In common terms, HUB refers to the center of activity, a place where all actions happen. Originally HUB is a word from mechanics where all the spokes meet in a wheel making it pertinent for how a vehicle functions. Hubs are important for coordination and this plays a pivotal role in the Cosmos. In today’s article, we are looking at Cosmos, how it works.
Cosmos is an open source blockchain project that aims to connect other blockchains to each other, in order to establish an easily usable, fast, scalable, interoperable and low fee hub system. Cosmos envisions themselves as the internet of blockchains, which may sound similar to PolkaDot or Harmony One and these projects share many similarities among them.
In a traditional internet, when millions of interactions happen across social media such as Facebook, WhatsApp, all of these are controlled by a central entity. The Cosmos internet of blockchain would allow different blockchains to communicate with each other in a decentralized manner, so that no single person is able to control the entire process.
Hubs are important for systems to handle a high number of users as well as applications. In cosmos, they analyzed the crypto landscape and found no hub. In other words, they saw a large number of blockchains with interesting use cases, but the methods of communicating between these chains were not great. In fact, one of the biggest blockchain vulnerabilities that exists today are the blockchain bridges, which are tools used to move money from one chain to another. Cosmos created a hub and zone model that facilitates the transfer of tokens across various chains.
Jae Kwan, one of the founders of Tendermint protocol that later became Cosmos, stated in the POMP podcast that “if you want to use Blockchain A, but you only have tokens from Blockchain B, it is difficult to go across the two chains using the tokens you already have”. Although Atomic swaps take care of this, they are limited as they have to use specific hash algorithms as well as being capable of handling smart contracts.
The team at cosmos felt that there was certainly a gap in this process and developed the cosmos hub. The Cosmos hub improves this by letting any chain that has a zone, to use any chain that has a zone without worrying about atomic swaps or compatibility issues. The Hub does this by using IBC (Inter Blockchain Communication Protocol)
The IBC allows for seamless transfer of tokens between different zones that are attached to the cosmos hub using something called two way pegging. This idea comes from the bitcoin side chain projects that are used to scale the network. Cosmos uses the same idea to create representations of coins on other chains without compromising the security of the main chain.
The Cosmos team has also built the Cosmos software development kit (SDK), allowing developers to build blockchains using the Tendermint consensus algorithm.
The SDK minimizes complexity by offering the most common functionality contained among blockchains (i.e., staking, governance, tokens). Developers can create plugins to add any additional features they want to have.
Tendermint is the name of the original project created by Jae Kwon, Ethan Buchman and Zarko Milosevic. The Tendermint BFT algorithm validates transactions and executes blocks to the blockchain. It uses a protocol called the application blockchain interface to connect to applications. The protocol functions through a proof-of-stake (PoS) governance mechanism that supports integrating the computers’ distributed network running Cosmos Hub.
ATOM is the native token of Cosmos that is rewarded in return for securing the services on the Cosmos Hub. In 2019 and 2020, ATOM’s price hovered between $2 and $8. During a crypto bull run in 2021, ATOM’s price surged to a peak of $29.44 in May 2021. Four months later, ATOM’s price hit its all-time high of $44.54. From there, ATOM’s price dropped briefly before spiking again to $43.22 in October 2021 and it is currently trading at $12-$13 mark.
ATOM owners can stake their tokens to ensure network security, and in return, get a portion of the network transaction fees and block rewards distributed for validation. The token is also necessary for taking part in Cosmos Hub governance. ATOM owners can delegate their tokens or actively take part in governance by holding ATOM in their wallets.
Cosmos is typically a protocol that attempts to bring together several blockchains under a single roof. ATOM has some fantastic partnerships with the likes of Binance and also with the Oracle Corporation and networks such as OmiseGo. Blockchains can maintain sovereignty, execute transactions rapidly, and communicate with other blockchains in the ecosystem with Cosmos, making it ideal for a wide range of use cases.
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