The Layer 1 DeFi leader is Ethereum (CRYPTO: ETH), but the second largest might surprise you if you aren't in the know.
That's because Cosmos (CRYPTO: ATOM) does things a little differently, with a system that connects the Cosmos Hub to hundreds of application-specific blockchains. Its solution provides services from the Hub as options for projects, but doesn't require the projects to use all of the features.
Everything is open source, so you don't need to talk to anyone from Cosmos or Interchain.
On Monday, Sept. 26, the Cosmos community will converge in Medellin, Colombia, for two days at Cosmoverse. Branded as "The biggest Cosmos event of the year," the Cosmos summit will feature three days of presentations from the founders and business and tech leaders discussing new and existing features that help projects in the Cosmos ecosystem make the best use of what Cosmos Hub has to offer.
Cosmos' utility token, ATOM, has suffered in 2022 along with most altcoins, but Cosmos is ready to build the token's utility with announcements set to come out at the show.
We spoke with Billy Rennekamp, Cosmos Hub product lead at Interchain GmbH, on the dynamics that separate an interoperable, multichain view of the future that seems to be popular right now vs. Cosmos' specific interchain approach to empowering Web3 projects.
Billy Rennekamp, Cosmos Hub product lead at Interchain.
BZ: How is Cosmos' vision different from other Layer 1 blockchain networks?
Rennekamp: "There's the Cosmos network, the internet of blockchains. And there's the blockchain called the Cosmos hub, which is the ATOM token blockchain. But the Cosmos network is really one of hundreds of chains that use the Inter‐Blockchain Communication protocol (IBC) to connect. So it's a different paradigm from Ethereum or Bitcoin (CRYPTO: BTC) or any other ETH killers that share Ethereum Virtual Machine (EVM) with many applications and users on a single blockchain. Cosmos is hundreds of blockchains. Each blockchain is typically dedicated to a single application, and they're all connected via IBC. So these blockchains can still interact in the same way two smart contracts can interact on a single blockchain."
What is the origin and intent of Interchain?
"The Interchain Foundation was founded in 2017 in Switzerland, and they helped perform the fundraiser for the ATOM token and Cosmos hub blockchain. But the vision of Interchain is more than just the Cosmos hub. It's about a new paradigm in which blockchains can scale and become accessible to mass audiences because they are application-specific and interconnected."
How long have you been part of developing the Cosmos ecosystem?
"Since 2017, I've been involved in Cosmos. I was working on the Ethereum space part-time and in Cosmos part-time.
When the IBC launched in 2020, I shifted my attention (to Cosmos) because I had launched a project on Ethereum and immediately ran into Gas costs. I launched an NFT project that was the leading Gas consumer in the summer of 2019. Users couldn't play what was essentially a toy or a game because Gas costs were so high.
I think there should be thousands of types of networks for all our blockchain applications. Now I'm focusing on interchain security … Because when you launch an application-specific blockchain, that blockchain must be as secure as it needs to be for that application. One of the problems you've seen with Ethereum is that every app deployed is paying the same price for security. And not all applications need World War III-level security ... We want applications to be on a custom network fit for their needs, instead of trying to make a one-size-fits-all approach like Ethereum."
What separates a multichain approach from an Interchain approach?
"I think of multi-chain as kind of a dirty word. We all expected or hoped that we'd have the simplicity of a single chain, and we realized that that's not viable and it's not what's going to happen.
So now, we deal with a multichain world with bespoke and cumbersome bridges that are breaking and getting hacked. And that's why multichain is a problem, whereas Interchain is a reality with many blockchains. It is designed to incorporate, encourage and be built with many chains in mind from day one.
What other blockchain projects follow the same idea of dedicated blockchains?
"Polkadot is the largest project that we're often compared to, and they have a top-down perspective on application-specific blockchains. We have a bottom-up perspective. All of (Polkadot's) application-specific blockchains must be secured by their central chain. In Cosmos, the chains may be secured by our central chain, but they are not required to be.
We offer the Internet of blockchains. They're trying to create the intranet of blockchains. In the Cosmos space, people can create their own blockchain and start building. We didn't realize it when Binance built (BNB) chain using our technology. They didn't have to ask for permission. So it's a bazaar model vs. a cathedral model that we've seen fascinating developments in and massive growth of blockchains compared to Polkadot, which has a much smaller number of projects working."
What about the future of the ATOM token?
"ATOM tokens have been criticized because they don't have value lock-in. Or the same sort of traditional story that projects like Polkadot have, where you have to use ATOM to participate in, and that's a long-term bet that we've made, is that ATOM is going to find all these other essential ways to accrue in value. Still, we'll not force you to pay ATOM upfront to benefit from the technology. We have a much longer-term bet on value accrual for ATOM, which is the point of Cosmoverse next week, where we announced the white paper 2.0, which focuses on the economics of ATOM itself and the Cosmos Hub blockchain."
What are people going to be seeing at Cosmoverse next week?
"It will focus on two major areas of development. One area is interchain security – that is our shared security model. And so that's going to create new revenue streams for the Cosmos hub and the ATOM token where each of these new blockchains will pay an ongoing fee to receive that security. The details and the economics will be part of the updated white paper. New chains who join as what we call 'consumer chains' will pay a fee in their new inflationary token to the provider chain, which is the Cosmos hub. So the provider chain provides security for the consumer chain. They send tokens to the provider chain, which are distributed to ATOM holders. Another big change is that we've just modified how inflation works so the ATOM token is much more sound money."
What is the key thing people need to understand about this interchain future? And what virtues does it offer beyond a multichain future?
"We bring in a configuration with the right balance of sovereignty and interoperability. And sovereignty is a weird word, and it's not very sexy, but its meaning is important. Applications have sovereignty and the ability to change themselves. They have the ability to be deployed on the infrastructure that they're necessary for. They have the ability to be custom fit for what they're meant to do. And today, we have all of these one-size-fits-all solutions that are very painful to work with. I don't know if you've ever heard developers complain about deploying smart contracts, but it is nowhere near the developer experience of working in web 2.0. And application-specific blockchains mean that you can recreate all of the standards of a Web2 industry that benefit the success of the Web3 industry, which is that technology and hardware are custom fit to support the purpose of the products. You're not retrofitting products into something that is decentralized by its nature. You're taking the decentralization, and you're applying it to the old technology. You're making Web2 decentralized, basically, instead of trying to insert web applications into a decentralized framework. And we think that that just unlocks the value and the ability for applications to be built for mass adoption."
What makes decentralization an essential part of Cosmos?
"It's related to the Cosmos philosophy. Application-specific blockchains make it possible for a huge variety of application types because they can be custom-built for their needs. Variety is the key there. I think some applications in the world are important to be decentralized for corporate censorship resistance. Some things are a priority to decentralize because the data is so important that there needs to be redundancy.
Decentralization has lost a lot of its meaning because it means different things for different people and in different contexts and different applications need different degrees of decentralization.
Cosmos Hub launched in 2019 in a completely decentralized manner. And I think it will get harder to launch a new decentralized network. We're going to see the rise and success of blockchain applications that don't need to be decentralized. However, they can still participate as part of Cosmos, using IBC. So, the importance of decentralization is mainly attached to a specific category of applications."
What would you see as the failure or limitation that caused some of the awful disasters we've seen this year, like Terra Network?
"I think that one specifically was hubris. I don't believe Do Kwon was acting out of malice, scamming, or anything. I think he wanted to make a massively successful mass-adoption product. And I think he was close to it. The idea that everyday users have access to stable tokens that have greater yields than people are used to with savings accounts – that is an extremely valuable product story.
Most every crypto project relies on early adoption to fund the development of the technology. The compounding returns of being an early adopter will only diminish over time. What's important is that the actual product value of that project has to increase over time. And at some point, the speculative value will run out, and the actual product value has to surpass it. Terra tried to do it too fast and too hard. But it doesn't mean that the product isn't a good idea."
What should we expect over the next 12 months from Cosmos?
"I think we'll see a lot of breakout hits on new application-specific blockchains. Osmosis is a really promising DeFi hub. I think that we'll see that when you have an application-specific blockchain, your product can really shine. I think we'll see new categories of apps that stand out independently. They probably won't have the same market cap as an Ethereum or an Avalanche because it's a single application. But I think that we're going to see people actually enjoying using these applications because you're able to cater a user experience specifically for it. And I think we're going to see the Cosmos Hub set a new course and direction for its next update. The Cosmos hub hasn't really made massive changes in the last few years because we put all of our time and energy into the IBC, Cosmos SDK and Tendermint (now Ignite) to make it possible for all these other projects to build."
The Last Word
In the tech space – even in Web3 – it's easy to lose track of the fact that new ideas are a finite resource, as well as our most valuable in the business of changing the world for the better.
Cosmos' approach to an interchain future is very persuasive in that philosophically, it puts the focus on how to meet the needs of each project or app vs. retrofitting each new project to the virtues of one blockchain that may have features irrelevant to the project but for which the project will still inevitably indirectly pay.
This reframing of the challenge and solution of developing in blockchain is the most compelling part of Cosmos. In 2022, a focus on solutions – not on pumping a single chain with all the feverish enthusiasm of the "home team" – seems more in keeping with the times.
Cosmos recently graduated its first class from the Interchain Developers Academy, a course run every three months with between 200 to 500 blockchain developers to help them understand how to build in the Cosmos ecosystem. Graduates receive a basic certification and keys to all the open-source tech Cosmos has available.
It's clear that even the leaders in blockchain – especially Bitcoin and Ethereum – don't have the standalone bandwidth to handle multiple global use cases and have to catch up regarding user expectations about carbon emissions. It is impossible to say where the future will lead the blockchain space, but Cosmos has a unique vision, and it is a utility-first take on the future of the space.
Cover photo modified from image by Felix-Mittermeier.de from Pixabay.
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