The Bankless Guide to Cosmos

Cosmos is a decentralized network of interoperable and independent blockchains.

Unlike singular chains like the Ethereum mainnet or alternative “layer 1” (L1) chains such as BNB Chain or Solana, Cosmos employs the Inter-Blockchain Communication Protocol (IBC) to enable seamless token and data transfer among its connected Cosmos chains.

In this way, the Cosmos network relies on a “layer zero” (L0) model, as the project provides a framework for creating custom-tailored blockchains that are interoperable with other Cosmos-powered chains. Apps can deploy as “appchains,” or application-specific blockchains, rather than directly onto Cosmos as they would on an L1. All of these chains are supported by the underlying Tendermint Core consensus engine, which ensures the wider network’s security and efficiency.

At the heart of the Cosmos network is the Cosmos Hub, which is the first and foundational blockchain deployed on the platform. In this ecosystem “Hubs,” such as the Cosmos Hub, interconnect “Zones,” which are analogous to shard chains in the Ethereum ecosystem. The Cosmos Hub itself is a proof-of-stake (PoS) blockchain secured and governed by ATOM token holders, making it directly comparable to, and usable as, L1 infrastructure.

How Cosmos works

The three foundational elements of the Cosmos network’s infrastructure are the IBC Protocol, Tendermint Core, and the Cosmos Software Development Kit (SDK).

The IBC Protocol is a messaging protocol similar to TCP/IP that enables multiple distinct blockchains to communicate with one another, fostering interoperability. This system allows users to readily participate in and move assets among all the various Cosmos chains that exist.
The Tendermint Core consensus algorithm forms the true foundation of the Cosmos, as it were, since it works to secure and interconnect all Cosmos chains. This system uses a PoS consensus mechanism to provide faster transaction times and lower energy consumption compared to proof-of-work (PoW) protocols like Bitcoin.
The Cosmos SDK is an easy-to-use, open-source toolkit that makes it easy for projects to build their own PoS or proof-of-authority (PoA) blockchains. Instead of relying on a virtual machine-based approach, the resource offers a customizable structure to build unique blockchains tailored to specific applications. This model grants developers greater freedom and influence over their projects.

The pulse of Cosmos

Remember that Cosmos is an L0, a network of networks, so it doesn’t directly facilitate its own DeFi or NFT activity. To get a sense of the current pulse of the Cosmos ecosystem, then, you have to compare its appchains and alt-L1 stats against the stats of other L1s and L2s.

For example, at the time of writing the largest Cosmos chain was Cronos per its $305M in total value locked; this current TVL level makes Cronos the 10th-largest DeFi chain according to DefiLlama. Beyond Cronos, the largest Cosmos chains in operation today include Kava ($148M TVL) and Osmosis ($116M TVL)..

The ATOM token

The Cosmos ATOM token plays a crucial role in maintaining consensus and security for the Cosmos network. Similar to how ETH works for Ethereum, ATOM is used to cover transaction fees on Cosmos. Where ATOM and ETH differ, though, is that ATOM can be used to vote in onchain governance matters, while there is no governance analogue to this for ETH.

Per this guide’s latest update, ATOM was trading around the $8.35 USD mark with a $2.44B market capitalization, making it the 30th-largest crypto in the cryptoeconomy at the time; its circulating supply was just over 292 million out of an infinite max supply.

Popular venues for trading the ATOM token include both centralized and decentralized exchanges. Centralized exchanges, such as Binance, Coinbase, and Kraken, offer a traditional trading experience with higher liquidity and advanced trading features. On the other hand, decentralized exchanges, like the Osmosis appchain on Cosmos, provide a trustless, peer-to-peer trading environment, giving users more control over their assets and swaps.

What you need to use Cosmos

A Cosmos wallet — Today, Keplr Wallet is the most popular browser extension/mobile wallet for opening and managing Cosmos ecosystem addresses. After downloading, use the Create New Account option to proceed. You’ll need to back up your mnemonic seed, name your account, and create a password. Then, you’ll be all set to receive your first ATOM deposit!
Starter ATOM — To start making Cosmos-based transactions, you’ll need ATOM in your wallet to cover gas costs; an easy way to begin is to buy a small amount on your CEX of choice and then deposit it to your Keplr Wallet address.

How to bridge to Cosmos

A wallet like Keplr will make it easy to find and move funds to different Cosmos chains. However, if you’re interested in moving Ethereum-based assets to Cosmos or Cosmos-based assets to Ethereum, the primary bridge to use is the Gravity Bridge, which has been purpose-built for the Cosmos ecosystem.

However, individual Cosmos chains may have their own bespoke bridging UIs, like the Canto Bridge, that you can also consider.

What to do on Cosmos

1. Trade on Osmosis

Osmosis, a popular decentralized exchange within the Cosmos ecosystem, is an appchain that requires its native OSMO tokens for trading.

To get started, visit app.osmosis.zone/assets and connect your Keplr wallet. Deposit ATOM by selecting “Cosmos Hub – ATOM” and entering the desired amount. After the transaction is complete, navigate to the Osmosis Swap page, input the amount of ATOM you want to exchange for OSMO, and click Swap. Approve the transaction, which will be fee-free for your first trade since you don’t have OSMO yet.

2. Collect NFTs on Stargaze

Looking to do more than just trading on Cosmos? Consider picking up some STARS tokens on Osmosis, as these are the native token of the Stargaze NFT marketplace appchain. With STARS in hand, visit your assets dashboard on Osmosis, scroll down to the token and then withdraw your funds to Stargaze. Once your tokens appear on the marketplace, you can begin browsing the available collections, like Bad Kids, to find the first Cosmos NFTs you want to collect.

3. Stake CANTO on Canto

Canto, a Cosmos-based blockchain launched in August 2022, features in-built DeFi primitives such as Canto DEX, Canto Lending Market, and the $NOTE cryptodollar, all compatible with the Ethereum Virtual Machine (EVM). Its unique offering includes Contract Shared Revenue (CSR), allowing smart contract creators to earn a portion of transaction fees generated from user interactions with their projects. Staking, or delegating, involves securing the Canto network by locking up CANTO tokens, which in return provides users with rewards in the form of additional CANTO and voting power for governance proposals.

Additional Cosmos apps

Eager to discover more of what the Cosmos app scene has to offer?

If you’re prepared to dive in, these apps represent some of the most popular projects on Cosmos that you can explore today:

Kava Lend — Lending on Kava
OKCSwap — DEX on OKExChain
Beefy — Yield aggregator on Canto
Curve — DEX on Kava
Mars Protocol — Lending on Osmosis

Additional Cosmos resources

If you want to delve in further and enhance your knowledge of Cosmos in general, numerous additional resources are worth investigating. Here are a few you can use to learn more:

Zooming out

Through its unique Layer 0 infrastructure, Cosmos facilitates seamless communication and asset transfers between its connected chains, empowering developers to create custom-tailored blockchains for specific applications.

With a range of popular projects and resources to explore, the young Cosmos ecosystem already offers many possibilities for users and developers alike. Whether you’re interested in trading tokens, collecting NFTs, or staking on various platforms, the Cosmos ecosystem has something for everyone.