Back in 2009, the elusive Bitcoin creator Satoshi Nakomoto created the first blockchain technology to gain adoption. Since then, several crazes of alternative cryptocurrency projects have emerged, inspired by this initial cutting-edge tool. Cryptocurrency projects after Bitcoin are often referred to as altcoins. While developers simulated new blockchains using Bitcoin templates, there are now functional improvements and new possibilities for blockchain technology.
Developers build on the basic functionality of the first blockchain to create platforms with more utility. A blockchain is a distributed ledger that stores the history of cryptocurrency transactions. This means that copies of transaction data are shared among users on the network.
Developers with new ideas have introduced countless new applications of blockchain technology such as smart contracts, IoT blockchains, decentralized finance (deFi), and more. This has led to the development of a mature cryptocurrency market with an active community.
This article will focus on two successful blockchain projects that have gained widespread adoption due to their diverse capabilities and use cases; Ethereum and Cosmos. They all offer unique solutions to the cryptocurrency community.
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Ethereum vs Cosmos
This article will satisfy all your curiosity about these two projects: what are they? What principles are they based on? What are their unique use cases? How did they become so popular in the cryptocurrency space?
Let’s take a deep dive into Ethereum and Cosmos respectively.
What is Ethereum?
Ethereum was co-founded by Vitalik Buterin, a young Russian-Canadian computer programmer. Ethereum’s blockchain holds the second largest cryptocurrency in the world, second only to Bitcoin in terms of market capitalization.
Ethereum runs an open, permissionless blockchain, which means a record of transaction activity, known as state, is stored on computers connected to its network. Each computer that makes up a node is interconnected through a peer-to-peer network. Unlike the traditional banking model, users can only make requests to withdraw money or send assets through the banking network, in which case the user is solely responsible for the request and execution of the transaction.
Ethereum and Cosmos use the same consensus protocol – Proof of Stake (PoS). The consensus protocol determines how transactions are verified on the blockchain. In the case of PoS, nodes on the network that contribute the most stake (needed to add new blocks to the chain) are prioritized during the verification process.
The network allows users to seamlessly transfer ETH to each other, stake tokens to earn interest, and mint non-fungible tokens (NFTs). NFTs are unique Crypto assets that provide proof of ownership and are stored on the blockchain.
Unique solution for Ethereum
Ethereum developers have expanded the horizons of blockchain, introducing smart solutions such as Decentralized Finance (DeFi) services and Decentralized Autonomous Organizations (DAOs). Decentralized applications are like regular mobile/desktop applications, except they may not have any central owner; ownership is shared among users. The question is, how does Ethereum do this?
In 2013, Vitalik released a white paper that introduced the concept of smart contracts. He proposes that these smart contracts will moderate decentralized applications, ushering in a new era of applications that run without the sovereignty of their creators.
Smart contracts are computer programs stored on the blockchain that execute transactions if certain predetermined conditions are met. Through the use of smart contracts, transactions between two parties can be transparently brokered through a computer network. The need for an intermediary to verify transactions is replaced by computer programs.
These features open doors to new dimensions in the cryptocurrency space. As the pioneer of smart contracts, Ethereum provides a platform for developers to build various decentralized applications on its blockchain. Today, over 3,000 dApps are built on the Ethereum blockchain.
Additionally, Ethereum provides a module for developers to create their own decentralized applications (dApps) and design native tokens that will facilitate financial transactions on their platform. These dApps control the protocols and data used to run applications to users.
Moving on to our next case study, Cosmos.
What is Cosmos?
In 2014, Jae Kwon invented Tendermint, the core of the Cosmos blockchain. Ethan Buchman later joined Jae to develop the Cosmos blockchain, a decentralized network featuring a collection of independent blockchains. Examples include Osmosis, Cosmos Hub, and Juno. These independent blockchains run concurrently and are connected via the IBC protocol. There are over 40 parallel blockchains in its ecosystem hosting over 262 dApps. Ethereum has only one blockchain with thousands of dApps.
ATOM is the native cryptocurrency of Cosmos. This Crypto currency facilitates transactions on the Atom blockchain. Participants on the network are encouraged to stake ATOM tokens to maintain the network by rewarding them with interest for staking.
Cosmos’ unique solution
Cosmos has added a new feature that allows for cross-blockchain interoperability. This means that users in its vast ecosystem of independent chains can communicate with each other and exchange data trustlessly in the process.
Each blockchain originating from Cosmos is called a zone. Each acts as a sovereign unit, operating on its own without interference or help from other sibling blockchains. Cosmos unites by stringing these separate entities together using the Inter-Blockchain Communication Protocol (IBC).
Cosmos development team Tharsis has deployed a public blockchain and EVM called EVMOS, which is now live and helps bridge the gap between Ethereum and Cosmos. When everything is connected via the IBC protocol, projects no longer need to worry about bridges.
Inter-Chain Communication (IBC)
Each blockchain originating from Cosmos is called a zone. Each acts as a sovereign unit, operating on its own without interference or help from other sibling blockchains. Cosmos is federated by stringing these separate entities together using IBC (Inter-Blockchain Communication Protocol).
By combining Tendermint’s Byzantine Fault Tolerant consensus protocol with IBC, Cosmos creates an interactive portal for different regions within its ecosystem, while still maintaining its independence.
Comparing Regions and Dapps
When understanding blockchain, if you are not actively paying attention to the development process, you are likely to miss some changes. This is what Cosmos and Ethereum have in common, and they are developing at an astonishing rate.
It is important to remember that Ethereum previously operated as a proof-of-work network, where users competed to mine for block subsidy rewards. As of today, Ethereum now runs on a proof-of-stake consensus model following an event known as a “merge.”
Osmosis.Zone is a prime example of a cosmos model that can be compared to Uniswap on Ethereum. On the Ethereum network, Uniswap exists only as a decentralized application in the form of a set of reliable contracts. Osmosis is its own application specific blockchain focused on serving the AMM market and is able to leverage the IBC protocol to reduce reliance on bridging technology. Having the sovereignty of its own chain allows it to be tailored to the needs of the community, making changes through on-chain consensus and voting on proposals. To help increase adoption, the Osmosis network has allowed 0-gas transactions for nearly a year, something the Uniswap protocol could not achieve because it has no say in the governance of the Ethereum chain.
Things get interesting when you start looking at the EVMOS blockchain, a fork of the Cosmos SDK that runs the Ethereum Virtual Machine. The impact of this development ensures that there will be competition between the Ethereum and Cosmos ecosystems for years to come. Ethereum has a history of charging high fees to network users, and even with the introduction of proof-of-stake, fees are still many times higher than transactions in EVMOS EVM or other areas within Cosmos.
Ethereum has a clear first-mover advantage as a mature platform for developing decentralized applications, with dominant transaction volume and TVL (total value locked), but just because you’re the first doesn’t mean you’ll be Always the first long run.