Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
For months, we’ve been covering The Merge on Ethereum in depth, but this isn’t the only major development in L1s for 2022. Unlike Ethereum, which scales with modularity by separating data availability, consensus, settlement and execution, Cosmos is a network of monolithic app-chains connected through what’s known as IBC (Inter-Blockchain Communication), a trust-minimized communication protocol.
The way to think about Cosmos is that apps will often spin up their own chains and then utilize IBC to interact cross-chain. The security of Cosmos chains relies on what’s known as Interchain Security. This makes it possible to launch a Cosmos chain without having to launch their own validator set, and instead lease another chain’s validators. There are drawbacks to this model that I won’t go into but I do recommend doing more research on this topic. Since IBC went live only a year ago, there are now 48 active zones or chains.
Most of us in crypto are familiar with Cosmos having heard of the token ATOM, associated with the Cosmos Hub. One unfortunate fact that may be holding back Cosmos from faster community growth is that the ATOM token has no value accrual. Instead of extracting rent from apps built on top of it, ATOM earns relatively little, currently about $1600/day vs the Ethereum network earning over $3M/day in the middle of crypto winter. However, there is promise moving forward with a long term vision for the Cosmos Hub, to provide security as a service in order to allow more advanced applications to launch on their own chains. With all chains leasing security