Cosmos was founded in 2014 with a mission to create an “internet of blockchains,” enabling multiple blockchains to communicate and interact seamlessly with one another in a connected universe. Its native cryptocurrency, ATOM, is used as a means of exchange and secures the network through staking.
Problems that Cosmos aims to solve
There are three main concerns that Cosmos was designed to address:
1. Interoperability: There are hundreds of blockchains, but each one tends to operate in an isolated bubble, unable to interact easily with other blockchains outside that bubble. This fragmentation is an obstacle for projects that need to span multiple blockchains. Cosmos can facilitate the exchange of assets and data seamlessly between diverse blockchains, opening the door for a wide range of new use cases.
2. Scalability: As crypto networks grow, they often encounter congestion and slower transaction times. Cosmos provides a solution by allowing multiple chains to run in parallel, alleviating these scalability issues and ensuring that the entire system doesn't slow down as it expands.
3. Sovereignty: Many blockchain projects have their own governance systems, which can lead to fragmentation and conflicts. Cosmos introduces a governance model that empowers communities to govern their individual chains autonomously while remaining connected to the broader Cosmos network.
How Cosmos works
The Cosmos network is organised in a “Hub and Zones” model. At the centre of the network is the Cosmos Hub, the first blockchain launched on the Cosmos network. It serves as the main blockchain of the system. Other blockchains, known as “Zones”, can connect to the Cosmos Hub. Each Zone operates independently – it can set its own rules of governance and use its own validators – while still enjoying the benefits of being connected to the broader Cosmos network.
The key to Cosmos' interoperability is the Inter-Blockchain Communication (IBC) protocol. IBC allows different blockchains in the Cosmos network to communicate and transfer assets securely and efficiently.
At the heart of the Cosmos network is the Tendermint Core consensus mechanism. Tendermint is a Byzantine Fault Tolerant (BFT) system, meaning in theory that continue to operate correctly even if up to a third of the network’s nodes fail or act maliciously.
ATOM, the native cryptocurrency of Cosmos, plays a pivotal role in securing and operating the network. ATOM holders can participate in the network's governance, making decisions on protocol upgrades and changes. Additionally, they can stake their ATOM tokens to support the network's security and earn rewards.
As the crypto industry continues to evolve, Cosmos seeks to play a key role in shaping the future of the space, offering a solution that may bridge the gap between isolated blockchain networks.
Tip
Are you keen to explore Cosmos a bit more? You can learn about ATOM basics and get all the latest cryptocurrency news on Luno Discover.
Want to know how to buy, sell, send or receive ATOM? We’ve got answers in the following help articles:
This information is not intended to be nor does it constitute financial, tax, legal, investment or other advice; nor is it a call to trade. The information is intended as general market commentary for information purposes only. Before making any decision or taking any action regarding your finances, you should consult a qualified Financial Advisor.