamic, based on the total supply of bonded Atoms, with incentives to encourage bonding of 2/3 of the total supply.
  • If the total bonded Atoms is less than 2/3 the total supply, inflation increases until it reaches 20%.
  • If the total bonded Atoms are more than 2/3 of the supply, inflation decreases until it reaches 7%.
  • At ‘equilibrium’ (2/3 of the supply bonded), annual inflation should be approximately 44%.