Cosmos Hub marks a step change in blockchain interoperability

In the early days of Bitcoin and Ethereum, many anticipated a winner-takes-all outcome, where one blockchain would eventually act as the go-to platform for all transactions and decentralized applications.

But as the industry progressed, this idealism became less feasible. Without forking and the creation of new chains, experimentation proved to be extremely limited, and soon enough, hundreds of blockchains were springing up — each claiming to be adapted to a specific purpose within the larger blockchain ecosystem.

In the traditional business sector, the issue of siloed data and its negative impact on process efficiency has been a hot topic for decades – and it continues to be so. Literally billions has been spent trying to get different databases to talk to each other, with varying degrees of success.

No surprise then, that the same integration issue has reared its head again in the blockchain economy where the task of connecting siloed blockchains and enabling them to scale effectively, has proven to be a significant challenge.

The Cosmos Hub, which went live last week, is one potential solution, acting as a coordinating blockchain that forms a bridge between different chains, allowing each to detect the state of the other, and exchange assets trustlessly between the networks.

As well as allowing existing blockchains to connect, Cosmos provides a network of public blockchains for developers to use that are all built using the same Tendermint engine. Each individual blockchain (or Zone in Cosmos terms) is built on the same standard protocol, and can seamlessly connect to the bridging blockchain, known as the Hub.

Says Tendermint CEO Jae Kwon: "Blockchain technology is an incredible innovation that has unfortunately been hamstrung by a series of limitations, including scalability problems, a lack of usability and myriad of governance and environmental issues. The vision of Cosmos is to overcome these limitations and break down barriers to innovation, ultimately creating an internet of blockchains – a decentralized network of independent, scalable, and interoperable blockchains."

Cosmos and Atomic Swaps

To a certain extent, the promises of Cosmos have already been delivered by other cross-blockchain communication projects. Atomic Swaps — like 0x and Khyber Network — already allow blockchains with similar characteristics to swap assets using a layer two network. However, the Atomic Swaps solution is limited in the number of blockchains between which swaps can occur.

In the grand plan, this interoperability limitation is what Cosmos seeks to solve. By providing a backbone for the whole ecosystem where value can be shared – not just between two similar blockchains – but potentially between any blockchains that can plug into the Hub. However, Cosmos is currently limited to blockchains that share a "fast-finality" settlement mechanism, which includes Proof of Stake blockchains like Dash and NEO.

Probabilistic-finality chains, like Bitcoin and Ethereum, can also be plugged into Cosmos, but an additional ‘Peg Zone‘ is needed to act as an adapter. Eventually, these Peg Zones are expected to be configured to fit many different types of blockchains.

Cross-chain competition

In the three years that Cosmos has been in development, blockchain interoperability has become a hot topic, and was recently cited by the European Union Blockchain Forum as one of the major roadblocks preventing progress. As such, a number of high-profile projects are now battling it out to become the "blockchain of blockchains", and act as the universal connective tissue for cross-chain communication.

AION, ICON, and Wanchain, which together form the Blockchain Interoperability Alliance, are all working on their own multi-tier blockchain networks that involve a degree of interoperability.

ICON, South Korea’s most eminent blockchain project, is built on Loopchain — a blockchain engine that is the equivalent of Tendermint, and acts as an intermediary chain connecting an ecosystem of blockchains known as the ICON republic.

AION and Wanchain themselves have similar projects, and alongside Cosmos, Parity’s Polkadot has emerged as another frontrunner. Developed by Ethereum co-founder Gavin Wood, Polkadot is another blockchain interoperability protocol that went live with a proof of concept in May 2018, and is set to launch its official network in the third quarter of this year.

But as the first to launch, Cosmos has a significant head start, and has already managed to secure several prestigious partnerships. Biggest exchange by volume Binance has already built its DEX on forks of Tendermint and Cosmos; blockchain gaming platform Loom has announced that its PlasmaChain will be Cosmos-compatible, and social media streaming service Playlist, which counts more than 400,000 downloads on iOS, plans to use Cosmos to develop a token economy.