The Cosmos ecosystem explained

The Cosmos ecosystem explained

The Cosmos ecosystem is a decentralized network designed to connect various blockchains as part of an ambitious drive to power an ‘Internet of blockchains’. Using a novel technology called Inter-Blockchain Communication (IBC) protocol, Cosmos is able to facilitate seamless interaction and exchange of information between chains in its ecosystem. At the same time, Cosmos also offers tools that can drastically streamline and speed up the development of purpose-built blockchains, as part of a bid to reimagine what building blockchain applications can really be. 

Ultimately, Cosmos seeks to solve the limitations of the current generation of blockchain tech and usher in a new era of increased scalability, usability and interoperability in the blockchain space. Here’s how it hopes to achieve that.

The early days of blockchain app development

The early iterations of blockchain tech have been largely dominated by the core principles introduced by Bitcoin. The original blockchain network was born with a specific goal in mind – to offer a decentralized alternative to the traditional financial system. This was a cause that managed to attract a passionate community of developers and evangelists, who took on the mantle of maintaining and further developing the tech and showcase its benefits to the world. 

Soon it became apparent that blockchain technology could be used for much more than just payments and other transfers of value. On the contrary, its unique properties were applicable to a variety of use cases. This inspired many to start building their own blockchain applications. However, in those early days,  developing blockchain applications typically meant building entire blockchains customized to serve specific use cases. And that had its problems, namely the fact that building entire blockchains is a rather difficult and complicated task. Another challenge stems from the limited interoperability between independent chains.

Then came Ethereum, ushering in the next major phase in the evolution of blockchain technology. Ethereum’s inventor, Vitalik Buterin, has said that his intention was to create a general-purpose platform capable of supporting all types of blockchain, or decentralized, applications. Ethereum could do this thanks to a virtual machine (Ethereum virtual machine, or EVM) capable of executing custom logic in the form of smart contracts.

Ethereum’s arrival was a true game changer for dApp development. Not only were smart contracts much easier to write than entire blockchains, but they could also be deployed permissionlessly to the Ethereum network, which meant that anyone with relevant expertise could develop a decentralized application (dApp) relatively easily. And since all dApps exist on one the same blockchain, they can interact with each other just fine, circumventing the interoperability problem.

But while Ethereum’s approach solves some of the early problems of blockchain app development, it’s not without limitations. Chief among them is the scalability problem, which stems from the fact that Ethereum is still a Proof-of-Work blockchain. And while the upcoming shift to Proof-of-Stake, as well as the implementation of sharding and a variety of Layer 2 solutions, will alleviate that problem, at its core, the Ethereum model will always require dApps to compete for the limited resources of a single network.

A new paradigm shift

Despite the aforementioned limitations, the dApp model introduced by Ethereum has proven its merit and has deservedly established itself as the go-to method for blockchain app development. The model is so prevalent that Ethereum is by far the most popular platform for dApps, while EVM compatibility has become a major selling point for many rivaling networks.

That said, others have gone to explore alternative approaches and Cosmos has been one of those projects.

At the core of Cosmos’ approach is the vision of the Internet of Blockchains – a vast, interconnected system of blockchains, each specifically designed to serve a particular use case. At a first glance, this seems as a step back as it resembles the pre-Ethereum approach to blockchain application development. There are a couple of important differences, however, the chief among them being that Cosmos is using powerful tools to make blockchain development vastly easier and more streamlined than ever before. At the same time, the Cosmos ecosystem also supports also works to ensure seamless interoperability between chains, removing the second major hurdle to using purpose-built blockchains as a viable alternative to dApps.

Cosmos achieves this with the help of a set of robust tools. Here are the highlights:

Tindermint BFT

Tindermint is an open source tool that takes care of consensus and networking for a blockchain protocol. This saves massive time and leaves developers free to focus their efforts on building the application layer of the blockchain. Tindermint can connect to any application via an intermediary protocol called ABCI (Application Blockchain Interface). One of the advantages of this protocol is that it works with any programming language, which means developers can choose the language that best suits their needs.

Another advantage is that Tindermint supports both private and permissionless networks. The developers only need to specify whether they would use a restricted validator set (private network) or would allow anyone who has staked a specified amount of tokens to be a validator (PoS permissionless network).

Because Tindermint uses Proof of Stake, it enables the creation of high performance networks, with block times that can reach as low as one second. Another property of Tindermint is that, unlike Proof-of-Work networks like Bitcoin and Ethereum, it supports instant finality.

Cosmos SDK

Cosmos also seeks to make building on top of Tindermint as easy as possible. And this is what Cosmos SDK is designed to do. It is a generalized framework that comes with robust tools for developing secure applications on Tindermint. 

A big part of what makes this possible is Cosmos SDK’s modular design, which affords a lot of flexibility to developers looking to build blockchain applications. The idea is to create a rich ecosystem of modules to allow developers to easily implement different functionalities and features into their blockchain applications. This commitment to modularity and customizability is also reflected by the fact that anyone can contribute to the growing ecosystem by building new modules.

Cosmos SDK also provides tools for building command line interfaces, REST servers and utility libraries.


If Tindermint BFT and Cosmos SDK take care of blockchain and application development, respectively, IBC, or the Inter-blockchain communication protocol, enables the exchange of information between blockchains in the Cosmos ecosystem.  

Considering that different chains could have different approaches to how they do build their infrastructure, IBC is designed to work with a wide variety of blockchains. In order to be IBC-compatible, blockchains need to meet just a few requirements, most notably to have consensus layers with instant or fast finality. Naturally, this excludes Proof-of-Work blockchains.

In short, the IBC protocol is ideal for connecting Tindermint chains into one cohesive ecosystem under the Cosmos banner. In addition, it can also facilitate communication with external chains that have fast finality. All this allows the Cosmos ecosystem to grow organically, while remaining connected to the broader Web3 sector.

Perhaps the most remarkable aspect of the Cosmos ecosystem is its modular design based on ‘Hubs’ and ‘Zones’. In order to keep the number of connections between chains from ballooning, Cosmos utilizes IBC in a much smarter way. The protocol is used to connect separate chains, or Zones, to a  special blockchain called a Hub. Once a Zone is connected to the Hub, it can communicate to every other chain connected to that hub. This approach is similar to the method used by Polkadot, which relies on a ‘Relay Chain’ that connects the various ‘parachains’ in its ecosystem.

Beyond fast finality

The setup described above still leaves one notable omission – blockchains that do not have fast finality, for example PoW chains like Bitcoin. To solve this problem, Cosmos introduces its own take on the blockchain bridge concept in the form of “Peg Zones’.

A Peg Zone is a proxy chain that has fast finality which ensures IBC compatibility. The Peg Zone can then act as a bridge between the target chain and the Cosmos ecosystem. A Peg Zone needs to be custom-built to serve a specific target chain.

The Cosmos ecosystem is growing

Cosmos has already managed to establish a thriving ecosystem, centered around the Cosmos Hub and fueled by its native ATOM token. Users can stake in the Cosmos Hub and are rewarded for their efforts with ATOM tokens. The Cosmos ecosystem already hosts some 265 apps and over $65 billion worth of digital assets.

Looking ahead, Cosmos aims to continue to expand its ecosystem with a myriad of interconnected chains and apps until it creates a true Internet of blockchains. It remains to be seen whether this ambitious vision will come to fruition.

At LimeChain, we have significant experience in leveraging Cosmos’ powerful tools to build impactful applications. Currently we’re using Cosmos technology as part of our work on the CUDOS Network, which seeks to provide a Web3 alternative to traditional cloud computing. If you’re looking to harness the power of Cosmos for your innovative product, don’t hesitate to get in touch with us!