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The Bankless Guide to Cosmos

Updated: Feb. 2024
Bankless Bankless Aug 11, 20234 min read
The Bankless Guide to Cosmos

Cosmos stands out in the blockchain universe as a network of independent yet interconnected blockchains, often referred to as "appchains."

This design contrasts with traditional, isolated blockchains by focusing on interoperability—the ability for different blockchains to exchange information and transactions effortlessly.

Accordingly, Cosmos is envisioned not just as a single blockchain but as a comprehensive framework for creating an entirely new kind of internet of value, one where blockchains can communicate freely, sharing data and value across the ecosystem.

This interconnectedness is what sets Cosmos apart per its mission to create a foundation for a more collaborative and efficient blockchain landscape.

How Cosmos works

At the heart of Cosmos' ability to bridge diverse blockchains are three foundational technologies: the Inter-Blockchain Communication (IBC) Protocol, CometBFT, and the Cosmos Software Development Kit (SDK). These pillars create a foundation for supporting various Virtual Machines (VMs) for flexible smart contract functionalities.

  • 🌌 The IBC Protocol is a messaging protocol similar to TCP/IP that enables multiple distinct blockchains to communicate with one another, fostering interoperability. This system allows users to readily participate in and move assets among all the various Cosmos chains that exist.
  • ⚙️ The CometBFT consensus algorithm forms the foundation of the Cosmos interchain ecosystem since it works to secure and interconnect Cosmos chains. This system uses a PoS consensus mechanism to provide faster transaction times and lower energy consumption compared to proof-of-work (PoW) protocols like Bitcoin.
  • 💻 The Cosmos SDK is an easy-to-use, open-source toolkit that makes it easy for projects to build their own PoS or proof-of-authority (PoA) blockchains. Instead of relying on a virtual machine-based approach, the resource offers a customizable structure to build unique blockchains tailored to specific applications. This model grants developers greater freedom and influence over their projects.
  • 🌐 The VMs on Cosmos like CosmWasm and Ethermint enable the deployment of smart contracts on Cosmos chains, facilitating the execution of complex programmable logic and applications. CosmWasm provides a secure and adaptable environment for development, while Ethermint ensures Ethereum compatibility, allowing developers to leverage Cosmos' interoperability and efficiency for Ethereum-based apps.

The pulse of Cosmos

The main blockchain at the heart of Cosmos, Cosmos Hub, is where ATOM holders can stake their tokens to help secure the wider network. At the moment, more than 254 million ATOM ($2.45B) are staked on the chain, with staking rewards currently yielding ~9% APY.

As for the wider ecosystem, there are nearly 40 additional independent blockchains deployed on Comsos today with a combined total value locked (TVL) of ~$1.4B. These appchains target a range of different use cases, including trading (Osmosis), liquidity (Thorchain), data (Celestia), and beyond.

At the time of writing, the largest Cosmos chain was Cronos, which has +100 DeFi projects built atop it across its current $337M TVL. This size presently makes Cronos the 15th-largest DeFi chain according to DefiLlama. Beyond Cronos, the largest Cosmos chains in operation today include Kava ($243M TVL) and Osmosis ($223M TVL).

Getting started by staking ATOM

To begin with Cosmos, a great starting point is by staking ATOM, which is currently trading around $9.64 per token. Staking offers passive returns via ATOM rewards and can help familiarize yourself with the basics of Cosmos transactions. Diving in is straightforward:

  • Create a Cosmos wallet — A popular option is Keplr, a user-friendly browser wallet for Cosmos chains that also offers an in-built streamlined staking interface. 
  • Acquire ATOM — The easiest path here is to buy ATOM on a crypto exchange like Coinbase or Kraken. When you have the funds you want to stake ready to go, deposit them into the Cosmos address you generated in Keplr. 
  • Stake through Keplr — With your ATOM in hand, click on the “Manage Portfolio in Keplr Dashboard” button in your wallet. In the “Staking” hub, click on “Cosmos Hub,” and then choose a validator to stake with from the provided list. Input the amount of ATOM you want to stake and approve the final transaction with your wallet.

Also, keep in mind that with Keplr you can follow this exact same staking flow for other Cosmos chain tokens that you want to stake with, like Celestia's TIA or Osmosis' OSMO.

Cosmos projects to try

If you’re a newcomer to the Cosmos ecosystem, there are a handful of notable projects you can consider exploring to begin with. Some popular options include:

  • 🔄 dYdX — A DeFi trading platform. 
  • 🧑‍🚀️ Gravity Bridge — A Cosmos-Ethereum bridge. 
  • 📈 Injective — A DeFi smart contract chain.
  • 🌌 Stargaze — An NFT marketplace. 
  • 🪙 Stride — A liquid staking platform for Cosmos tokens. 

Additional Cosmos resources

If you want to delve in further and enhance your knowledge of Cosmos in general, numerous additional resources are available. Here are some you can use while you're just starting out:

  1. 📜 Cosmos blog
  2. 🕳️ Cosmos Ecosystem portal
  3. Cosmos FAQ
  4. 📢 Cosmos News by ZKV

Zooming out

Through its unique interoperability-centric infrastructure, Cosmos facilitates seamless communication and asset transfers between its connected chains, empowering developers to create flexible and custom-tailored blockchains for specific applications.

With a range of rising projects and staking opportunities to explore, the young Cosmos ecosystem already offers many possibilities for users and developers alike. Whether you're interested in trading tokens, collecting NFTs, earning staking rewards, or beyond, the Cosmos ecosystem has something for everyone.


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