Will Cosmos Ecosystem Become The New Home For DApp?

Blockchains like Ethereum are transitioning into more extensive payment layers, and most economic activity will take place on the various Layer 2 or Layer 3 chains built on top of that. A similar situation is playing out in Cosmos, where Cosmos Hub is trying to become the canonical layer of security for other application chains.

Cosmos fits the broader blockchain ecosystem

Cosmos is an ecosystem of blockchains that can scale and interact with each other. Before Cosmos, blockchains were isolated and could not communicate with each other. They are challenging to build and can only handle a small number of transactions per second, and cosmos solves these problems with a new technical vision.

Cosmos’ vision is to make it easy for developers to build blockchains and break down barriers between blockchains by allowing them to transact with each other. The ultimate goal is to create the Internet of Blockchains, a network of blockchains that can communicate with each other in a decentralized manner. With Cosmos, blockchains can maintain sovereignty, process transactions quickly, and communicate with others in the ecosystem, making it optimal for many use cases.

Cosmos aims to be the “Internet of blockchains” and has now attracted more than 275 decentralized applications (dApps) to its blockchain. One reason for this growth is that smaller teams have become easier to build on top of Cosmos since last April’s upgrade called the Parallel Inter-Blockchain Communication (IBC) protocol parallel to the Cosmos Software Development Kit (SDK).

This vision is achieved through an open-source toolkit such as Tendermint, Cosmos SDKs, and IBCs designed to quickly enable anyone to build custom, secure, extensible, and interoperable blockchain applications.

Cosmos, which has a proof-of-stake consensus mechanism, provides the Cosmos SDK for developers to enable cross-chain bridges between Ethereum Virtual Machine (EVM) compatible blockchains.

Problems Killing Ethereum

Unlike Cosmos, Ethereum tokens are among the groups most affected by the current crypto market instability and volatility. Despite a lot of attention on the subject over the past year, the London Hard Fork, and many statements from founder Vitalik Buterin, have planned and proposed new ideas to overcome existing challenges facing Ethereum and regulate high Ethereum gas fees. However, more efforts were needed to solve the problem.

This persistent problem is increasingly important as decentralized applications built for decentralized finance, decentralized exchanges, NFTs, and blockchain-based video games have become mainstream in the past two years. Decentralized financial instruments have led to a significant increase in popularity. As of this writing, there have been over $5 million in fees in the last 24 hours on OpenSea alone. OpenSea is the largest NFT marketplace and is built on Ethereum.

In other words, blockchains are designed to be a home for decentralized applications, the same way Ethereum does, and offer faster speeds and lower transaction fees. Some good examples are Binance Smart Chain, Solana, and Cosmos.

The future of dApps on Cosmos

Cross-chain interoperability

Cosmos blockchains are inherently tied together via the Inter-Blockchain Communication Protocol (IBC), which allows chains within the IBC to communicate natively with each other and send liquidity, messages, and assets across-chain. IBC, although in its early stages, provided an excellent platform for solving the bridging problem – the lack of a standard for monolithic blockchains for cross-chain communication. Every Cosmos blockchain is linked to IBC, as are many built from the Cosmos SDK.

Aggressions built on Ethereum cannot communicate with each other or the Ethereum Mainnet. Because of this, it is likely that we will see global blockchain adoption slow down due to significant bridge hacks as the day goes on and more and more compilations appear. In 2022 alone, between Ronin, Wormhole, and Harmonyhack, more than $1 billion was stolen from vulnerable bridge contracts. We need cross-chain communication standards.

Solve scalability

Now that we can easily create and connect blockchains, there’s one last problem to deal with scalability. Cosmos leverages two types of scalability:

• Vertical Scalability: This includes methods for scaling the blockchain itself. By eliminating Proof-of-Work and optimizing its components, Tendermint BFT can reach thousands of transactions per second. The bottleneck factor is the application itself.
• Horizontal Scalability: Even if the consensus engine and application are highly optimized, at some point, a chain’s transaction throughput will inevitably hit a threshold that it cannot cross. That’s the limit of vertical scaling. To get around it, the solution is to switch to a multi-chain architecture. The idea is to have multiple parallel chains running the same application and operated by a standard set of validators, making blockchains theoretically infinitely scalable.

This ecosystem of blockchains will offer outstanding vertical scalability at launch, which will be a huge improvement over current blockchain solutions. Then, upon completion of the IBC module, horizontal scaling solutions will be deployed.

Shared Security

Shared security is a new feature of this ecosystem. It was introduced by Sunny Aggarwal and was initiated by the recently adopted Atom 2.0 proposals in this blockchain ecosystem governance forum. The shared security model allows validators of one Cosmos blockchain to verify transactions on other Cosmos blockchains (up to a specific limit) by placing stakes in the blockchain’s tokens. It wants security – that is, shared security.

While Ethereum provides its own version of shared security for aggregates, there is a tipping point where aggregates become mining for Ethereum security as they attract the most users, apps, and TVL. This tipping point is unlikely to materialize fully, but it is essential to note the trade-off between scalability and security that Ethereum faces as the rollup ecosystem grows.

What’s Next

The emergence of application-specific compilations on Ethereum speaks to the desires of today’s developers and users. Builders want a fully customizable technology stack and refuse to be bound by Ethereum Layer 1 restrictions. Users wish for less or no fees and faster and more convenient transactions. Both builders and users have come to the conclusion that Ethereum L1 is not enough.

Cosmos knows this, and as ASR development continues on Ethereum, many of these projects will likely find Cosmos attractive. Convenience will lead to the next wave of blockchain adoption, and Cosmos is well-positioned to attract more builders and applications that will lead the charge.

Through a diverse array of DApps, Cosmos seeks to gain significant market share from Ethereum and other decentralized application blockchains. It’s cross-chain bridges and network specifications bring high speed and low cost to projects.

Can Cosmos continue to grow and effectively compete with Ethereum, Binance Smart Chain, and Solana? So it would be a mistake to ignore what is happening on this blockchain ecosystem.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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