Go to https://wallet.keplr.app/chains/cosmos-hub, search for Chorus One from the list of validators, and click on it.
Go to https://wallet.keplr.app/chains/cosmos-hub, search for Chorus One from the list of validators, and click on it.
Enter the amount you want to stake (leave some amount in your wallet to pay for the fees)
Click on the Delegate button
Click on Delegate and then Approve the transaction in your wallet/ledger. You're now staking with Chorus One!
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Mintscan is the ecosystem's explorer.
It is the Software developer kit readily available for the entire Cosmos ecosystem and beyond.
Hubs serve as Zone routers. Cosmos terminology for "application-specific blockchains" is "zones." Each Zone is a spoke that is linked to a hub. Hubs may be linked to other hubs. This network of linked Hubs and Zones forms the Cosmos Network, sometimes known as the "Internet of Blockchains." It is important to note that the Cosmos ecosystem is completely permission-less, which means that anybody may construct a Hub or a Zone, and each blockchain is free to accept or prohibit connections with other blockchains.
Interchain Security Is the Cosmos Solution to Shared Security. Cosmos subscribes to the notion that sovereignty and interoperability are the two key ingredients for building an open ecosystem of blockchains that can scale for mass adoption. Read more about it here.
The Cosmos Network is a decentralized network of blockchains that are autonomous, scalable, and interoperable, laying the groundwork for a new token economy through horizontal scaling of individual app chains.
The Interchain Foundation is a project that supports the Cosmos Network. The Tendermint team did the majority of the original software development, but in the spirit of the Cosmos Network, development has grown decentralized over time.
ATOM is the native token of the Cosmos Hub. ATOM have three use cases: as a spam-prevention mechanism, as staking tokens, and as a voting mechanism in governance.
We are thrilled to introduce our latest product, Chorus One SDK. This advanced toolkit is set to transform how our customers integrate staking functionalities into their applications. As the leading staking provider with the most extensive network support in the industry, robust security features, and comprehensive transaction management, our SDK (Software Development Kit) is poised to become an essential tool for institutions and developers, enabling them to leverage enterprise-grade staking solutions across all major networks including Ethereum, Solana, TON, Avalanche, Cosmos, NEAR, and Polkadot with unparalleled ease and efficiency.
The Chorus One SDK is an all-in-one toolkit for building staking dApps or implementing programmatic native staking into your product. It supports non-custodial staking on various networks validated by Chorus One. With this SDK, our customers can build, sign, and broadcast transactions, as well as retrieve staking information and rewards for user accounts.
Chorus One has the most extensive network support for staking in the industry. Currently, the Chorus One SDK provides support for the following networks, with plans to expand to even more in the future:
The Chorus One SDK is designed for a diverse audience, including:
By using the Chorus One SDK, our customers can easily integrate programmatic native staking, access detailed staking position data, and minting of osETH LST to offer flexible staking options to their end users.
At Chorus One, we prioritize security, transparency, and user control. Our decision to develop an SDK over a traditional API was driven by the following considerations:
Enhanced Security
Verifiable Trust and Transparency
Open-Source and Auditable
💡 Why does it matter?
Choosing the Chorus One SDK means prioritizing security, transparency, and user empowerment. With local transaction building and signing, and open-source transparency, users can confidently participate in staking activities across supported networks.
Our SDK offers a robust suite of tools for managing staking operations on various networks. Here’s a high-level overview of its functionality:
Comprehensive Transaction Management
Detailed Information Retrieval
Integrated Validator Support
Command Line Interface (CLI)
For more detailed information on how our SDK works and technical guides, explore the following resources:
The launch of Chorus One SDK marks our commitment to simplifying staking. By equipping our customers with all the necessary tools, we enable them to effortlessly integrate and deliver an exceptional staking experience to their end users.
If you’re an institution, wallet provider, asset manager, or developer looking to integrate staking into your product or would like to learn more, reach out to us at staking@chorus.one.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally, operating infrastructure for 60+ Proof-of-Stake networks, including Ethereum, Cosmos, Solana, Avalanche, and Near, amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
This article is extracted from the Q1 2024 Quarterly Insights. To read the full report, please visit https://chorus.one/reports-research/quarterly-network-insights-q1-2024
Authors: Michael Moser, Umberto Natale, Gabriella Sofia, Thalita Franklin, Luis Nuñez Clavijo
On PoS networks, the financial aspect of staking is equivalent to the computational power committed on PoW networks. If we were to make an analogy with PoW, shared security could be compared to “merge mining”, a mechanism that allows a miner to mine a block in one blockchain, by solving the cryptographic challenge on another chain.
As a generalization, shared security technologies imply, at least, one security provider chain and, at least, one security consumer chain. To guarantee security, the shared security solution must allow for misbehavior in either the provider or consumer chains to be penalized, and that can be even by slashing the capital used for security of the provider chains. Different approaches are being used to optimize for the specific needs of each ecosystem. We will review the approaches most advanced in terms of development, and highlight the incentives and risks associated with the adoption of those technologies.
Although one may argue that Ethereum has pioneered the concept of shared security with L2s - like Arbitrum and Optimism, other blockchains have been exploring “the appchain thesis” and experimenting with more customized solutions:
The motivation behind shared security is twofold:
Rollups solutions are the main contenders for Layer 2 (“L2”) scalability in the Ethereum (the “L1”) path to modularity. This strategy allows the execution, in terms of computation and memory, to be processed “off the main chain”. The settlement properties of the state are kept on the L1 chain, which pools the security of the ecosystem through its validator base, and “rolled” from the L2 in batches (thus the name “rollup”).
This aggregation of transactions helps to minimize execution costs for each individual transaction. To maintain an ordered control of the state and upcoming transactions, rollups can make use of different architectures: historically we’ve seen a growing trend of optimistic (e.g. Arbitrum, OP, Base) or zero-knowledge (“ZK”, e.g. Starknet, Scroll) rollups, both of which have achieved limited levels of maturity in their proving mechanisms.
New architectures or upgraded versions of past ideas have also taken flight in the past months. Validiums have been brought backto the spotlight with new developments such as X Layer, and a particular flavor deemed “Optimium” (that uses the OP stack) now powers contenders such as Mantle, Mode Network, Metis, etc. The innovation, however, continues to thrive. The idea of “Based rollups” was first introduced in March by lead EF researcher Justin Drake,a simple design that allows L2 sequencing to be defined by L1 validators in their proposed blocks, thus deepening the shared security model between the layers.
It is safe to say that the rollup ecosystem continues to be the leading product in the shared security environment, with a TVL of $45.49 billion (counting canonically bridged, externally bridged, and natively minted tokens). In the last 180 days, transactions per second on the rollups have dwarfed activity on Ethereum mainnet, and the number of active users (considering distinct wallets) has risen meteorically in comparison to the L1.
The idea behind shared security has captured extraordinary attention with EigenLayer, the restaking protocol built on Ethereum that has become a leading narrative within the network’s large staking community. In fact, restaking might as well become a larger sector than even the entire industry of single-asset staking. Driven by growing demand from stakers (seeking increased returns on their investments) and developers (sourcing security), the industry is witnessing an unprecedented shake up with capital flowing to secure multiple chains in aggregate. Concretely, EigenLayer’s TVL has managed to reach the 5 million ETH milestone at the time of writing.
Since we first identified restaking as a fundamental trend in our Q1 2023 edition, we’ve discussed EigenLayer at length and become deeply invested in the future success of the protocol: our research has focused on finding optimal risk-reward baskets for AVSs - total risk is not simply a combination of linear risks, but needs to take correlations into account.
As a result of our experience on the Holesky testnet and as mainnet operators for several AVSs, we publicized our approach to AVS selection. The thesis is straightforward: to identify and onboard the AVSs that have chances of being break-out winners, while filtering out the long tail of AVSs that merely introduce complexity and risk.
Much of what’s left to flesh out has to do with reward mechanisms and slashing conditions in these restaking protocols. As EigenLayer and other shared security models evolve and reach maturity, more information surfaces. Most recently, the Eigen Labs team presented their solution for the slashing dilemma (at least partially): $EIGEN. Current staking tokens have limitations in a model such as the AVS standard, due to the attributable nature of the slashing conditionson Ethereum. In other words, ETH can only secure work thatis provable on-chain. And since AVSs are by definition exogenous to the protocol, they are not attributable to capital on Ethereum.
Enter $EIGEN, the nominal “universal intersubjective work token” that intends to address agreed faults that are not internally provable. The slashing agreements under this classification should not be handled through the ETH restaked pool (as they necessitate a governance mechanism to determine their validity) but this second token, thus fulfilling the dual staking promise that the team had previously outlined. Currently, EigenDA is in its first phase of implementing this dual-quorum solution, and users can restake and delegate both ETH and EIGEN to the EigenDA operators.
Replicated security went live on the Cosmos Hub in March 2023as the initial version of the Interchain Security protocol (“ICS”). Through this system, other Cosmos chains can apply to get the entire security of the Cosmos Hub validator set. This is accomplished by the validator set of the Cosmos Hub running the consumer chain's nodes as well, and being subject to slashing for downtime or double signing. Inter-Blockchain Communication (“IBC”) is utilized to relay updates of validator stake from the provider to the consumer chain so that the consumer chain knows which validators can produce blocks.
Currently, all Cosmos Hub validators secure the consumer chains. Under discussion is the “opt-in security” or ICS v2, an evolution of the above, that allows validators to choose to secure specific consumer chains or not. Another long-awaited feature is the ability for a consumer chain to get security from multiple provider chains. Both, however, introduce security and scaling issues. For example, the validator set of a consumer chain secured by multiple providers can have poor performance, since it will grow too large.
Solving most of the concerns around Replicated Security, Mesh Security was presented by Sunny Agarwal, the co-founder of Osmosis, in September 2022. The main insight is that instead of using the validator set of a provider chain to secure a consumer chain, delegators on one blockchain can be allowed to restake their staked assets to secure another Cosmos chain, and vice versa...
With Mesh Security, operators can choose whether to run a Cosmos chain and enable features to accept staked assets from another Cosmos chain, thereby increasing the economic security of the first one. This approach allows one chain to provide and consume security simultaneously.
BabylonChain uses Bitcoin’s economic value to secure PoS chains. Specifically, Bitcoin has several properties that make it particularly for economic security purposes, prominently its large market cap, and beyond this, the fact that it is unencumbered, less volatile, and generally idle and fairly distributed.
Staking is not a native feature of the Bitcoin blockchain. Babylon implements a remote staking mechanism on top of Bitcoin’s UTXO model, which allows the recipient of a transaction to spend a specific amount of coins specified by the sender. In this way, a staking contract can be generated that allows for four operations: staking, slashing, unbonding, and claiming coins after they have been unbonded.
Blocks are processed natively on the PoS chain using BabylonChain for security first, and then in a second round, validators provide finality by signing again using so-called extractable one-time signatures (EOTS). The central feature of this key type is that whena signer signs two messages using the same private key, it is leaked.
Therefore, if a validator signs two conflicting blocks at the same time, the corresponding private key is leaked, allowing anybody to exit the staked BTC through a burn transaction.
Separately, BabylonChain protects against so-called long-range attacks by timestamping, where the PoS chain’s block hashes are committed to the Bitcoin chain. Such an attacked would occur when a staker unbonds but is still able to vote on blocks, i.e. could attack a chain costlessly. Through timestamping, the set of stakers on Bitcoin is synchronized with the blocks of the PoS chain, precluding a long-range attack.
When exploring the evolution of different solutions to shared security, it becomes clear that it improves one of the dimensions of security in PoS chains - the financial commitment behind a network, resulting in a higher cost of corruption, or the minimum cost incurred by any adversary for successfully executing a safety or liveness attack on the protocols. As a natural challenge to modularity, some networks are born with optimized solutions to how different projects would be able to leverage a validator set. That is the case for Avalanche and Polkadot, for example. On the other side, there are solutions being built as an additional layer on top of existing networks, like EigenLayer and Babylon. And there is the Cosmos ICS, which leverages IBC, and is modular enough to not form part of either of the previous two groups.
In the set of analyzed projects, two categories emerged: restaking and checkpointing. The former aims to unlock liquidity in the ecosystems, while the latter works as an additional layer of security to a protocol, without directly changing the dynamics for stakers nor node operators. In the end, those projects also have secondary effects on the networks. For example, restaking reduces the need for scaling the validator set in the Cosmos, while checkpointing has the potential to minimize the unbonding period for stakers.
Shared security can also change the economic incentives to operate a network. Particularly related to restaking, the final rewards for validating multiple networks are expected to be higher than validating only one. However, as always, return scales with risk. Shared security can compromise on the decentralization dimension of security, opening the doors to higher levels of contagiousness during stress scenarios, and it also adds new implementation and smart contract risk.
In the context of decentralized networks, shared security is the idea of increasing the economic security of a blockchain through the use of resources from another - one or multiple - networks.
Shared security can also change the economic incentives to operate a network. Particularly related to restaking, the final rewards for validating multiple networks are expected to be higher than validating only one. However, as always, return scales with risk. Shared security can compromise on the decentralization dimension of security, opening the doors to higher levels of contagiousness during stress scenarios, and it also adds new implementation and smart contract risk.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally, operating infrastructure for 50+ Proof-of-Stake networks, including Ethereum, Cosmos, Solana, Avalanche, and Near, amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
Cosmos is steadily becoming the place to create the ultimate modular blockchain. Cosmos SDK allows developers to effortlessly roll out tailored blockchains, resulting in a flood of new projects that provide specialized settings for novel products. The goal of modular blockchains is to divide Execution, Settlement, Consensus, and Data Availability. Refer to page 19 of this report to learn more about modular vs. monolithic blockchain designs (Ethereum). As a result, we see various teams tackling the issues of each layer and creating optimal solutions and developer environments. Ultimately, developers could use these optimizations to create an application that is highly performant using such an ultimate modular blockchain. Not to mention the greater decentralization that comes with spreading your product across numerous ecosystems.
Let’s go over the problems that current ecosystems face in each layer of the modular stack, and how various quality teams are solving these issues. Please bear in mind that there are other teams that are solving these issues too, we are just exploring some.
It is important to explain that when a block is appended to the blockchain, each block contains a header and all the transaction data. Full nodes download and verify both, whilst light clients only download the header to optimize for speed and scalability.
Full nodes (validators) cannot be deceived because they download and validate the header as well as all transaction data, whereas light clients only download the block header and presume valid transactions (optimistic). If a block includes malicious transactions, light clients depend on full nodes to give them a fraud proof. This is because light nodes verify blocks against consensus rules, but not against transaction validity proofs. This means that a 51% attack where consensus is altered can easily trick light nodes. As node runners scale, secure methods to operate light clients would be preferable because of their reduced operational costs. If nodes are cheaper to run, decentralization also becomes easier to achieve.
The DA problem refers to how nodes can be certain that when a new block is generated, all of the data in that block is truly published to the network. The problem is that if a block producer does not disclose all of the data in a block, no one will be able to determine if a malicious transaction is concealed within that block. A reliable source of truth as a data layer is required that orders transactions as they come and checks their history. This is what Celestia does, solely optimizing the Consensus and the DA layer. This entails that Celestia is only responsible for ordering transactions and guaranteeing their data availability; this is similar to reducing consensus to atomic broadcast. This is the reason why Celestia was originally called ‘Lazy Ledger’, however, efficiently performing this job for a future with thousands of applications is no easy job. Celestia can also take care of consensus. See the different types of nodes in Celestia here.
Two key features of Celestia’s DA layer are data availability sampling (DAS) and Namespaced Merkle trees (NMTs). Both are innovative blockchain scalability solutions: DAS allows light nodes to validate data availability without downloading a complete block; NMTs allow Celestia’s execution and settlement layers to download transactions that are only meaningful to them. In a nutshell, Celestia allows light nodes to verify just a small set of data, that when combined with the work of other light nodes, provides a high-security guarantee that the transactions are valid. Hence, Celestia assumes that there is a minimum number of light nodes sampling the data availability layer.
“This assumption is necessary so that a full node can reconstruct an entire block from the portions of data light nodes sampled and stored.”
It is worth noting for later that these layers (DA & Consensus) are naturally decentralized and easier to have fully on-chain, as most of the work is taken on by the validators. Scaling here will ultimately depend on the consensus algorithm. ‘Rollapp’ developers will not need to assemble a validator set for their applications either.
The present web3 environment suffers from centralization in the execution and settlement layers. This is due to the fact that the on-chain tech stack severely limits an application’s functional capability. As a result, developers are forced to perform heavy computation off-chain, in a centralized manner. On-chain apps are not inherently interoperable with external systems, and they are also constrained by a particular blockchain’s storage and processing capability.
More than just a distributed blockchain database is required to create the ultimate decentralized apps. High-performance processing, data IO from/to IPFS, links to various blockchains, managed databases, and interaction with various Web2 and Web3 services are all common requirements for your application. Additionally, different types of applications require different types of execution environments that can optimize for their needs.
Blockless can take advantage of Celestia’s data availability and focus to improve application development around the execution layer. Blockless provides a p2p execution framework for creating decentralized serverless apps. dApps are not limited by on-chain capacity and throughput by offloading operations from L1 to the performant, configurable execution layer offered by Blockless. With Blockless you can transfer intensive processing from a centralized cloud service platform or a blockchain to the Blockless decentralized node network using built-in functions. With the Blockless SDK, you can access any Web2 and Web3 applications as it currently supports IPFS, AWS3, Ethereum, BNB Chain, and Cosmos.
Developers using Blockless will only need to provide the serverless functions they want to implement (in any language!), as well as a manifest file that specifies the minimal number of nodes required, hardware specifications, geolocation, and node layout. In no time, their services will be operating with ultra-high uptime and hands-free horizontal scaling. To learn more about the architecture of the Blockless network go here, but yet again, its orchestration chain is a Cosmos-based blockchain responsible for function/app registration. The cherry on the cake is that you can use and incorporate or sell community functions and extensions into your own application design in a plug-and-play manner using Blockless Marketplace. In Cosmos, you can already do this through projects like Archway or Abstract.
Popular L2s and Rollups today like Arbitrum, Optimism, and StarkNet use Ethereum for data availability and rely on single sequencers to execute their transactions. Such single sequencers are able to perform fast when submitting to Ethereum but evidently stand as a centralized point of failure. Saga has partnered with Celestia to provide roll-ups as a service to enable a decentralized sequencer set.
Saga provides easy-to-deploy “chainlets” for any developer to roll out an application without having to care about L1 developments. Although their main focus is to support full appchain formation on top of the
Saga Mainnet, the technology can also support the modular thesis. This means that rollup developers can use Saga’s validators to act as sequencers and decentralize their set. In other words, Saga validators can also work in shifts submitting new blocks for Celestia rollups.
Saga offers a service that organizes validators into sequencers and punishes misconduct through shared security. Saga’s technology provides functionalities to detect invalid block productions with fraud proofs and to manage censoring or inactivity, challenges are made to process a set of transactions. This means that Saga can enhance the settlement layer whilst using Celestia for data to generate fraud proofs and offline censor challenges. This could also even be done for Ethereum, with the additional benefit of having shared security between chainlets and IBC out of the box. To further understand the difference between running a rollup or a chainlet, please refer to this fantastic article.
In such a modular world, developers finally have full customization power. One could choose to build sovereign rollup or settlement rollups, or even a hybrid. In our example, it could even be possible to use Saga’s consensus instead of Celestia’s. Referring to our example, we could have an application that decentralizes its execution computing through Blockless whilst programming in any language, decentralizes its sequencer set and is able to deploy unlimited Chainlets if more block space is required with Saga, and has a reliable and decentralized data availability layer with Celestia. What’s best, all these layers are built and optimized with Cosmos SDK chains, meaning they will have out-of-the-box compatibility with IBC and shared security of Chainlets.
The Cosmos Hub keeps track of balances and routes transactions through the internet of blockchains. When you stake your ATOMs with Chorus One you can earn rewards up to 9.67% per annum.
The Cosmos Hub seeks to become the center of a network of blockchains abiding by the standards of the Inter-Blockchain Communication protocol (IBC). Cosmos technologies like Tendermint and the Cosmos SDK framework are used by projects like Binance Chain, Band, Terra, Kava, Aragon, and others - securing multiple billions of dollars in value. By delegating ATOM to Cosmos Hub validators like Chorus One, stakers receive a share of inflationary token rewards, as well as fees from transactions that go through the Hub, for example for routing tokens between two IBC-compatible blockchains.
Please note that the unstake period is 21 days. This means that you can only unstake and withdraw coins to your wallet after this time has passed. We wish you profitable staking!
In case you don't have the keplr extension installed in your browser visit https://www.keplr.app/ and click on Install extension.
Click on Install Keplr for Chrome if you are using a Chrome browser or Brave if you are using the Brave browser and follow the installation instructions.
Click on the extension in the Chrome/Brave toolbar and the following page will open up.
In case you do not have an existing Keplr account you can create a new account
You will be shown 12 words as your mnemonic seed. Select24 words option for a more secure mnemonic. Back it up securely (read the warning below)
Back up your mnemonic seed securely.
Enter an account name and a passphrase to unlock your wallet. You will be asked for the mnemonic again. Enter the 24 words in order. This is to make sure you remember the mnemonic.
Finally, click on Next to create your account
Regardless of whether you already have an account or if you created it just now you may now click on the extension to view your address or visit https://wallet.keplr.app/#/secret/stake to see the full dashboard.
If you don't already have ATOMs in your account fund it with some tokens. You may use an exchange to transfer the ATOMs tokens to your address or get it from someone who already holds those.
To stake click on the Cosmos network in the left panel and click on Stake.
You will be shown a list of validators with whom to stake on the right side. Scroll to Chorus One and click on Manage.
A modal with Chorus One's description will pop up. Click once on Delegate to enter the amount of tokens you want to stake.
Clicking on Delegate again will take you to Keplr wallet for approval. Approve the transaction and you will be able to see your stake.
There is a 21-day unbonding process for staked ATOM tokens during which delegator ATOMs do not earn rewards and cannot be transferred, exchanged, or spent. ATOMs can, however, be slashed during the unbonding period.
After some time you will see rewards getting accumulated in your account. You can simply go to the Keplr extension to claim them.
Chorus One is excited to announce that we have onboarded the Passage3D ecosystem as validators.
Passage, or Passage 3D, provides tools for creating a metaverse of virtual worlds that may be accessed using a web browser with no hardware requirements.
The Passage worlds are led by the Strange Clan game, as well as the Blok Hous, which host live NFT auctions and artist performances. These are the inaugural metaverse worlds in the Cosmos ecosystem. The Passage ecosystem runs on the Cosmos Ecosystem and makes use of CPU capacity from the Akash Network decloud with the desire to also decentralise its GPU.
Released on the Juno blockchain, the Passage Marketplace will allow NFTs in the Cosmos Ecosystem to be traded, viewed, and transferred, with ATOM serving as the primary token of exchange. This will be the first NFT-Marketplace to use the native Cosmos ecosystem token.
The Passage token ($PASG) serves as the universal utility token for all Passage worlds. The developers of the new world will stake Passage tokens in order to build a new world within the Passage metaverse.
The APR for World Creator Staking will be the same as for ordinary staking. The needed amount and lock-up duration are determined by the world’s scale. This model will begin with a USD value and will not be tied to a set number of Passage tokens. ATOM payouts are converted to PASG rewards for staking pools.
The gaming industry has a current market value of $200 billion and is expected to reach $340 billion by 2027. At Chorus One, we believe that GameFi and NFTs will become increasingly important in this share. Passage3D is here to expand and improve the GameFi ecosystem.
Passage has developed a Cosmos SDK blockchain in collaboration with the development company VitWit. The blockchain will initially offer staking, vesting, and airdrop capabilities, with a goal of counting 100 validators at blockchain genesis, using the Cosmos SDK. The blockchain’s major features will be a mix of security and efficiency, allowing for a large volume transaction rate with minimal costs.
The Passage token will have a low initial circulating supply of 145 million tokens with a fixed supply capped at 2 billion tokens.
There is a high initial inflation of 50%, followed by a 35% decline each year until maximum supply is attained after year 5. After year 5, staking rewards will be derived from Marketplace transaction costs. 71% of the available tokens are associated with staking incentives.
Aside from the more typical payouts for staking the token, all $PASG stakers will receive in-world advantages for assisting in the security of the blockchain. Savings on streaming Passage worlds and marketplace discounts on transaction costs (0.4–1.2% depending on stake amount) are among the perks. Find more information here.
You need to withdraw rewards and re-stake them with some frequency if you want to make use of compounding returns hence, additional delegation is needed for compounding. There is an un-bonding period of 21 days.
This article provides a brief comparative analysis between centralised exchanges (CEX) versus decentralised exchanges (DEX). This will be followed by a comparison of various DEX exchanges to understand why dYdX has opted to join the Cosmos ecosystem. The primary reasons are increased decentralisation, higher throughput, and a developer-friendly SDK.
To help you grasp the subsequent arguments and comparisons, we’ll first go through the key distinctions between a CEX and a DEX. If you already know the distinctions, skip to Part 2 of this article.
Centralised Exchange (CEX): a type of cryptocurrency exchange that is operated by a company that owns it in a centralised manner. Liquidity is supplied by traders in the form of orders (order book model) that keeps the assets involved in all respects in their custody (e.g. Binance, Coinbase). This method gives the CEX a significant advantage since order placement, matching, and settlement can happen immediately off-chain (even if you then have to switch to the Blockchain in effect to move them to a personal wallet).
Decentralised Exchange (DEX): a platform for exchanging cryptocurrencies based on functionality programmed on the blockchain (i.e., in smart contracts). The trading is done peer-to-peer or between liquidity pools. The liquidity in DEXs (Uniswap and dYdX) is given by the users themselves, who contribute the tokens to a specific pool in return for the fees paid by all those who swap the tokens.
Whereas in CEXs, the user trades directly with the platform and purchases the token of his choice with fiat market availability, the scenario is somewhat different in DEXs. To get a token, a user must swap it for another token pair with a liquidity pool of those 2 assets.
Centralised exchanges enable buyers and sellers to submit bids and asks for specific assets via order books (e.g. cryptocurrencies). Order books still exist on a decentralised exchange, where a user may submit a bid or an ask. However, we often see an alternate option where a user can trade without a counterparty via an automated market maker (AMM). An automated market maker uses a mathematical formula known as a ‘constant product’ to calculate an asset price at every moment by calculating x * y = k. (without bids and asks having to be actively placed). This is possible because market makers on decentralised exchanges are referred to as ‘liquidity providers’ (LPs). LPs place assets in a smart contract and authorise the contract to be traded against. In exchange, an LP receives fees based on the amount of liquidity offered versus the whole pool. In general, using Uniswap as an example, the user must have Ethereum in order to trade with Compound, Curve, and many other services. By doing so, the user pays a 0.3 percent fee directly to the pool where he swapped the token, which is then distributed among all liquidity providers.
Now that we’ve established the primary distinctions between CEXs and DEXs, we’ll look at two sorts of exchange transaction mechanisms that are frequently observed on these exchange platforms.
What is an order book in crypto?
The orderbook concept is the foundation of many CEX and DEX’s (in the case of dYdX) operations. All orders to buy and sell a token are labelled “Bid” and “Ask” in the order book system. The spread is the difference between the highest bid and lowest ask at the top of the book. If a person buys or sells rapidly at the best price available, the order is known as a market order, and the buyer and seller are matched based on top of the book orders. A limit order, on the other hand, is when a person buys or sells a token at a certain price such that the order is posted on the order book.
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What are Liquidity Pools in crypto?
A liquidity pool is a collection of money put by LPs into a smart contract. AMM transactions allow you to purchase anything without a seller as long as the pool has enough liquidity and your trade affects the token ratio computed by the algorithm. This approach does not need an order book. Although both LPs and order books operate on a peer-to-peer basis.
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This strategy is problematic due to the high amount of slippage for big orders, which necessitates gigantic pools. Uniswap V3 reduced this problem by implementing the concentrated liquidity functionality. Liquidity providers concentrate liquidity in the most likely trading prices rather than spreading it across the entire price range.
We are also now starting to see the rise of hybrid initiatives which combine AMMs and orderbook models in an attempt to extract the best of both worlds. The Cosmos ecosystem is beginning to stand out in this area too, with upcoming protocols such as Onomy.
The cumulative decentralised exchange volume for the past 7 days stands at $10 billion. Uniswap, yet again, led the pack in trading volume.
dYdX’s current trading volume closely resembles Uniswap’s and ranks 10th in ‘Token Holders by DeFi projects’.
However, it is worth noting that the ratio of DEX:CEX spot volume reflected a mere value of 13% for the month of June, noting a decline from 16% in January. Binance, with significantly lower fees, still dominates the market ($11bn 24h volume). This data clearly highlights that decentralised exchanges are merely complementing centralized exchanges that still account for the lion’s share (trading volume).
Despite this, Uniswap has repeatedly surpassed Coinbase in trading volume in the past. In terms of token trading availability, the former dominates with 430 verified coins in V3 and over 8000 trading pairs in V2.
While Binance currently supports trading in more than 600 coins, Uniswap V3 has significantly more liquidity than Coinbase and Binance. However, this is unique to Ethereum and its many pairings.
Uniswap provides double the liquidity of Binance and Coinbase for ETH/USD. Uniswap boasts 3x the liquidity of Binance and 4.5x the liquidity of Coinbase for ETH/BTC. It also possesses three times the liquidity of large centralized exchanges for ETH/mid-cap pairings. NB: A larger liquidity is required in decentralised exchanges to avoid considerable spreading with big trades.
dYdX and Uniswap are both DEXs that operate on the Ethereum blockchain.
What is Uniswap?
Uniswap is an open-source DeFi platform that employs an automated liquidity protocol paradigm instead of an order book. LPs (Liquidity Providers) construct this pool with no listing costs. Any ERC-20 coin may be created if a liquidity pool is accessible for traders.
Factory and Exchange are two Uniswap smart contracts. Factory contracts help introduce new tokens to the network, while Exchange contracts help exchange tokens. When a Liquidity Provider puts a pair of tokens into a smart contract, other users may buy and sell this trading pair, and the liquidity provider receives a cut from the trading charge.
What is dYdX?
dYdX is a non-custodial decentralised exchange that uses Ethereum smart contracts to trade. This allows traders to trade on margin while simultaneously benefitting from Ethereum’s security.
dYdX teamed up with StarkWare to create a Layer 2 protocol. Traders may deposit money and trade instantaneously without incurring transaction costs. Following China’s reiteration of their stance on banning cryptocurrency, daily trading volume surged to nearly $10 billion on dYdX, beating Uniswap for the first time in September 2021. Later, dYdX lost a significant amount of its market share due to competition and outage problems which questioned the integrity of the protocol. Despite this, being the first perpetual DEX protocol to implement a Layer 2 solution has certainly paid off.
Derivatives trading is a trademark of dYdX. Compared to spot trading, derivatives trading offers more application possibilities, which may help customers adapt to changing market trends, increase profits, hedge risks, improve resource allocation, etc. Derivatives trading is projected to add new incremental users, more live water to the market, and set the groundwork for a fresh DeFi breakout.
Recently, dYdX announced that the protocol is moving to Cosmos to build its own native chain on Cosmos SDK and Tendermint Proof-of-stake with the hopes of regaining the market dominance it once had.
Here is how and why the move is set to achieve full decentralisation, seeking to solve the problems dYdX had in the past:
Cosmos makes it easy to establish a blockchain with cross-chain capabilities leveraging the Cosmos Tendermint proof-of-stake consensus engine. Cosmos is decentralised and customizable and each Cosmos chain has its own validators and staking token. Other alternative L1s or L2 would not be suitable for dYdX because they are incapable of handling the throughput that dYdX requires (10 operations/second and 1,000 places/cancellations per second).
Because app-specific chains in Cosmos are not dependent on other protocols in the network, network congestion experienced in Ethereum is not a concern. Projects can also benefit from Interchain Security from the Cosmos Hub to increase stability and security.
dYdX contemplated constructing an AMM or RFQ system, but realized an orderbook-based protocol was essential for pro traders and institutions. As such, dYdX concluded that an improvement requires a decentralised off-chain network to handle the orderbook.
While Serum on Solana does create the order book exchanges on-chain, Solana trades centralization for greater speed. dYdX wishes to achieve faster transaction processing while maintaining decentralisation, which is a tough task. Enter Cosmos.
Developing a blockchain for dYdX V4 allows full customization over how the blockchain functions and validator duties. As indicated, Cosmos’ chain may be tailored to the dYdX network’s demands. Traders would pay fees based on deals performed, comparable to dYdX V3 or other centralized exchanges. Cosmos will also bring a greater utility to the current pure governance $DYDX token.
What is Cosmos SDK?
One of the most differential aspects of Cosmos is its SDK. The Cosmos SDK is a collection of tools and frameworks created by the Cosmos team. Developers may use this SDK to begin building the application logic layer. Furthermore, users may utilize Cosmos SDK in combination with Tendermint Core and ABCI to access the consensus engine and networking layer’s current functionality.
Some of the benefits include the ease with which the essential ABCI methods, the storage layer, cryptographic features, and client apps in Go may be implemented. It also offers on-chain governance and management of user accounts, keys, and transaction balances, among other items.
The SDK is extremely simple to use, and many of its features may be scaffolded in seconds using Github. You may also overwrite existing methods with your own logic. This saves teams and developers a lot of time and energy when it comes to creating projects. As an example, Kyve Network took less than a week to transfer from Ethereum and have a base chain up and running. It is generally much harder to launch chains on other networks. Read more about why it is so, here.
Lately, there have been reports of Cosmos incurring a significant cost of chain security. This is not entirely correct. With an inflation rate of 8% and an average commission rate of 8%, the validators receive 0.6% of the token supply each year. That’s hardly a lot. Furthermore, individuals enjoy staking because it increases their engagement; they lock up tokens, and validators test your software or perform other services. It’s not a high price to pay.
The future of Ethereum Layer 2, Ethereum 2.0, will increase performance, but the overwhelming assumption is that it will still prioritize security over speed. In comparison, Solana is extremely quick, making it ideal for high-frequency trading systems. When it comes to performance and flexibility, a sovereign app-chain is an obvious choice.
A win-win move
By moving to Cosmos, dYdX will also add a new group of customers to the Internet of Blockchain’s ecosystem; for example, its 24h trading volume is presently $2Bn+, compared to $15M on Osmosis, the network’s largest DEX. Additionally, as stated by Messari’s recent article, StarkWare’s latest valuation alone in private markets was $8 billion. Cosmos’ current valuation in public markets ($ATOM) is $2.9 billion. This certainly raises the question of a possible mismatch in value, especially if Cosmos starts to attract more L2s taking advantage of Ethereum’s slow-moving developments.
This article provides a brief comparative analysis between centralised exchanges (CEX) versus decentralised exchanges (DEX). This will be followed by a comparison of various DEX exchanges to understand why dYdX has opted to join the Cosmos ecosystem. The primary reasons are increased decentralisation, higher throughput, and a developer-friendly SDK.
To help you grasp the subsequent arguments and comparisons, we’ll first go through the key distinctions between a CEX and a DEX. If you already know the distinctions, skip to Part 2 of this article.
Centralised Exchange (CEX): a type of cryptocurrency exchange that is operated by a company that owns it in a centralised manner. Liquidity is supplied by traders in the form of orders (order book model) that keeps the assets involved in all respects in their custody (e.g. Binance, Coinbase). This method gives the CEX a significant advantage since order placement, matching, and settlement can happen immediately off-chain (even if you then have to switch to the Blockchain in effect to move them to a personal wallet).
Decentralised Exchange (DEX): a platform for exchanging cryptocurrencies based on functionality programmed on the blockchain (i.e., in smart contracts). The trading is done peer-to-peer or between liquidity pools. The liquidity in DEXs (Uniswap and dYdX) is given by the users themselves, who contribute the tokens to a specific pool in return for the fees paid by all those who swap the tokens.
Whereas in CEXs, the user trades directly with the platform and purchases the token of his choice with fiat market availability, the scenario is somewhat different in DEXs. To get a token, a user must swap it for another token pair with a liquidity pool of those 2 assets.
Centralised exchanges enable buyers and sellers to submit bids and asks for specific assets via order books (e.g. cryptocurrencies). Order books still exist on a decentralised exchange, where a user may submit a bid or an ask. However, we often see an alternate option where a user can trade without a counterparty via an automated market maker (AMM). An automated market maker uses a mathematical formula known as a ‘constant product’ to calculate an asset price at every moment by calculating x * y = k. (without bids and asks having to be actively placed). This is possible because market makers on decentralised exchanges are referred to as ‘liquidity providers’ (LPs). LPs place assets in a smart contract and authorise the contract to be traded against. In exchange, an LP receives fees based on the amount of liquidity offered versus the whole pool. In general, using Uniswap as an example, the user must have Ethereum in order to trade with Compound, Curve, and many other services. By doing so, the user pays a 0.3 percent fee directly to the pool where he swapped the token, which is then distributed among all liquidity providers.
Now that we’ve established the primary distinctions between CEXs and DEXs, we’ll look at two sorts of exchange transaction mechanisms that are frequently observed on these exchange platforms.
What is an order book in crypto?
The orderbook concept is the foundation of many CEX and DEX’s (in the case of dYdX) operations. All orders to buy and sell a token are labelled “Bid” and “Ask” in the order book system. The spread is the difference between the highest bid and lowest ask at the top of the book. If a person buys or sells rapidly at the best price available, the order is known as a market order, and the buyer and seller are matched based on top of the book orders. A limit order, on the other hand, is when a person buys or sells a token at a certain price such that the order is posted on the order book.
What are Liquidity Pools in crypto?
A liquidity pool is a collection of money put by LPs into a smart contract. AMM transactions allow you to purchase anything without a seller as long as the pool has enough liquidity and your trade affects the token ratio computed by the algorithm. This approach does not need an order book. Although both LPs and order books operate on a peer-to-peer basis.
This strategy is problematic due to the high amount of slippage for big orders, which necessitates gigantic pools. Uniswap V3 reduced this problem by implementing the concentrated liquidity functionality. Liquidity providers concentrate liquidity in the most likely trading prices rather than spreading it across the entire price range.
We are also now starting to see the rise of hybrid initiatives which combine AMMs and orderbook models in an attempt to extract the best of both worlds. The Cosmos ecosystem is beginning to stand out in this area too, with upcoming protocols such as Onomy.
The cumulative decentralised exchange volume for the past 7 days stands at $10 billion. Uniswap, yet again, led the pack in trading volume.
dYdX’s current trading volume closely resembles Uniswap’s and ranks 10th in ‘Token Holders by DeFi projects’.
However, it is worth noting that the ratio of DEX:CEX spot volume reflected a mere value of 13% for the month of June, noting a decline from 16% in January. Binance, with significantly lower fees, still dominates the market ($11bn 24h volume). This data clearly highlights that decentralised exchanges are merely complementing centralized exchanges that still account for the lion’s share (trading volume).
Despite this, Uniswap has repeatedly surpassed Coinbase in trading volume in the past. In terms of token trading availability, the former dominates with 430 verified coins in V3 and over 8000 trading pairs in V2.
While Binance currently supports trading in more than 600 coins, Uniswap V3 has significantly more liquidity than Coinbase and Binance. However, this is unique to Ethereum and its many pairings.
Uniswap provides double the liquidity of Binance and Coinbase for ETH/USD. Uniswap boasts 3x the liquidity of Binance and 4.5x the liquidity of Coinbase for ETH/BTC. It also possesses three times the liquidity of large centralized exchanges for ETH/mid-cap pairings. NB: A larger liquidity is required in decentralised exchanges to avoid considerable spreading with big trades.
dYdX and Uniswap are both DEXs that operate on the Ethereum blockchain.
What is Uniswap?
Uniswap is an open-source DeFi platform that employs an automated liquidity protocol paradigm instead of an order book. LPs (Liquidity Providers) construct this pool with no listing costs. Any ERC-20 coin may be created if a liquidity pool is accessible for traders.
Factory and Exchange are two Uniswap smart contracts. Factory contracts help introduce new tokens to the network, while Exchange contracts help exchange tokens. When a Liquidity Provider puts a pair of tokens into a smart contract, other users may buy and sell this trading pair, and the liquidity provider receives a cut from the trading charge.
What is dYdX?
dYdX is a non-custodial decentralised exchange that uses Ethereum smart contracts to trade. This allows traders to trade on margin while simultaneously benefitting from Ethereum’s security.
dYdX teamed up with StarkWare to create a Layer 2 protocol. Traders may deposit money and trade instantaneously without incurring transaction costs. Following China’s reiteration of their stance on banning cryptocurrency, daily trading volume surged to nearly $10 billion on dYdX, beating Uniswap for the first time in September 2021. Later, dYdX lost a significant amount of its market share due to competition and outage problems which questioned the integrity of the protocol. Despite this, being the first perpetual DEX protocol to implement a Layer 2 solution has certainly paid off.
Derivatives trading is a trademark of dYdX. Compared to spot trading, derivatives trading offers more application possibilities, which may help customers adapt to changing market trends, increase profits, hedge risks, improve resource allocation, etc. Derivatives trading is projected to add new incremental users, more live water to the market, and set the groundwork for a fresh DeFi breakout.
Recently, dYdX announced that the protocol is moving to Cosmos to build its own native chain on Cosmos SDK and Tendermint Proof-of-stake with the hopes of regaining the market dominance it once had.
Here is how and why the move is set to achieve full decentralisation, seeking to solve the problems dYdX had in the past:
Cosmos makes it easy to establish a blockchain with cross-chain capabilities leveraging the Cosmos Tendermint proof-of-stake consensus engine. Cosmos is decentralised and customizable and each Cosmos chain has its own validators and staking token. Other alternative L1s or L2 would not be suitable for dYdX because they are incapable of handling the throughput that dYdX requires (10 operations/second and 1,000 places/cancellations per second).
Because app-specific chains in Cosmos are not dependent on other protocols in the network, network congestion experienced in Ethereum is not a concern. Projects can also benefit from Interchain Security from the Cosmos Hub to increase stability and security.
dYdX contemplated constructing an AMM or RFQ system, but realized an orderbook-based protocol was essential for pro traders and institutions. As such, dYdX concluded that an improvement requires a decentralised off-chain network to handle the orderbook.
While Serum on Solana does create the order book exchanges on-chain, Solana trades centralization for greater speed. dYdX wishes to achieve faster transaction processing while maintaining decentralisation, which is a tough task. Enter Cosmos.
Developing a blockchain for dYdX V4 allows full customization over how the blockchain functions and validator duties. As indicated, Cosmos’ chain may be tailored to the dYdX network’s demands. Traders would pay fees based on deals performed, comparable to dYdX V3 or other centralized exchanges. Cosmos will also bring a greater utility to the current pure governance $DYDX token.
What is Cosmos SDK?
One of the most differential aspects of Cosmos is its SDK. The Cosmos SDK is a collection of tools and frameworks created by the Cosmos team. Developers may use this SDK to begin building the application logic layer. Furthermore, users may utilize Cosmos SDK in combination with Tendermint Core and ABCI to access the consensus engine and networking layer’s current functionality.
Some of the benefits include the ease with which the essential ABCI methods, the storage layer, cryptographic features, and client apps in Go may be implemented. It also offers on-chain governance and management of user accounts, keys, and transaction balances, among other items.
The SDK is extremely simple to use, and many of its features may be scaffolded in seconds using Github. You may also overwrite existing methods with your own logic. This saves teams and developers a lot of time and energy when it comes to creating projects. As an example, Kyve Network took less than a week to transfer from Ethereum and have a base chain up and running. It is generally much harder to launch chains on other networks. Read more about why it is so, here.
Lately, there have been reports of Cosmos incurring a significant cost of chain security. This is not entirely correct. With an inflation rate of 8% and an average commission rate of 8%, the validators receive 0.6% of the token supply each year. That’s hardly a lot. Furthermore, individuals enjoy staking because it increases their engagement; they lock up tokens, and validators test your software or perform other services. It’s not a high price to pay.
The future of Ethereum Layer 2, Ethereum 2.0, will increase performance, but the overwhelming assumption is that it will still prioritize security over speed. In comparison, Solana is extremely quick, making it ideal for high-frequency trading systems. When it comes to performance and flexibility, a sovereign app-chain is an obvious choice.
A win-win move
By moving to Cosmos, dYdX will also add a new group of customers to the Internet of Blockchain’s ecosystem; for example, its 24h trading volume is presently $2Bn+, compared to $15M on Osmosis, the network’s largest DEX. Additionally, as stated by Messari’s recent article, StarkWare’s latest valuation alone in private markets was $8 billion. Cosmos’ current valuation in public markets ($ATOM) is $2.9 billion. This certainly raises the question of a possible mismatch in value, especially if Cosmos starts to attract more L2s taking advantage of Ethereum’s slow-moving developments.
Cosmos has historically been an ecosystem that has promoted horizontal scalability, as opposed to vertical scalability. The Cosmos ecosystem has been able to scale horizontally more efficiently than any other ecosystem as a result of having the most mature interoperability protocol and software development kit in cryptocurrency, known as the Inter-Blockchain Communication Protocol (IBC) and Cosmos Software Development Kit (Cosmos SDK). Simply put, IBC is a set of standards that facilitates communication between blockchains in the Cosmos and the Cosmos SDK is an open-source framework for building permissionless Proof-of-Stake (PoS) blockchains. IBC and Cosmos SDK enable teams to spin-up application-specific PoS blockchains with ease, which connects to all other PoS blockchains built with Cosmos SDK and IBC. As of time of writing, there are 46 zones (Cosmos SDK blockchains) that are connected to IBC. The power of having the flexibility and optionality to create your own blockchain in the Cosmos allows the ecosystem to scale ‘horizontally’. Any time blockspace reaches capacity on a single blockchain, another blockchain can be conceived that connects to the existing blockchain. This is in stark contrast to other ecosystems such as Ethereum, whereby an application suffers if blockspace on Ethereum is at capacity because bandwidth becomes much more expensive. Now, for the first time in Cosmos history, there are multiple vertical scaling solutions being built in the Cosmos ecosystem that complement existing horizontal scaling solutions that already exist within the ecosystem. This article focuses on four vertical scaling solutions being worked on in the Cosmos, which include (Cosmos Hub) Interchain Security, Dymension, Celestia and Saga. The Cosmos ecosystem is unique in that each vertical scaling solution being worked on intrinsically scales horizontally as well, thanks to the flexibility facilitated by the modularisation of Cosmos.
When bandwidth becomes expensive on networks such as Ethereum, users suffer from high transaction fees. Networks such as Ethereum have attempted to solve issues with scalability by creating scaling solutions that work ‘vertically’, as opposed to ‘horizontally’. Vertical scaling entails another layer being built on top of Ethereum network, which leverages the underlying security of Ethereum (known as the Layer 1) yet handles transaction execution off-chain (known as the Layer 2). This is an important step to take transaction execution off-chain because as of right now, transaction execution on Ethereum is responsible for the majority of bandwidth woes. Another word for a Layer 2 is an execution layer because transactions are executed off-chain. After transactions are executed on a Layer 2 (execution) layer, a proof is sent to the underlying Layer 1 (e.g. Ethereum) of the state changes that have occurred off-chain. There is then either a period of time whereby other actors in the network can prove fraud if execution off-chain is different to what has been written on-chain (via fraud proofs) or a verifying contract on-chain has to verify the validity of a zero-knowledge proof coming from an actor such as a sequencer that must also ensure all transactions are available so any full node can recover all transactions in order to also verify that execution being written on-chain is correct. Without diving too deep into the technical details, simply speaking Layer 2s can save users gas due to superior encoding, which is well-explained by Vitalik Buterin here.
Using a Layer 2, or vertical scaling is an alternative way for users and applications to execute transactions off-chain and write data to the Layer 1 to save blockspace by using compressed data and calldata (as opposed to writing directly to storage of a Layer 1, which is more expensive bytes-wise) and hence results in lower transaction fees.
In the past, Cosmos and Ethereum have taken a completely different approach, with Ethereum focusing on vertical scaling and Cosmos focusing on horizontal scaling. Now, the two ecosystems seem to be converging as both are making progress towards incorporating elements of the opposite approach to scaling in order to compliment its existing work on either vertical or horizontal scaling. This article will focus on vertical scaling solutions that are in the works in the Cosmos ecosystem that aim to complement the existing horizontal scaling solutions that are already available in the Cosmos. In particular, this article will cover 4 vertical scaling solutions in no particular order that are being worked on in the Cosmos, including: Interchain Security, Dymension, Celestia and Saga.
The first vertical scaling solution to mention going live in the Cosmos is Interchain Security on Cosmos Hub. In short, Interchain Security allows networks to lease security from the Cosmos Hub. In practice, this means that networks do not have to spend time ‘bootstrapping’ validators for its network, which can be a drawback of horizontal scaling. To explain further, each network that goes live in the Cosmos has security equal to the amount of value it has staked, meaning there is an argument that networks could be seemingly less secure in the Cosmos if the amount of assets backing a network (staked) is not high enough. For example, due to the nature of Tendermint consensus, if a validator (or group of validators) controls more than 34% of stake on a network, it is able to halt finality in a Cosmos network and essentially censor a network. Therefore, it can be appealing for a Cosmos team to instead opt for using the security of Cosmos Hub, which currently has ~$1.5bn worth of stake (ATOM) securing it. Not only would a team not have to worry about increasing the value of its network to ensure the security of it but it can also ‘lease’ validators that already exist on Cosmos Hub and therefore not have to do business development work to obtain validators and work on its security budget for its own validator set. In return, a ‘consumer chain’ (a chain that borrows security from Cosmos Hub) pays a leasing fee to the Hub itself and those who secure it, which is x% of a consumer chain’s emissions schedule being redirected to Cosmos Hub delegators. The fee paid to Cosmos Hub delegators for each consumer chain will be specified in a Cosmos Hub governance post. A governance post that pitches a team’s vision / product is required from teams looking to rent security from Cosmos Hub because consumer chains are ‘permissioned’, meaning consumer chains can only borrow security from the Hub if enough ATOM holders vote YES on it in a governance vote. One nice feature of interchain security is that it gives team the choice of either creating their own ‘custom consumer chain’ or ‘contract consumer chain’. The main difference between the two comes down to the binary that validators run. In contract consumer chains this is standard, whilst in customer consumer chains teams have the flexibility of customising the binary to experiment with different transaction fees and transaction assembly. A good overview of Cosmos Hub interchain security versus other solutions is presented here:
Figure 1 — The advantages Interchain Security offers versus existing deployment options (source: Informal Systems)
Whilst the promise of leasing security from Cosmos Hub sounds enticing, there is a trade-off to be had here on decentralisation of Cosmos Hub. This is because validators that operate nodes on Cosmos Hub will also be required to run nodes for consumer chains simultaneously to the Hub (at least in version 1). This extra requirement on validators will likely result in validators needing ‘beefier’ hardware in order to keep up with the workload as consumer chains vertically scale whilst borrowing security from Cosmos Hub (similarly to shards borrow security from Ethereum in that ecosystem). To put it simply, validators suffer at the hands of making it easier for teams wanting to get a headstart with security and a validator set. However, it is important to note that consumer chains always have the option to create it’s own network (i.e. a team can use vertical scaling via interchain security to start and then transition to horizontal scaling outside of the Cosmos Hub with its own blockchain at a later point). To date, there is two projects that are a certainty to use interchain security, which is Quicksilver and Neutron. Quicksilver for example, has opted to use interchain security over building out its own network because it is focused on liquid staking, which directly impacts security of all Cosmos networks, therefore security of its own chain is paramount in order to keep the entire Cosmos ecosystem secure.
Another vertical scaling solution being worked on in the Cosmos is Dymension. Dymension is taking a very similar approach to Ethereum’s current vertical scaling roadmap. The main difference that Dymension is taking compared to Ethereum is the level of customisation and flexibility on offer versus what is available in Ethereum. Dymension is working on creating a Rollup Development Kit (RDK). The RDK takes inspiration from the Cosmos SDK and can be tweaked effortlessly by any team, depending on their needs. Dymension is working on ‘enshrined rollups’, which communicate and transact with the settlement layer via native protocols and modules and thus increase the overall security over traditional rollups. Another element Dymension has thanks to interoperability properties materialising from the Cosmos is that of native interoperability between Dymension rollups, which are connected to the Dymension settlement layer. Another unique property Dymension is leveraging that is not available in the Ethereum ecosystem is PoS for sybil resistance / to solve the keeper’s dilemma. Dymension has come up with a unique way to solve the keeper’s dilemma that rollups currently face in Ethereum.
Dymension is in its very early stages, so not much can be given away about the protocol design at this stage. The best way to think of Dymension is like Ethereum’s current settlement and execution layer design (e.g. ORUs executing tx off-chain and then writing state to the ‘settlement’ layer), only Dymension inherits many properties that makes Cosmos networks so dynamic, such as native interoperability, PoS and a developer framework to easily spin-up rollup chains.
Related to Dymension but also with its own unique design that is a vertical scaling solution going live in the Cosmos is Celestia. In a nutshell, Celestia is a ‘data availability network’. Breaking this down, Celestia validators guarantee that state (data) is available for verifiers to verify themselves that execution has been done properly off-chain in order to mitigate any need for a challenge period on the ‘settlement layer’. Celestia network itself does not execute any transactions. It is merely a network that has the latest state of an L2 that can be leveraged by verifiers to determine whether or not data is available (and therefore can reconstruct the previous state to check if execution has been done appropriately in different intermediate states). A nice design choice of Celestia is the way in which it uses 2d Reed-Solomon erasure coding to involve non-consensus nodes in determining whether or not data is indeed available. This is a scaling decision in itself, as light nodes in the past had no role in consensus. In Celestia, light nodes can probabilistically determine that all transactions are available because a block producer would have to withhold >50% of a block’s data in order for censorship to occur. Due to the technology of 2d reed-solomon erasure coding, it becomes a trivial task for light nodes to find out whether even just 1 transaction (which could be 1 in potentially thousands) is being censored by a block producer sequencing to a settlement layer. In data availability design without this, it is burdensome for light clients to sample transactions because if only 1 transaction was withheld (which could be critical), the more transactions that were being batched to a settlement layer, the harder it would be for a light client to find, the less security a roll-up would have.
In the Ethereum ecosystem, a rollup (such as Optimistic Rollup) could post calldata to Ethereum but it is still (relatively) expensive versus posting the same data to Celestia to ensure data is available (and therefore recoverable to challenge what is sequenced to the settlement layer). There is a chance that rollups that exist in Ethereum now might only use Ethereum in the future to challenge the off-chain execution if it was incorrect (and slash on Ethereum) and use Celestia as the data availability layer to verify that data is available in order to submit the challenge.
Celestia is also working on creating a framework that allows zones (outside of rollups) to also write transaction data to Celestia, whereby Celestia ensures it is available. In Celestia’s own words:
Optimint is the software that allows a chain to deploy directly on Celestia, as a rollup. It spins up its own p2p network, collects transactions into blocks and posts them onto Celestia for consensus and data availability.
Optimint is essentially a framework for developers to use that does not require them to undergo business development to find their own validators or create its own security budget as Celestia handles the work for them. Optimint is the consensus layer of Celestia, which provides a framework for transaction ordering that can be used in the data availability layer as well as settlement layer (if required). It is likely that Optimint could rival interchain security because the value proposition is the same for both of them. It is unknown how consensus will differ in Optimint vs Tendermint as it exists in Cosmos Hub today.
In any case, Celestia is a completely unique and elegant design that tailors to all execution layers’ needs. Celestia is blockchain-agnostic and provides consensus over data availability within an execution layer. This is a powerful concept and Celestia’s importance could transpire across both Cosmos and Ethereum in the near future.
Finally, another vertical scaling solution being built in the Cosmos is Saga. Saga is a network that is purpose-built to give each application that launches on its network its own execution environment. This means there could potentially be hundreds / thousands of ‘chainlets’ running on Saga. A core value proposition of Saga is that execution environments are customisable, an application has the flexibility to choose its own execution environment depending on its needs. The power of each individual application having its own execution environment is that resources can be managed in a more efficient way. Whenever one application runs out of blockspace, it can easily spin-up another execution environment that is focused on a particular subset of the activity from the original application via deploying another instance of the same smart contract in order to handle the load. Saga suffers a relatively similar fate to interchain security in that there is a lot of burden placed on validators in order to allow applications and application-specific chains to run smoothly. It is Saga’s intention to have chainlets provisioned by validators in a fully-automated way but this is a complex challenge to solve. If Saga is able to solve provisioning automation in an efficient way, it will be a force to be reckoned with within the Cosmos.
Figure 2 — An overview of the design choices made by Interchain Security, Dymension, Celestia and Saga
To conclude, traditionally Cosmos was fully-focused on scaling the ecosystem horizontally. Horizontal scaling is in stark contrast to the approach Ethereum has taken, which has focused on scaling the network vertically. In 2022, there has been a trend for teams to start working on experimenting with vertical scaling solutions in the Cosmos to complement the already existing horizontal scaling solutions that exist. The four major vertical scaling solutions that are being worked on in the Cosmos are Cosmos Hub Interchain Security, Dymension, Celestia and Saga.
Each vertical scaling solution comes with its own design choices and trade-offs. However one theme holds true amongst all vertical solutions being worked on in the Cosmos — flexibility. All vertical scaling solutions in the Cosmos are completely customisable and offer a tremendous amount of freedom for developers to experiment with. The original value proposition of the Cosmos — IBC, Cosmos SDK and Tendermint is being leveraged in different ways by new vertical solutions in the Cosmos. What is unique to scaling in the Cosmos is that it is intrinsically horizontal. All vertical scaling solutions being built still scale horizontally. This is in large part due to the seamless experience, standards and software development kits that are prevalent in the Cosmos. Even if a vertical scaling solution is built that leverages the security of an underlying validator set, it scales horizontally in an easier manner than what can be found in other networks because of the modularity of the Cosmos. For the first time in Cosmos history, vertical scaling will accompany existing horizontal scaling to pioneer what could be the most scalable blockchain ecosystem in existence.
Xavier Meegan is Research and Ventures Lead at Chorus One.
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Chorus One is one of the largest staking providers globally. We provide node infrastructure and closely work with over 30 Proof-of-Stake networks.
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Chorus One has received a joint grant from the Celo Foundation and the Interchain Foundation to develop the building blocks for a bridge that will allow Inter-Blockchain Communication (IBC) between Celo — an EVM-based, mobile-first blockchain platform focused on financial inclusion — and networks built on the Cosmos SDK, such as the Cosmos Hub.
A bridge built upon these components will enable users of the Celo platform to tap into the vast ecosystem of IBC-compatible blockchains and vice versa. Some exemplary use cases include bringing the Celo cUSD stablecoin to the Cosmos ecosystem, as well as including Cosmos-based assets like ATOM, BAND, LUNA, or KAVA in the Celo Reserve.
At Chorus One, we are committed to the “Internet of Blockchains” vision and believe we’re still in the first inning of blockchain interoperability. As of today, we are already operating validation and other node infrastructure on 14 different live networks. Currently, these are still mostly isolated, but in the upcoming months various interoperability efforts such as ChainBridge, Peggy, Solana’s Wormhole bridge, as well as ambitious protocols like IBC — which will go live on the Cosmos Hub soon via the Stargate upgrade — will usher in a new era of cross-chain decentralized applications.
Our work on WASM-based light clients (see also our previous Substrate <> Cosmos SDK project here) represent our first contributions to this space. Our goal with these efforts is to make it easy to add support for new blockchains and upgrades to clients without requiring the full governance process to establish new connections in the IBC ecosystem.
“As one of the top validators on both the Cosmos and Celo networks, I’m absolutely thrilled to see Chorus One working to connect the Cosmos and Celo ecosystems with a fully trustless bridge between these instant finality chains. The work adds to their growing body of past contributions to both networks, including the excellent Anthem staking platform.”
Marek Olszewski — Co-Founder at Celo
We are excited to contribute to realizing a world of interconnected blockchains and would like to thank the Celo Foundation and Interchain Foundation for their support.
Our CTO Meher Roy will present on this project that we aim to deliver in Q1 2021 during the upcoming Interchain Conversations online event taking place Dec 12 and 13. Register here in case you are interested to learn more about our work and other awesome initiatives in the wider Cosmos ecosystem.
Chorus One is offering staking services and building protocols and tools to advance the Proof-of-Stake ecosystem.
We provide staking services on both the Celo blockchain, as well as on multiple Cosmos networks; specifically: the Hub, Terra, Kava, Band, Secret Network, and Microtick. Visit our website to learn more and support our work by staking your tokens with us.
Website: https://chorus.one
Anthem Staking Platform (with support for CELO staking on Ledger): https://anthem.chorus.one
Monthly Newsletter: https://chorusone.substack.com
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Originally published at https://blog.chorus.one on November 13, 2020.
Chorus One has received a grant by the Web3 Foundation to develop parts of a bridge that will enable Substrate and Cosmos SDK-based blockchains to interoperate as part of the fifth grant cohort.
Such interoperability will allow, for example, a user on a Cosmos SDK blockchain to move TerraUSD coins to Substrate chains to take advantage of applications in the Polkadot ecosystem.
A core piece of Chorus One’s vision is the ability to freely transfer value and information across sovereign blockchain networks and applications. The Polkadot and Cosmos ecosystems have both been at the forefront of cross-chain interoperability.
We are excited to contribute to bridging these two ecosystems with this initial project that will enable Cosmos SDK blockchains to keep track of consensus updates on Substrate-based networks.
Polkadot combines the versatility of heterogeneous blockchains with the security and convenience of a single security pool and validator set. This is one of the most daring and promising visions of the blockchain space and could unleash unparalleled innovation. The Polkadot ecosystem is consistently shipping great software to advance that vision. We are incredibly excited to help bridge the flourishing Polkadot and Cosmos communities.
Brian Fabian Crain, CEO of Chorus One
A Substrate light client that’s compatible with the Cosmos SDK is a great first step towards bridging the Polkadot and Cosmos ecosystems. We’re excited to see the results of this work and eventually a complete bridge between both networks.
Dieter Fishbein, Head of Ecosystem Development at Web3 Foundation
This grant-funded project lays the groundwork for a bridge between Polkadot and Cosmos. The current project code consists of three parts: a relayer implementation that allows necessary information to pass between two blockchains, a Substrate-IBC module for the Cosmos SDK that is geared towards handling Substrate data, and a Substrate client consisting of WebAssembly bytecode to verify BABE and GRANDPA consensus information on Cosmos chains. In order to have a fully functional bridge, a second follow-on project that allows Substrate chains to validate Tendermint messages is required.
Our WebAssembly Light Client design for Substrate on Cosmos SDK can be extended to support any other blockchains whose light client logic is compile-able to Wasm. One key advantage of the design is the ability to upgrade the Substrate light client, which is derived from the canonical Rust implementation, on Cosmos SDK chains without requiring a full governance process and hard fork for each upgrade. Additionally, the design may be able to easily handle consensus algorithms and allow them to interoperate with the Cosmos ecosystem via IBC. Find the full details and technical description of our approach here.
We are excited to contribute to realizing a world of interconnected blockchains. If you are interested in working with us on this, reach out to us via the channels linked below.
Chorus One is operating validation infrastructure and building tools to advance the Proof-of-Stake ecosystem.
We will offer staking on Polkadot when the network goes live. You will be able to support our work and earn staking rewards by nominating our validators with your DOTs.
Website: https://chorus.one
Anthem Staking Platform: https://anthem.chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Image on cover art by Aaron Burden on Unsplash.
Originally published at https://blog.chorus.one on May 5, 2020.
We recently launched Anthem, our staking platform that seeks to improve the experience of participating in decentralized networks.
Anthem is a powerful tool that provides Cosmos ATOM stakers with financially relevant insights and allows them to manage their staking positions. Users can access historical data for any account on the Cosmos Hub, helping them to figure out how much that account earned while staking and how its balance developed over time.
Try it out yourself with any Cosmos account at https://anthem.chorus.one
Aside from providing historical data for individual users, Anthem’s data also allows us to gain insights into how the Cosmos Hub has developed since launch. This post will focus on analysing and visualizing the first year of staking on the Cosmos Hub.
The Cosmos Hub produced its first block more than a year ago, on March 13 2019 at 11pm UTC. Since then, there were three hard fork upgrades that introduced various changes to how the network operates, all coordinated and approved via the on-chain governance process.
Staking rewards on Cosmos are paid in ATOM tokens, which means the circulating token supply is constantly growing, a fact that some popular crypto data sites routinely ignore. In practice, the circulating supply has increased from 236.2m ATOM at launch to 253.5m ATOM at the time of writing (Apr 4, 2020). The following graph illustrates how total and staked token supply developed:
Looking at this graph, we can already tell that the percentage of supply that is at stake has been growing over time.
The Cosmos Hub has one of the most advanced live staking models. One feature is that changes in staking supply dynamically adjust the network’s issuance rate over time. The issuance rate (in Cosmos: inflation) trends downward up to a minimum of 7% when more than ⅔ of the total supply is staked (more details here). Since this threshold was first breached on the first of July 2019 the ratio never fell below the ⅔ threshold again, leading to the inflation parameter reaching the lower bound of 7% on February 25, 2020.
When charting the staking ratio over time, one can clearly pinpoint the moment when the threshold was first breached:
We see that a large amount of ATOM (almost 20m) was delegated around the 1st of July. This is the Tendermint team delegating their ATOM to a variety of validators (check it out yourself on Anthem).
The chart above also plots changes in the inflation rate and the resulting reward rate. The reward rate is the metric most relevant to stakers. It takes into account that staking rewards are only distributed to those staking. The reward rate signifies the annual growth in holdings that someone delegating their ATOM would expect (before accounting for validator commissions and differences in block times). We can see that at launch the reward rate was relatively high since a smaller portion of the supply was staking. Delegators taking on the risk to stake early were rewarded with a larger portion of the rewards. Then, as the amount of delegated ATOM grew, the reward rate quickly adjusted and has been staying between around 9–11% ever since.
Looking at the historical data, we can also see that the dynamic adjustment did not impact issuance much overall — annual inflation started out at 7%, peaked at 7.68% before the staking ratio threshold was breached, and went back down to 7%, where it stayed ever since.
One final interesting dimension to consider is how many accounts have been created on the chain and how many of those have active stake delegations.
Looking at this data, we can see that both overall accounts and those with an active delegation have been growing steadily. We can clearly see a jump and subsequent growth of accounts when ATOM transfers were first enabled with the launch of cosmoshub-2:
At the time of publishing there are around 16,000 staking accounts on the Cosmos Hub, or roughly 40% of the almost 40,000 accounts on the Cosmos Hub.
These are just a few observations from looking at on-chain data in one of the largest live Proof-of-Stake networks. We will follow up with further insights on networks we support in the future and will potentially add features to explore aggregate data within Anthem.
If you are interested in staking and this kind of data, please help us by taking one minute to answer three questions that will help us to improve the product:
Feel free to reach out to me, @FelixLts on Twitter or Telegram, if you’d like to get access to the raw data used in this analysis.
Support for other Proof-of-Stake networks is coming soon to Anthem — stay tuned for announcements by following us on Twitter or by subscribing to the Chorus One newsletter!
Originally published at https://blog.chorus.one on April 7, 2020.
Decentralization in Proof-of-Stake is a multifaceted topic. Many theories and designs have been suggested in the wider ecosystem on how a PoS system may decentralize power over multiple entities. The Cosmos Hub is one of few of these experiments that has been live for a couple of months. The following analysis covers stake distribution and diversification on the Cosmos Hub and aims to shine some light on how token holders have actually engaged with this early PoS network.
In a PoS network, the way token holders decide to participate in staking influences power distribution in the network. Do holders stake tokens themselves, do they pick one validator and stick with it, or do they diversify across validators? Diversifying stake should come with benefits: it lowers the impact a slashing would have on the token holder and helps to support different entities, thus strengthening decentralization and the ecosystem in general.
To find out how Atom token holders are participating in staking, I took a snapshot of data from the 5th September using the Stargazer API (thanks to Certus One for providing this API). The data takes into account all active delegations, as well as their size and the corresponding delegator and validator addresses. It should be noted that addresses don’t equal entities, there could be holders that hold their funds in different addresses, or holders that share addresses (exchanges/custodians), which will not be reflected in the following analysis.
Let’s start with a summary of the snapshot data. In total, at the time of the snapshot, 177,771,881 Atoms were being staked. The snapshot contains 11,387 active delegations from 6,459 addresses on the Cosmos Hub, which means the average address has 1.76 active delegations. From that we can already see that a large number of holders don’t seem to diversify.
Before we go more in-depth regarding stake diversification, let’s first consider the stake distribution. The following graph shows Atoms at stake with validators ordered by stake and colored according to the commission rate bracket that the validator belongs to (5% or lower, between 5–10%, and greater than 10%).
Looking at this we can see that the largest validators either charge a low commission rate below 5%, while others charge above 10%. These often signify funds that validate their own stake, or providers that focus on larger holders. Looking at the validator set ranked by stake visualizing the amount of addresses that delegate stake to them, we can see that low fee validators are popular especially among smaller holders. The top 3 validators by number of delegations charge no or a low fee:
This graph also contains some interesting outliers: e.g. Huobi Wallet on rank 43 has delegation from 636 addresses. Similarly, Coinone Node on rank 15 has 745 delegators. Both of these are exchange run validators. Another interesting mention is Cosmostation at rank 7, who managed to attract 678 delegators to their validator with a 12% fee, potentially a result of their successful wallet.
Now that we got an overview of stake distribution among validators, let’s take a closer look at delegations and the addresses they are coming from:
This data contains some interesting insights. For one, only about a quarter of addresses actually diversify their stake, but together these addresses account for about 64% of the total stake. What this means is that addresses that diversify on average hold about 5 times as many Atoms as those that don’t, providing us with insights that diversification is more popular with larger holders.
Taking a closer and counting the number of addresses given how many active delegations they have (n), we see a swiftly declining curve. While there are still 786 addresses with 2 delegations and 347 with 3; addresses with more than 5 delegations become very rare. There are a few interesting outliers that were cut off this graph. Specifically, an address maintained by B-Harvest sports 119 delegations with low Atom amounts that were carried for tracking purposes. 6 other addresses with seemingly similar patterns (<500 Atoms across 67 to 83 validators) exist.
Finally, if we visualize the Atom amount staked by addresses sorted by the number of validators they diversify amongst, we are presented with some more data points that stand out:
The peak of holdings with 36 delegations is from the Tendermint team address, which stakes ~21 million Atoms. Another peak with 46 delegations and ~7 million Atoms at stake is due to the ICF address. The most diversified address with significant holdings delegates to 51 validators. The two peaks with 16 and 18 delegations also signify well-diversified large holders.
In conclusion the data presented clearly indicates that Atom holders largely don’t diversify across multiple validators. In addition, we also saw a preference for low fees among smaller holders.
Our team at Chorus One believes that stake diversification is important to create a thriving validator set that engages with the network and contributes to ecosystem growth. It might be that currently token holders don’t care about diversification, are unaware of benefits, or that it is simply too hard, or not worth the effort to diversify (low slashing risks, diversifying requires increased research on validators, bad UX of having to carry out multiple transactions to delegate and to withdraw rewards,…).
We are researching ways to make participating in staking and diversifying easier. Join our Telegram to discuss and let me (@FelixLts) know what else you’d be interested in for future analysis. Interesting extensions could be to expand on differences between whales and small holders or to take a look at other Proof-of-Stake networks (e.g. Tezos). If you have a dataset for other PoS networks or want to help obtaining the relevant data please reach out.
Originally published at https://blog.chorus.one on September 10, 2019.
We have curated a list of the current top wallets to store and delegate your Cosmos Atoms from. Before diving into the options, I would like to remark that the safest way to store larger amounts of Atoms is on a hardware wallet. There are multiple wallets and tools that allow you to send, delegate, and participate in governance using a Ledger device. But let’s start with our list:
Lunie is the official wallet that was first developed by part of the Cosmos team (then called Voyager). The Lunie team has now spun off as a separate company.
Lunie is available as a web and mobile wallet (in development). There’s also a Lunie browser extension that allows you to securely generate keys. Lunie enables you to safely perform every operation from sending to participating in governance through your Ledger device without having to download additional software.
Find out more at: https://lunie.io/
Evaluation
+ Security audit
+ Web wallet usable with Ledger devices and browser extension
- Mobile wallet can’t store keys yet (in development)
The popular multi-asset mobile wallet with support for ETH, BTC, EOS also has a Cosmos wallet. imToken supports a lot of functions like exchanging tokens, using DApps and now also storing and staking your Cosmos Atoms!
+ Multiple Assets (BTC, EOS, as well as Ethereum and Cosmos assets)
+ Many functionalities (token exchange inside the wallet, DApp support,…)
+ Available on both iOS and Android
+ Security audit
Trust Wallet, the open-source multi-currency mobile wallet, has its own staking platform that also includes Cosmos. The platform allows you to stake from the mobile Trust Wallet application (iOS and Android), as well as from Ledger devices or other wallets that support WalletConnect.
Evaluation
+ Multiple ways to access (Ledger, Trust Wallet, WalletConnect)
+ Support for multiple currencies and applications
- Only supporting a subset of validators and features
This slick mobile wallet is developed by the Korean team at Cosmostation, who also run their own validator and block explorer. The wallet is available as a web wallet, as well as on the Apple App Store and Google Play.
+ Great design and UX
+ Amount of information and features
+ Available on desktop as well as mobile (iOS and Android)
- No security audit
Another mobile wallet from the Chinese team at WeTez, who are already experienced in staking on Tezos. They also operate a validator on the Cosmos network and educate the Chinese community around the staking ecosystem.
+ Support for Cosmos, IRISnet and Tezos
+ Available on both iOS and Android
- No security audit
- No governance features and little information in the interface
There are a variety of tools build by validators to allow for easy staking and governance participation using a Ledger device. These include delegating through the Hubble and Stargazer block explorer and the delegation tool from our colleagues at Staking Facilities, as well as our own tool. The Chorus One tool additionally allows delegators to participate in governance themselves.
+ Easy to use
- Limited features and only Ledger devices supported
There are a variety of wallet options available already today. We recommend storing large Atom amounts on a Ledger device. To do so you will need to have the Cosmos application installed on your Ledger device using Ledger Live. There are also some other wallets in development (e.g. IOV and Lunagram). We are looking forward to trying these out and seeing the wallets and tools mentioned in this article evolve.
Originally published at https://blog.chorus.one on April 26, 2019.
This is Part 2 of a series of posts. Part 1 can be found here.
We often see the term “network effect” in technology discussions. In common usage, the term can be misused to imply a natural tendency for networks to add value to all users as they grow. But this is not always the case.
Firstly, there are many different types of network effects, each with different characteristics and differing strengths. One thing that is often overlooked is that network effects can sometimes be negative and, in fact, sometimes both positive and negative effects can co-exist in the same network. An effect is positive when more people using the network gives everyone access to more value. But a broadband or mobile network may have negative network effects, where more users may lead to more congestion. We see something similar in a social network, where noisy content feeds caused by user growth can make it harder to find quality content. In a marketplace, more sellers result in more competition for other sellers (negative), but more products for buyers (positive), which in turn leads to more buyers which is good for all sellers (positive). This specific example is called an indirect network effect. The NFX venture fund has an amazing collection of essays on network effects here: https://www.nfx.com/essays.
In this post, we’ll show why network effects are so important in Cosmos. The main reason is that Cosmos is not just a network: it’s a network of networks. Each sub-network has its own network effects which will interact with each other. When Ebay started they could focus on one network: buyers and sellers in a marketplace. Likewise for Uber: drivers and commuters. The Cosmos Hub has at least three types of network effects at launch.
NFX defines two-sided platform network effects as follows:
“… 2-Sided Platform nfx … the supply side actually engineers products that are only available on the platform. The supply side has to do work to integrate to the platform. The products created and sold by the suppliers are a function of the platform, not independent of it.”
At first glance, it may seem that Cosmos SDK fits into this classification. Developers build apps as the supply side, with app users as the demand side. And these apps are “not independent of the platform”. So this looks like a typical developer platform such as iOS, Windows, or Xbox. Here we can see that Cosmos is a platform.
But… NFX also define protocol network effects that “arise when a communications or computational standard is declared and all nodes and node creators can plug into the network using that protocol”.
When we look at Cosmos this way our focus is on its ability to become a global standard for inter-blockchain communication, much like TCP/IP powers the internet or VHS became the video standard. So Cosmos is also a protocol.
Another perspective on Cosmos focuses on resource provision. We can look at Cosmos as having two-sided marketplace network effects, with validators providing computational resources on one side and app developers paying for these resources (either directly or by passing the costs onto their end users) on the other side. In fact, we can also see a second two-sided marketplace, with delegators as resource providers providing capital and validators as the demand-side, providing security and a safe return on that capital. So, from this perspective, Cosmos consists of two back-to-back two-sided marketplaces.
For Cosmos to succeed, each of these three classes of network effects (platform, protocol, and marketplace) need to strongly reinforce each other. They will each come into play at different phases in the growth of Cosmos.
As a platform, the focus needs to be on growing the developer community. The Cosmos community will need to build out the best tooling for developers to build, deploy and support applications. It will need to be cost-effective for developers to get their apps into production and in use. The community needs to create the best forums for the community of developers, sharing sample code, supporting each other, updating documentation etc.
But it’s also important that the validators and delegators help to build developer and user confidence in the network, by securing the infrastructure, avoiding network downtime and improving overall resiliency. Cosmos validators will need to work together to ensure that as the first apps take off, the user experience is on par with centralized services like AWS and other centralized networks. The network must also remain cost-competitive so that developers and users are not put off by high fees, while maintaining high enough rewards to support world-class infrastructure providers and to provide competitive risk-adjusted yields for delegators, especially in light of competing investment opportunities in the decentralized finance (DeFi) space. This is why the effectiveness of the marketplace mechanisms are so important.
But the Cosmos vision of multi-token services and the interoperability of chains will become increasingly important over time. This is where protocol network effects become increasingly important. While each effect can be built up over time, all three are mutually self-reinforcing. An early win with a multi-token service, even one with low transaction volumes, could have a meaningful impact on the long-term chances of the Cosmos Inter-Blockchain Communication (IBC) Protocol becoming the de facto standard for token exchange. But if there were weak rewards for validators or a high number of slashing events (causing weak delegator returns), this could start to negatively impact the quality of the network infrastructure thus damaging the long-term potential of IBC and weakening the attractiveness of Cosmos as a developer platform.
What is especially interesting is the relative strength of each network effect. Platform effects are weaker than protocol network effects. This is because developers love nothing more than trying out new tools and platforms, as is evidenced by the huge number of developer libraries and frameworks. Right now this is a strength for Cosmos, as Ethereum developers are more likely to experiment with a new platform. But even though platform effects are weaker, they can still provide an advantage, so it’s important for Cosmos to build an effective community of developers helping each other, contributing to tools, videos, Q&A forums etc. This will serve to strengthen the overall proposition, giving itself more time to build out the stronger protocol effects.
In summary, Cosmos is a network of network effects. If these network effects can reinforce each other, this could make Cosmos more powerful than any protocol, platform or marketplace that has previously existed. But it requires a delicate balance. It will be an exciting experiment!
Stay tuned for more in this Internet of Blockchain series, where we dive into staking economics, value capture, governance and more.
Follow us on Twitter and join our Telegram and mailing list to find out more.
Originally published at blog.chorus.one on April 8, 2019.
There is a tangible feeling that the gloves are coming off in crypto. When crypto was growing fast and valuations hit peak bubble, it was easy to argue that crypto was such a big transformation that all the early movers could be winners. As crypto winter befell us, the focus turned to survival and on buidling. Crypto took a hit, but the smart money stayed in and the crypto ecosystem is in much better shape to disrupt the global economy. But now some people’s minds are turning to the impending battle of the chains.
In this article, the first of a series of posts, we’d like to argue the opposite point of view. We believe that it’s much too early for crypto infighting. When markets mature, competition will get intense. But we are nowhere near a mature market. Right now, it’s in everyone’s interest to focus on growing crypto into a rich, diverse ecosystem of projects that can thrive together.
Throughout the blog post series, we will work to reclaim the “Internet of Blockchains” (IoB) vision from the many projects that have claimed it as their own. When we speak about IoB, we mean a vision of the decentralized web that is made of tens of thousands, maybe even millions, of interconnected blockchains. This vision may include a range of general-purpose smart contracts platforms, each with their own features that create differentiated value propositions. There may be competing inter-chain protocols that allow value to flow across the IoB, potentially through decentralized hubs that can securely route these flows. Data will be dispersed across a range of private and public repositories. Much of the business logic will sit in application-specific chains.
We want this reclaimed Internet of Blockchains vision to serve as a catalyst for a renewed focus on positive-sum thinking within the wider crypto community. Maybe we can even call it Interoperability Maximalism 😁.
When Chorus One selects a network to support, interoperability is a key requirement. You could say it’s our central investment thesis. The two projects we run validators on today (Cosmos Hub and Loom Network) both reflect this interoperability bias. Both the Cosmos Hub and Loom’s PlasmaChain are two very important pieces in the IoB vision. They are both, in their own ways, interoperability hubs. Loom is a Layer 2 network built on Ethereum, so ETH and ERC20 tokens can be used by apps running on the chain. Loom has also announced interoperability with Cosmos Hub, Tron, and EOS (and we’re guessing there might be more network integrations to come). Cosmos has announced plans to bridge their hub to Bitcoin and Ethereum. They also provide an SDK for developers to build their own application-specific blockchains or “zones” (as they are known in Cosmos terminology). Cosmos are also working on their Inter-Blockchain Communication (IBC) Protocol, which could become the global standard for inter-blockchain value exchange, allowing digital assets to be moved across chains.
So instead of thinking what <insert your favorite blockchain> should be doing to out-compete the rest of the community, why don’t we try to reframe these strategy discussions and try to figure out where each blockchain fits into the Internet of Blockchains? What special value does each chain add? Does it differentiate by providing unique value? Can it identify a niche to fill and then look to build network effects within that niche?
For general-purpose smart contracts platforms, this might mean some form of specialization i.e. identifying key use cases to focus on and adding features that uniquely enable those use cases. What attracted us to Loom, was their decision to focus on features for the gaming industry, by building the essential elements required by the game studios who are lined up to capitalize on the great disruption that crypto brings to their industry. Once a niche is identified, each project can then try to figure out where the network effects are. In gaming, marketplaces for trading in-game assets are the best places to build sustainable competitive advantage.
Other networks we are speaking with are a looking to drive down the cost per transaction on smart contract networks to give them a unique advantage in verticals that require massive transaction volume e.g. micropayments. Others are focusing on developer productivity, through great tooling and new paradigms for code reuse.
Another approach is to build specific protocols. The Cosmos IBC protocol takes a siloed network and makes it more useful by making it interoperable with other networks. When protocols become global standards (think HTTP, TCP/IP) they become irreplaceable. Protocols have very powerful network effects. So Cosmos Hub with IBC has identified its niche. But more importantly, the Cosmos community have a clear strategy on how to succeed in this niche i.e. to make IBC the global standard. In later posts we’ll show how Cosmos SDK, Ethermint, pegged zones etc. all come together to maximize IBC’s chances of success.
So stay tuned. This interplay of differentiation and strategy is at the heart of how we think about interoperability. Over the series of posts, we’ll dig deeper into a range of topics that will hopefully start a wider conversation about how we deliver on the Internet of Blockchains vision.
Follow us on Twitter and join our Telegram and mailing list to find out more.
The Cosmos Hub has launched and one of its core features is the ability for Atom holders to collectively govern the blockchain. Atom holders can submit proposals and signal their approval or disapproval to proposals submitted to the network by signing a special type of transaction. The following article will cover the governance procedure on the Cosmos Hub and introduce our governance tool that allows any Atom holder to participate in the on-chain governance mechanism.
In the current Cosmos Hub governance implementation anyone can submit a text proposal to the system. A minimum deposit is required for a proposal to enter the voting period during which Atom holders will be able to vote on whether the proposal is accepted or not. The numbers used in the following are based on the parameters implemented on the Cosmos Hub at the time of writing (25th March 2019).
For a proposal to be considered for voting, a minimum deposit of 512 Atoms needs to be deposited within 2 weeks from when the proposal was submitted. Any Atom holder can contribute to this deposit to support proposals, meaning that the party submitting the proposal doesn’t necessarily need to provide the deposit itself. The deposit is required as spam protection, Atom holders that contributed Atoms to a proposal will be able to collect their deposit when the proposal was accepted or when it did not reach the minimum threshold after 2 weeks.
When the minimum deposit for a particular proposal is reached the 2 week (336h) long voting period begins. During this period, Atom holders are able to cast their vote on that proposal. There are 4 voting options (“Yes”, “No”, “No with Veto”, “Abstain”).
Important details in the governance implementation of Cosmos are:
If a proposal is accepted depends on the result of the coin voting by Atom holders. The following requirements need to be satisfied for a proposal to be considered accepted:
If one of these requirements is not met at the end of the voting period, e.g. because the quorum was not met, the proposal is denied. As a result, the deposit associated with the denied proposal will not be refunded and instead be awarded to the community pool.
An accepted proposal will need to be implemented as part of the software that is run by the networks’ validators. A future blog post will cover different types of proposals and how exactly validators coordinate to implement a proposal that passed the procedure described above.
For an exemplary governance vote, check out the first governance proposal from validator team B-Harvest about adjusting the block time rate used to calculate network inflation to mirror actual conditions in the network (Note: Chorus One is supporting this proposal because it aligns staking rewards paid out by the live network with what was described in the Cosmos whitepaper).
At Chorus One, we aim to enable token holders to exert influence on network governance. For this reason, we created a tool that allows Atom holders to effortlessly cast their own governance vote from their Ledger device. You can find the tool on our Cosmos page:
https://chorus.one/networks/cosmos
Another part of our effort in terms of network governance is informing and discussing governance procedures and proposals with our community of delegators and the wider Cosmos ecosystem, join our Telegram and follow our social media channels to stay informed about our stance in matters of blockchain governance!
We believe the governance implementation of Cosmos with delegators inheriting validator votes, but delegators being able to overwrite validator choices and make their own decision is a great solution to the low governance turnouts that can be observed in other blockchain networks. We think this approach does good in striking a balance between a representative democracy (“proxy voting”) for less interested holders, while still allowing for direct influence for token holders that want to directly engage in network governance.
Cosmos Hub governance is still in its early days and we aim to provide our input into how the system could be improved, as we believe a well-functioning governance mechanism will increase the likelihood of success of the Cosmos Network, feel free to chat with us about your ideas!
Chorus One Governance Tool:
https://chorus.one/networks/cosmos
Cosmos SDK Governance Documentation: https://cosmos.network/docs/spec/governance/
Cosmos Network Governance Forum: https://forum.cosmos.network/c/governance
Governance Proposals Statistics:
https://bharvest.io/wallet_en
https://hubble.figment.network/chains/cosmoshub-1/governance
Gaiacli Instructions:
List of query commands (in gaiacli):
gaiacli query gov -h
Participation (through gaiacli):
https://cosmos.network/docs/gaia/delegator-guide-cli.html#participating-in-governance
Originally published at blog.chorus.one on March 25, 2019.
This post is a comprehensive overview of staking on the Cosmos Hub. It will explain the current implementation, cover implications and risks for delegators, as well as expected returns including a reward calculator. The results provided by the calculator serve as a projection, Chorus One doesn’t guarantee their accuracy. The Cosmos Hub is about to launch and with that Atoms, the cryptocurrency native to the Cosmos Network, can be used to stake (also referred to as bonding) to help secure the internet of blockchains and to receive rewards for it. The concept of staking can be hard to grasp and the Cosmos Hub implementation is one of the most sophisticated to date with a lot of caveats that need to be considered to achieve the optimal risk-adjusted return as an Atom holder.
Staking means you are locking your tokens and participate in securing and maintaining the Cosmos Hub, for which you are rewarded in the network’s native tokens (Atoms). You can delegate your tokens to a validator that will run the required node infrastructure for you in exchange for a cut of the rewards. This post specifically focuses on delegating, if you want to learn about the difference between validating and delegating check out our explanation of these concepts here.
Staking in the Cosmos Network is highly incentivized, the main utility of Atoms is to be used to determine the decision power of validators in the consensus process. Atom holders collectively decide which validators will secure the Cosmos Hub and their individual influence in the network.
To start staking you need to own Atom tokens, which at launch means you will need to have participated in the fundraiser. Transfer of Atom tokens will be enabled through a governance vote, so please be aware that any offer to buy Atoms before that is either a scam, the wrong token, or an IOU, which will mean that you should make sure you trust whoever you are buying the Atoms from.
Once you own Atoms, you can participate in securing the network and earn rewards by staking them. A list of validators, their terms, and other information will be available on the blockchain. Presumably, most wallets and other websites will also make this information available in their interfaces.
To participate, you need to send a special type of transaction to the network and the protocol will then automatically assign (bond) your tokens to the validator you specified, increasing their voting power in the consensus process. From that point on your tokens are locked and associated to that validator’s consensus votes. Check this infographic for a reference to how consensus is formed with Tendermint.
Important to note here is that at launch, the official Voyager wallet won’t be audited, so the recommended way to delegate is to use the CLI (command line interface). Delegating using the CLI requires some technical expertise: You have to set up Go, install the Cosmos SDK and dependencies, type in commands into the command line, etc. We’ve done a lot of work on making that process easier and will be releasing a tutorial about it very shortly. An alternative option for non-technical users may be to wait for a stable Voyager release.
Once you are bonded you start receiving rewards, these are influenced by the following factors:
The global inflation rate, which gradually decreases to 7% when more than 2/3 of the total Atom supply is bonded. If less than 2/3 is bonded, the global inflation rate will gradually adjusts up to a maximum of 20%.
The staked Atom supply. Rewards get calculated based on the total supply, but distributed only to those who are staking. So the fewer people stake, the higher the effective rate of rewards for those staking.
The block time interval. The longer the block time interval, the lower the actual rewards paid out to stakers, as rewards are paid out on a per block basis.
As the effective inflation rate, fee levels, and Atom price are largely independent of your behavior, I will first focus on the impact of factors that you have an influence on. The important factors to consider here are (aside from the amount to stake) validator commission rates and uptime, as well as your re-staking behavior.
There is another, possibly the most important factor, to consider when staking in Cosmos. That is the possibility of getting slashed as a result of your validator not following protocol rules. What this means is that deposited tokens (not just rewards!) can be removed by the protocol if the validator you are bonded to misbehaves, e.g. by double-signing a block. This punishment can be as high as 5% of your delegated amount, and it serves to protect the network from malicious validators. Since slashing also applies to delegators, it is important to choose your validator(s) based on their trustworthiness and the security of their infrastructure. Double-signing a block is an attack on the network and could be a result of an actually malicious validator that tries to cheat the network, a validator whose setup is flawed in some way, or host compromise, which could be a result of bad key management practices (e.g. rogue employees) or other security holes in validator infrastructure or operations.
At launch, slashing parameters are set to 5% for a double-signing and 0.01% if a validator misses 95% of blocks in a rolling 10,000 block window. Depending on the block times in the network, this means about half a day to a day of consecutive downtime will result in a 0.01% slashing for the validator and his delegators (e.g. at 5 second block times, the 10,000 block window corresponds to 13 hours and 54 minutes. If a validator is offline for around 13 hours and 12 minutes within this window, a slashing of 0.01% will occur).
The following graph shows how the effective inflation rate (the annual yield an Atom holder delegating will receive in Atoms) based on an assumed 15% commission rate, 5s block times, no revenues from transaction fees (which is likely in the bootstrapping phase of the network) and not considering downtimes, slashings, and re-staking behavior. One thing to note is that the global inflation rate will gradually adjust towards 7% when more than 2/3 of the total Atom supply is staking and towards 20% when there’s less than 2/3 of the Atom supply staking. The rate of change in the inflation rate in the network is limited to 13% per year. As the inflation rate at launch is set to 7%, this effectively means that it will take at least a year of low staking participation for the inflation rate to reach 20%.
To protect against a validator attacking the network and then immediately withdrawing his stake, the Cosmos Hub is enforcing a 21-day unbonding period. During this period, staked Atoms do not receive rewards anymore, but slashing is still possible. This means your Atoms are illiquid for 21-days after you decide to stop staking! In the future, there may be some possibility to get short term liquidity on unbonding Atoms through financial derivatives.
You can at any time change which validator you delegate to without delays and at no cost, aside from fees paid for the re-delegation transaction. Use this function to change your validator if you aren’t satisfied with its service any longer, factors could e.g. include a rise in commission rates, or extended downtimes that lower your rewards, or softer factors such as you wanting to support another validator team that benefits the ecosystem, a team that supports your staking efforts, or that shares your opinions on how to govern the network, etc. Be aware that re-delegation take 21 days to finish and that the protocol limits re-delegations to seven per account. Read more here.
There are situations in which you are automatically unbonded from the validator you are bonded to, which requires you to bond your Atoms again if you want to continue to stake. These are:
This basic reward calculator projects potential rewards from delegating Atoms to Cosmos validators based on the assumptions stated. The calculator requires you to put in the current global inflation rate and staked supply. It may be extended to help you determine your optimal re-staking interval and the resulting expected rewards.
form.myjotform.com
We will update this article to account for changes and provide other resources to our community of delegators to help them in their staking journey. Please feel free to share this post with other Atom holders and ask us questions on our Telegram or on any other channel.
Originally published at blog.chorus.one on March 12, 2019.
This is the first part of a 3-piece blog series on the key ideas behind the Cosmos Network.
In March 2019, one of the promising Blockchain 3.0 projects — the Cosmos Hub — goes live. It delivers the ability to build an Internet of Blockchains — myriad decentralized ledgers, hosting disparate financial applications, able to coordinate the movement of financial assets between each other. Understanding the Cosmos vision and its implementation is valuable for cryptocurrency technologists and investors, since the upside is massive. This is the story of the key ideas behind Cosmos, and how they came to be. We start off in 2014, with Jae Kwon’s vision of consensus without mining. One by one, we’ll covers five key ideas leveraged by the Cosmos team to arrive at the current system. These key concepts are:
If the above looks unfamiliar, you’re in the right place! Reading this set of two articles, will position you to follow the conversations around this quantum leap in blockchain technology. This article covers concept (1)-(3) while later articles cover concepts (4)-(6).
Our story starts in 2014. Back then the first wave of Bitcoin 2.0 projects like Colored Coins, Mastercoin and Peercoin were in vogue. Most of these attempted to build on top of Bitcoin, but a few attempted to create Proof of Stake — a new way of securing cryptocurrency ledgers that would obviate the need for mining hardware, and reduce the operating costs of a cryptocurrency ledger. With bitcoin hovering around $600, miners were already spending over $400 million annually running their mining machines to operate the Bitcoin blockchain while concurrently delivering a capacity of fewer than 7 transactions per second. The need for a new way of coming to consensus over the balances of accounts was needed — ideally some method that would cut the annual operating costs 100-fold, so that an even more deflationary cryptocurrency could be realized. After all, these were the days cryptocurrency users watched over the inflation rates like hawks.
Out of these efforts, Peercoin and Nxt were the most prominent. The technical approach of both was to try to simulate mining using coin balances — deploy some mechanism that would scan the balances of all accounts, and randomly select some account to produce the next block. Higher the number of coins held by an account, higher the odds it would be selected to create the next block. It was as if the coins one held would become virtual ASIC miners, and periodically give one the chance to create a block and earn some reward. It was an approach headed for the dustbin of history, but we didn’t know that yet.
This is when Jae Kwon quietly entered the scene with a logical and deceptively simple idea: To leverage previous academic work around consensus protocols to build a cryptocurrency system called Tendermint. If anyone scanned the academic literature of consensus mechanisms from the last 15 years, they would have stumbled upon Byzantine Fault Tolerant consensus mechanisms like PBFT and DLS. These consensus mechanisms were built for scenarios where a group of accountants that ‘knew’ each other could jointly agree on the state of a system, for instance, a financial ledger (containing accounts and balances). These mechanisms were not suitable to build a system like Bitcoin. Bitcoin relies on permissionless entry — anyone can become an accountant for the Bitcoin network by setting up a mining pool. Academic consensus mechanisms were built for scenarios where some social/legal process would identify a known, closed set of accountants. Jae’s contribution was to marry the idea of security bonds, which we cover later, with classical consensus mechanisms to build a cryptocurrency network secured without mining.
These academic mechanisms, the most notable of which is Practical Byzantine Fault Tolerance, are best imagined as glorified roundtable voting systems. Imagine a roundtable with a lot of seats; each seat populated by an accountant as in the diagram below. In reality, these accountants are not humans but software running on disparate computers on the internet. These accountants carry their own individual copy of a financial ledger being maintained by the group. This ledger, the blockchain, is a set of ordered pages (also known as blocks) with each page containing user transactions. The role of PBFT is to ensure that books carried by the accountants stay synced up with each other and that there always is a single authoritative version of the book. One accountant is selected as a leader, and its role is to collate user transactions, package them up in a page, sign the page digitally and propose that the page is added to the ledgers of the other accountants. Accountants have communication channels open with each other. Other accountants receive the proposed page, verify the veracity of the accounting in it; sign and broadcast affirmative votes provided the accounting is correct. Once an affirmative quorum of ⅔ of the accountants is reached, the leader collects the affirmative votes and proposes the next page. The next page can contain proof that the previous page had sufficient affirmations. When the PBFT leader becomes unavailable, a new leader can be elected. This is the basic mechanism of updating the ledger — by the slow addition of pages containing user transactions, each page requiring a roundtable voting cycle.
The beauty of PBFT is that it tolerates up to ⅓ of the accountants, including the leader, to be actively malicious. Below this threshold, actively malicious accountants cannot create invalid ledgers, and ledger users are safe against their malicious behavior. Another powerful property is that pages, once added to the ledger, are final and cannot be reversed. This is in contrast to Bitcoin where blocks added to the blockchain, can be replaced by new ones provided a sufficient number of miners actively work towards such an outcome. Finally, the system naturally has a few orders of magnitude lower operating costs per transaction as compared to Bitcoin.
Therefore, PBFT and its derivatives were the perfect building block for consortium blockchains. Consortia are able to select a set of its own members to run the accountants on their individual infrastructures, and be able to deliver a financial ledger to consortium users. Many permissioned blockchain projects, such as Hyperledger Fabric, Symbiont etc. have taken similar paths. One of the earliest permissioned ledger companies was Monax (previously called Eris Industries). Monax wanted to build a permissioned version of the Ethereum Virtual Machine and looked to replace Proof-of-Work with something more suitable. They discovered Tendermint in 2014 and became its first real user. So a short aside is that Tendermint has seen considerable usage among consortium blockchains for many years.
But let’s get back to the topic of cryptocurrency networks. The design we described does not work to build a cryptocurrency for it is infeasible to agree on a definitive set of accountants for a distributed, mutually untrusting, cryptocurrency community. In other words, we needed a mechanism that could allow anyone to spin up an accounting server, and be able to join the accounting set of a PBFT based cryptocurrency.
A second key insight paved the way forward. Let’s first state the equivalent idea, in the world of human relationships. In situations where we need to trust other people/counterparties to behave well, security deposits are often instituted to guarantee good behavior. For example, in order to let an apartment, a landlord asks for financial value to be put into escrow. If the renter misbehaves, say by trashing some equipment in the apartment, the landlord has the recourse of using the escrowed financial value to make themselves whole. The act of putting financial value in escrow, with the threat of never receiving it back, creates economic incentives for good behavior for the renter.
The original Tendermint paper from 2014 applied the same dynamic to the scenario of sourcing accountants from a cryptocurrency community at large. Let’s say we had a cryptocurrency token at our disposal for escrow. Could we source a diverse group of accountants by requiring prospective accountants to place security deposits, in the form of this token, into escrow on the cryptocurrency ledger itself? Further, could one punish these accountants by destroying their security deposits if they misbehaved? Both of these have been demonstrated possible in a beautiful application of economic incentive design.
The Cosmos Hub has Atoms, with a starting supply of around 220 million, as its internal token. Accounts and Atom balances of the accounts are maintained in the ledger (the blockchain) of the Cosmos Hub. In order to select the accountants that would maintain the ledger, an option is created for any account holder to post its Atom balances as a security deposit and become an accountant for the ledger. Witness the beautiful circularity in the design: One has a ledger of Atom balances; particular holders of Atom balances are able to (voluntarily) use those balances as security deposits and become accountants; and the set of accountants chosen thus maintain and update the ledger. This is how the fundamental problem of selecting a group of accountants for PBFT flavored consensus algorithms was resolved in the Tendermint paper from 2014.
Of course, different accountants will post different amounts of security deposits. Those posting larger security deposits (like 10 million Atoms) have greater value at stake than those supplying smaller security deposits (like 1 million Atoms). If both these parties were to have an equal say in deciding which pages get added to the ledger; then there would be an enormous incentive for the larger security deposit accountant to split their deposit into smaller amounts, and get a bigger say. The only logical conclusion, therefore, is for the say, or voting power, of each accountant to be proportional to the security deposit posted by them.
Security bonds solved a separate, titanically important, problem in the cryptocurrency space — the problem of how to punish accountants for their misbehavior. Systems, prior to early Tendermint, had relied on attracting a set of accountants (miners) via the promise of inflationary rewards. One can think of these block rewards as a carrot — individual miners ran accounting systems for cryptocurrency in the expectation of inflationary rewards in the native tokens of the networks. In 2014, the Bitcoin system printed new bitcoin, worth $400 million plus, and awarded them to its set of functional accountants in 2014 — the Bitcoin miners. However, Bitcoin has no mechanism to actively punish a miner if they try to, say, include a fraudulent transaction in the network. Bitcoin possesses only carrots but no sticks!
Tendermint based cryptocurrencies including Atoms, however, institute mechanisms to punish misbehaving accountants — destroy part of their security bonds! It also rewards accountants the same way as Bitcoin, by inflating the token supply and distributing inflated tokens to the accountant set. This might seem like an innocuous difference, but it will become a centerpiece in our later blogs.
For example, one of the ways an accountant can misbehave is to attempt to vote twice, for two different pages, to be added at the same place in the ledger. Unlike a normal voting system, there is no central party like the Government to ensure that an accountant votes only once. Accountants are able to place two contradictory votes when two leaders propose pages concurrently. The ability to punish accountants is critical to disincentive such behavior. Other misbehaviors include the inclusion of invalid transactions in pages proposed by an accountant and being offline for extended durations of time. Each of these misbehaviors attracts penalties of varying amounts.
This unique combination of security bonds for accountants, and the need for accountants to run open source software to maintain the blockchain created a new role, and a business opportunity. This new economic opportunity is to build infrastructure in order to be a validator — a party that supplies security bonds, and operates infrastructure to maintain different Tendermint blockchains as an accountant. Chorus One is one of those accountants: a validator for the Cosmos Hub.
This means that, if the Chorus accountant were to misbehave in any way, the firm stands to lose a significant amount of capital. Misbehavior can occur due to configuration faults, external attacks or rogue insiders. The difficulty of running a validator stems from the need to build a secure system that can ward off these different attack vectors through an intelligent design. We summarized part of our design, that leads us to be confident enough to post a large security bond, in this article.
The concept of a validator has existed since 2014 — it has taken half a decade to go from theory to practice to commercial business opportunity! The passage of time has introduced a new role in cryptocurrency systems based on Tendermint — the delegator. The fundamental issue that emerged with validation, is the disjointedness between the set of parties capable of running a validator; and the set of parties that held atoms. For instance, a hedge fund might hold millions of Atoms, but be unwilling to run validation infrastructure since it is not their core competency. Tendermint based cryptocurrency systems, including the Cosmos Hub, solve this problem by allowing accounts to delegate, or transfer, their voting power to other parties running a validator. Rewards from running the validator, are then split between delegators and validators. You can find out more about the validation-delegation relationship here.
In this article, we’ve covered the 3 keys ideas that Jae Kwon presented as a vision in 2014 — the decision to build a PBFT-inspired cryptocurrency design, the usage of security bonds to adapt the consensus mechanisms to a cryptocurrency setting, and the wholesale creation of the validation/delegation ecosystem.
It has been a long journey to go from ideation to a practical working system. The reward of the Tendermint design is a cryptocurrency ledger design (plus open source implementation) with low operating costs that can process hundreds of transactions a second. This in itself is a big contribution to the blockchain ecosystem.
But, the true revolutionary implications of the design are still to follow! In the next article, we will cover the business opportunities presented by application-specific blockchains. Someday in the future, the implementation of shared security or sortition security networks with the Atoms as a base currency will also be presented. All of these are key to understanding the opportunities in the Cosmos ecosystem. Stay tuned, and let us know your questions.
If you want to discuss Cosmos further, stop by our Chorus One Telegram and say hi. And, of course, we’re happy to answer any questions about delegating to Chorus One.
At this point it is hard to argue with the fact that most projects in the crypto space are being built on Ethereum, but there are many upcoming smart contract platforms that may present an alternative for developers. The Cosmos Network is one of these highly anticipated “third generation” blockchains. Cosmos is using a modular architecture and allows for easy developability and better scalability, if you want to learn more about Cosmos and its value proposition check out our introductory blog post here.
This post is introducing some of the top projects that are currently developing on Cosmos and what made them choose the Cosmos Network to host their applications.
IRISnet aims to build an interchain service protocol for building next-generation distributed applications. The goal is to provide an interface to integrate business services from heterogeneous systems into the Cosmos Network. IRISnet is extending the Cosmos inter-blockchain communication protocol (IBC) through standard transaction types with the goal of functioning as an adaptor of business logic from other private or public blockchains or even legacy systems.
The project is a strategic partner of the Interchain Foundation and Tendermint, who are the main driving forces behind the Cosmos Network. The IRIShub will potentially be the first hub to interoperate with the Cosmos Hub and its connecting zones. Bianjie.ai, the core team from China behind IRISnet, is currently focused on getting their hub ready for mainnet and developing the IRIS Service layer. IRISnet has started its own incentivized testnet, where participating validators can earn IRIS tokens for completing tasks. There are plans to launch a hackathon titled Game of Genesis after the final Cosmos testnet competition Game of Stakes took place. If everything goes as planned, the IRIShub will be live shortly after the Cosmos Hub, with a targeted launch date around the end of Q1 2019.
When asked why IRISnet chose to build on Cosmos, Suyu Huang from the Bianjie.ai team said the following:
“IRISnet believes in the vision of an internet of application-specific blockchains and aims to amplify the value of business applications. The interoperability solution of Cosmos (IBC) was a natural fit for this problem.”
Sentinel is building a multi-protocol network layer to provide access to services and distributed resources for P2P and decentralized applications. Their first service is a decentralized Virtual Private Network (dVPN) that allows users to redirect and mask their internet traffic through a set of high-bandwidth nodes.
Each service on the Sentinel network will be a Tendermint zone with its own network of service nodes and validators staking tokens, which will be able to interoperate within the Cosmos Network. Another exemplary service on the Sentinel network is Swixer, a cryptocurrency mixer that is utilizing cross-chain swaps allowing users to anonymously convert tokens. The Sentinel team is planning to develop a SDK to enable easy integration of third party applications that require access to distributed resources and services.
Sentinel is being built using Tendermint and the Cosmos SDK due to their core strengths in the areas of scalability, governance and interoperability:
The Agreements Network is a decentralized contract management platform aiming to serve as the legal layer for the networked world. Lawyers can generate template agreements and represent them on the network using a toolkit consisting of standard processes like signatures, payments and registrations. These templates can then be invoked and operated in an automated fashion and at scale, with the network providing data assurance for contract formation, chain of custody and fulfillment of obligations.
The Agreements Network is a Proof-of-Stake blockchain based on Hyperledger Burrow utilizing Tendermint consensus and a custom EVM implementation optimized for executing legal processes. The project’s goal is to function as a hub within the Cosmos Network through which other zones can access and interact with the legal agreements between participants stored on the Agreements Network.
The advantages of this approach are:
FOAM aims to bring location-based information to the world of blockchains and smart contracts. By combining low-frequency radio hardware with a peer-to-peer network of nodes staking the FOAM token and token curated registries (TCRs), the FOAM network is incentivizing the creation of a GPS alternative including a world map filled with information (Points of Interest). The project aims to enable parties querying the network to provide a so-called “Proof of Location” to smart contracts, which could be useful in many applications spanning from blockchain gaming to trade finance.
The team raised around $16.5 million at the end of July 2018 through an innovative token sale approach that required users to interact with the protocol before being able to sell their tokens.
FOAM will utilize Tendermint consensus in combination with staking FOAM tokens for consensus between nodes belonging to a FOAM zone. A zone in FOAM refers to a set of radio beacon nodes covering an area of the world within the FOAM network. The team is currently developing an architecture for how such zones could connect to the Cosmos Network.
TruStory is a social network application that wants to bring an end to fake news by identifying the truth behind claims through a decentralized network of topic experts. TruStory is using tokens to incentivize identifying accurate and refuting inaccurate information. In the first version, TruStory will be purely focused around cryptocurrency-related questions.
The team behind Preethi Kasireddy creating TruStory decided to develop on Cosmos for a number of reasons:
The Cosmos Network is positioned as an attractive platform to host decentralized applications. The separation of the consensus and application layer logic (ABCI) together with the modularity of the Cosmos SDK allow developers to easily compose applications with modules fitting to their use case.
Application-specific blockchains utilizing fast finality Tendermint consensus that are able communicate through the IBC protocol could help to usher in a new era of scalable and interoperable blockchain applications. We are excited to see how the Cosmos Network will evolve and are looking forward to help secure this ecosystem in our role as validators. If you are searching for validators for your zone on the Cosmos Network, don’t hesitate to reach out to us through our website or our other channels linked below.
About Chorus One
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Medium: https://medium.com/chorus-one
Slack: https://chorus.one/slack
Telegram: https://chorus.one/telegram
Originally published at blog.chorus.one on November 29, 2018.
This post is the first of a series that will introduce major Proof-of-Stake smart contract platforms. We will regularly add profiles to the “Proof-of-Stake Contenders” series covering the founding history, the team and basic components of the projects, including how their protocol is incorporating staking. The first contender will be the project that we at Chorus One have until now spent most of our time on: the Cosmos Network.
The main vision behind the Cosmos Network is that of an interoperable, scalable “internet of blockchains”. The project’s goal is to enable developers to easily spin up blockchains on a per-application basis, with components that can be switched out to fit the desired use case. To achieve this, the Cosmos Network is utilizing a modular design and a Hub and Spoke model, facilitated by a multitude of technologies and developer tools that enable communication between blockchains and pluggable features such as staking, slashing, governance, etc.
Before the Cosmos Network whitepaper was released in 2016, co-founders Jae Kwon and Ethan Buchman had already been actively working together on Tendermint, a BFT (Byzantine fault-tolerant) algorithm devised to achieve consensus in an adversarial distributed setting, which serves as the basis for the Cosmos Network. Jae Kwon is the author behind the 2014 Tendermint paper, which was one of the first papers that described a possible alternative to Proof-of-Work in public blockchains drawing on distributed system research. Ethan Buchman’s thesis from 2016 on Tendermint remains one of the best technical introductions to blockchains to this day. The two are the leading forces behind the company Tendermint, which is developing the Cosmos Network on behalf of the Interchain Foundation.
The Cosmos Network fundraiser took place on the 7th of April 2017 and was one of the most popular at the time. In the Cosmos fundraiser, participants contributed over $16m in around 30 minutes to receive 168,475,963 Atoms at network launch (at a rate of ~$0.10 per Atom). The rest of the Atom allocation (25%) are distributed to the Interchain Foundation (10%), All in Bits (aka Tendermint) (10%) and seed investors (5%) at launch. The fundraiser raised a record amount at the time, on par with the Ethereum fundraiser but completed in a much shorter time.
The project has been in development since and managed to gather an active community, especially around the staking and validation ecosystem, with over 250 entities registering for the final incentivized testnet (300,000 Atoms are going to be distributed) taking place in November 2018 before the mainnet launch that is scheduled to happen at the end of this year. The testnet dubbed Game of Stakes will test the security and performance of validator infrastructure by simulating and encouraging adversarial behavior between participating parties.
The Cosmos Network is made up of many components, many of which are modular to allow for high degrees of freedom for developers that want to use the Cosmos Network to host their decentralized application. There are two main technical components to the Cosmos Network, the consensus engine (Tendermint Core) and the application interface (ABCI). The Cosmos SDK is a toolkit written in Golang that developers can use to write applications using their own modules or the ones provided by the Cosmos team.
The heart of the Cosmos Network is the Cosmos Hub, which is going to be the first blockchain in the Cosmos Network. Zones connect to the Hub and are able to send transactions to each other through the Hub. Zones will host applications built on the SDK. An example could be a decentralized exchange (DEX) that runs on its own zone. The IBC protocol developed by the Tendermint team provides a standardized way for blockchains to communicate.
In the future there could also be other Hubs with their own Zones that connect to the Cosmos Hub. Zones can have their own set of rules, modules, and even validator sets. There are many concepts for zones in various stages of development, some of the most interesting ones include Ethermint and Ethereum or Bitcoin Peg Zones.
Ethermint is a fully Web3-compatible implementation of the EVM running on the Cosmos Network; it allows Ethereum applications to be ported over to Cosmos to benefit from higher throughput and instant finality. Peg Zones describe bridge blockchains that implement a way to transfer tokens from foreign blockchains into the Cosmos Network via a two-way peg. The Cosmos team has also come up with interesting ideas on how one could onboard the Ethereum community to the Cosmos Network, e.g. by issuing a token (Photon) that essentially mirrors balances of ether holders through a so-called hard spoon (you can learn more about this concept here).
The Cosmos Hub is a Proof-of-Stake blockchain that is secured by the native cryptocurrency of the Cosmos Network: Atoms. Atoms are bonded to (staked with) validators either by validators themselves or by other stakeholders (delegators). Delegators are able to delegate their stake with whichever validator(s) they wish to. If you want to learn more about validation and delegation in Proof-of-Stake, check out this blog post first.
To be able to achieve high performance, the Cosmos Network validator set is limited to 100 validators at launch. There are many cryptoeconomic mechanisms (incentives and penalties) in place to ensure that the protocol runs at it is supposed to, some of these include slashings and lockup periods. Slashing refers to destruction of locked up stake when undesired behavior is detected (through cryptographic evidence). These attributable actions include signing two different blocks at the same height (also called double-signing or equivocation) and being unavailable (offline) for an extended period of time. The lockup of three weeks (in Cosmos: bonding period) is required to prevent long range attacks.
The important thing to note is that in Cosmos, token holders delegating their stake to validators are held responsible for their validators’ actions. This means that they receive rewards in relation to the performance of their validator(s), but also face risks of slashings due to validator misbehavior. This is done to ensure that delegators do their due diligence and choose to delegate to trusted, non-malicious validators with a secure infrastructure setup.
For taking part in securing the blockchain ledger, the Cosmos Network compensates stakers (validators and delegators) with block rewards in the form of inflated Atom tokens and transactions fees paid by users of the network in whitelisted tokens of the Cosmos Network (in the beginning only Atoms, but overtime this may include whatever tokens validators are willing to accept). Returns from staking in Cosmos are based on a variety of factors. Some of these are related to the state of usage of the network and some to the performance of a validator.
The network will likely have negligible transactions fees due to its performance, especially in the bootstrapping phase. This means that rewards for staking will mostly depend on inflated Atoms. The annual inflation rate is targeted to be 7%, which will be reached if more than 66% of the total Atom supply have been staked for an extent period of time. If there are less than 66% of Atoms at stake, the inflation rate will gradually adjust and rise up to a ceiling of 20%.
The image below shows the range of possible annual yields in Atoms when delegating at an assumed 15% commission rate. The chart is cut off at a 20% of total Atom supply staking because at very low staking levels effective yields from staking reach extremely high rates of above 100%. Because of the dynamically adjusting inflation rate effective yields will gradually move towards the upper bound when below 66% of the supply are staking and towards the lower bound when above 66% of the supply are staking respectively.
This analysis shows that incentives in the Cosmos Network are designed to heavily encourage staking, as the Atom is mainly designed to be a staking token on which the security of the Cosmos Network depends.
Finally, Cosmos also features an on-chain governance mechanism that is going to ensure that protocol upgrades happen in a formalized manner. Atom holders will vote on governance proposals with a 1-token-1-vote system. Governance proposals can be submitted by anyone, proposals with a minimum amount of deposits behind them enter a voting period. Delegators will inherit the votes of their validators, but are also able to vote on governance proposals themselves by overriding their validators decision. If a proposal fails, the deposited tokens are lost. To learn more about the Cosmos governance process, check out the documentation here.
Due to its proximity to the Ethereum ecosystem, focus on decentralized applications, and due to Tendermint being one of the most advanced BFT algorithms in production, many projects are already building or consider to host their applications on the Cosmos Network once it goes live. A collection of candidates that have expressed an interest or are experimenting with the Cosmos SDK and Tendermint, including projects like OmiseGO, BigchainDB, FOAM and many others is available in this thread on the official Cosmos forum.
Cosmos is a visionary project with a sound design that pioneered many concepts which were adopted by other cryptocurrencies. Our team at Chorus One is extremely excited about the upcoming Game of Stakes testnet competition and to finally be able to demonstrate the robustness of our validator infrastructure in an adversarial setting. To stay up-to-date with our operations and the nearing launch of the Cosmos Network, visit our website or join the mailing list and other social channels linked below.
About Cosmos
Cosmos Network Website
Cosmos Blog
Cosmos Twitter
Whitepaper
Cosmos For Developers
Introduction
Cosmos Academy
Documentation
Github Cosmos SDK
Github Tendermint
More on Staking and Delegating
Chorus One Proof-of-Stake Blog Posts
Cosmos Delegator FAQ
[Technical] Introduction to the Proof-of-Stake Security Model
[Technical] PoS FAQ Ethereum
About Chorus One
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Medium: https://medium.com/chorus-one
Slack: https://chorus.one/slack
Telegram: https://chorus.one/telegram
Originally published at blog.chorus.one on October 26, 2018. Featured image by Richard Lee taken from Unsplash.
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