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!
.svg){kind=icon}
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.
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.
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.
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.
Pros:
Cons:
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.
Pros:
Cons:
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.
Medium: https://medium.com/@xave.meegan
Twitter: https://twitter.com/0xave
Chorus One is one of the largest staking providers globally. We provide node infrastructure and closely work with over 30 Proof-of-Stake networks.
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Newsletter: https://substack.chorusone.com
YouTube: https://www.youtube.com/c/ChorusOne
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.
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.
.png)
.png)
