Cosmos Adds Interoperability, Sending ATOM Higher

ATOM

Cosmos has expanded interoperability with other blockchains, pushing the price of ATOM through a crucial resistance barrier.

Cosmos Opens the Interoperable Era

In a nearly unanimous vote, ATOM token holders have enabled Cosmos’ Inter-Blockchain Communication (IBC) protocol.

The new feature will allow the Cosmos blockchain to work in conjunction with other networks that have upgraded to the IBC standard. Essentially, it makes it possible for independent blockchains to transfer digital assets and data between one another.

According to Tendermint CEO Peng Zhong, the passing of Proposal 41 marks a momentous milestone in the evolution of the Cosmos ecosystem as it builds the foundation for interoperability.

“The permissionless transfer of tokens value across chains is a historic moment on the timeline … We will continue to focus on building the Cosmos Hub as the heart of the interchain — enabling trade and connecting politically sovereign chains to create a new paradigm for economic exchange,” said Zhong.

The blockchains built on Cosmos’ native consensus model—including Kava, Agoric, Foam, and Crypto.com—will likely be the first to adopt the IBC standard, putting an end to network tribalism. This protocol’s flexibility and open nature might foster economic collaboration to build a robust ecosystem of networks.

IBC token transfers are expected to bring a significant amount of visibility to the Cosmos Hub, and ATOM will likely benefit from it.

ATOM Slices Through Resistance

ATOM, the native token of the Cosmos blockchain, rose by more than 7.60% upon the announcement that IBC will soon be activated.

The bullish momentum allowed this cryptocurrency to slice through a massive resistance barrier represented by the short-, mid-, and long-term moving averages on the 4-hour chart. ATOM also gained the 61.80% Fibonacci retracement level as support and looks poised to break through the 50% retracement level.

The SuperTrend indicator flashed a “buy” signal within the same time frame as ATOM prices broke through the resistance cluster. A further spike in buying pressure could see ATOM rise towards the 38.20% or the 23.60% Fibonacci retracement level.

These critical interest areas sit at $21.40 and $22.60, respectively.

Given the amount of interest and the confluence of multiple indicators around $19.50, this price hurdle suggests that bears will struggle to push prices down. Right now, the odds favor the bulls.

Disclosure: At the time of writing, this author held Bitcoin and Ethereum.

After five years of research and development, the industry’s first cross-chain technology, Inter-Blockchain Communication (IBC), is being rolled out onto the Cosmos Hub.

Internet of Blockchains Comes to Life

Cosmos is a decentralized network composed of multiple independent parallel blockchains, each using the Tendermint BFT, a Proof-of-Stake consensus protocol.

Five years ago, the initial Cosmos white paper envisioned building an internet of interoperable, application-specific blockchains. The idea was to implement the transfer of assets and information between blockchains that were previously isolated from each other.

Though the document was published in 2016, it was not until March 2019 that the Cosmos mainnet was launched. Still, interoperability among chains had not gone live just yet.

In January, the Cosmos team introduced Stargate, a set of upgrades that enabled the final transition towards the original vision of an “Internet of Blockchains” laid out in the whitepaper.

Stargate is the phased release of Inter-Blockchain communication (IBC), a protocol that powers blockchains in the Cosmos ecosystem to exchange data and tokens securely.

“IBC will have a transformative impact on the blockchain space by creating an ecosystem of politically independent chains that can interact via trade and information exchange. Knitting together many different blockchains can form a new crypto-economic system,” Christopher Goes, the lead developer of the IBC protocol, said in a press release.

Today, IBC has officially launched.

The initial version of IBC allows users to kick off token transfers between various chains on the Cosmos Hub. This will be an unprecedented event as, for the first time, a project will have achieved true cross-chain token transfers.

Inter-Blockchain communication (IBC) will be integrated on top of the Cosmos Hub, the central blockchain that connects all other Cosmos blockchains (known as Zones).

Each Zone within Cosmos plugged into the Hub will depend on IBC to send tokens and data with each other securely. This feature opens the door to interoperability of data and assets across dApps.

For example, with the help of IBC, Kava Labs, a DeFi platform built on Cosmos, recently said it would make Chainlink’s oracle data available to any blockchain within the Cosmos ecosystem.

Monday will be the first time *ever* that tokens native to other blockchains will be sent permissionlessly to the Cosmos Hub.

Thank you to the architects, the engineers, the designers, the marketers, and the community across the 200+ mainnet projects building on @cosmos. https://t.co/eZyAKJ3Vx1

— Peng Zhong ⚛️ (@zcpeng) March 26, 2021

A $50 Billion Blockchain Ecosystem

For Cosmos, data will need to flow trustlessly between different Cosmos Zones, requiring a secure consensus mechanism. For this, Cosmos Hub and Zones leverage Tendermint BFT, a Byzantine fault-tolerant (BFT) engine along with Delegated Proof of Stake (DPoS) consensus pioneered by the founders.

The Cosmos Hub deploys 150 validators, stakes ATOM tokens, and runs validating nodes to earn block rewards with each new block every three to six seconds. Any malicious behavior results in a slashing of the tokens, so validators are incentivized not to attack the chain.

When it comes to Zones, they can host a separate token and an independent governance mechanism. This means that Zones do not have to depend on the same validators as the Cosmos Hub, and there is no minimum number of validators. In fact, one would only need a single independent validator to start a Zone.

According to experts, because individual Zones depend on independent validators, it is a more complex issue to ensure robust security in each Zone. “As more money flows into the Cosmos world, the security of individual Zones will be tested,” Kent Barton, the head of research and Development at ShapeShift, wrote in a research report.

To enhance security in the Zones, Cosmos plans to implement Hub validators to secure Zones by staking ATOMs, a concept called cross-chain validation.

Cosmos has already attracted more than 200 crypto projects, making it one of the biggest public blockchain ecosystems. From all the projects, the network already commands more than $50 billion in cumulative value.

Some notable projects in decentralized finance (DeFi) and decentralized exchange (DEX) have rolled their chains on Cosmos.

The list includes Anchor Protocol, Binance Chain, Crypto.com, e-Money, Injective Protocol, Kava, Mirror Protocol, Terra, Ren Protocol, and many others. Besides Defi, other Cosmos-powered chains exist for smart contracts, social media, privacy, gaming, and enterprise systems.

Spinning a New Chain With Cosmos SDK

Centered on scalability and ease of use, Cosmos provides all the tools and environments needed to create customized blockchains.

Developers can use the Cosmos software development kit (SDK), described as developer-friendly by the team, to spin up a new blockchain with a few commands and minimal network fees. More importantly, the Cosmos SDK offers developers a door to the entire Cosmos ecosystem.

There is no upper limit on how many blockchains or zones can be added to the ecosystem, unlike sharding protocols like Polkadot, where there is a fixed number of blockchain shards (i.e., 100 parachains).

With IBC going live, many Cosmos-based blockchains will be able to immediately share resources and user engagement instead of building everything from scratch. For example, a DeFi project such as Kava on the Cosmos Hub can access liquidity from a stable coin project (also on the Hub) such as Terra.

“When you zoom out and look at the current state of the ecosystem, it’s remarkable that projects like Terra and Thorchain have enjoyed so much early success even without IBC! Once cross-chain liquidity, data-sharing, and “money lego” interoperability are unlocked, Cosmos will be well-positioned to realize its grand vision,” Kent Barton wrote.

The core development team also has other features planned in the coming months, such as staking bridge with Ethereum and Bitcoin, ATOM staking derivatives, a blockchain naming system, and an NFT marketplace.

All of these features and dApps will inevitably create more activity on the Cosmos Hub, which in turn, will generate more fees distributed to validators and delegators who have staked their ATOM tokens.

Disclosure: The author did not hold the cryptocurrency mentioned in this article at the time of press.

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