Why would something go up 10% after the company behind it laid off 50% of its staff? And nope, this isn’t an acquisition story. This is a crypto project that’s grown and evolved far beyond its founding team: Cosmos (ATOM-USD).
Cosmos has seen some competing developments in the past week or two:
On Friday, Tendermint – which created Cosmos in 2016, then laid much of its foundation – “parted with more than half of its employees,” as CoinDesk put it. Some were cut, others volunteered to take the severance package “against the backdrop of a contentious re-organization” and rebrand to “Ignite.”
However, Tendermint/Ignite had already “handed over the reins” of Cosmos in February. Now, marketing and “community initiatives” fall to the Interchain Foundation – where Cosmos’ other co-founder, Ethan Buchman, ended up.
But both organizations are just stars in a larger constellation, so to speak:
Cosmos is built to be an “internet of blockchains,” where developers “collaborate across team lines,” as Billy Rennekamp (Product Lead of Cosmos Hub) described it on Charlie Shrem’s Untold Stories podcast in April. “We’re excited about their new feature, because we want each blockchain to have its place in the world.”
Today, Cosmos has welcomed 49 apps and services, including Binance Smart Chain (BNB-USD) and popular DeFis and exchanges like THORChain (RUNE-USD) and KuCoin (KCS-USD). As the Cosmos ecosystem has grown and thrived, it’s lured developers away from Ethereum (ETH-USD)…
In fact, dYdX (DYDX-USD) – a decentralized exchange built on Ethereum in 2017 – has now decided to switch to its own chain on Cosmos. (This is the bigger news that originally kicked off ATOM’s breakout: June 22 and counting.)
A Basic Map of Cosmos
There’s a lot going on here: Cosmos ecosystem vs. Cosmos Hub… The technology behind it that all these developers want to use – including Tendermint, which is a software and a company… And as an “internet of blockchains,” where does the ATOM crypto fit in?
Here are the basics to understand about Cosmos:
Developers are coming there for one or both of its superior tech offerings: the Cosmos SDK and Tendermint. These tools let you program without writing everything “from scratch” – or building on someone else’s blockchain.
There’s an Inter-Blockchain Communication (IBC) protocol, so your project can “talk” to other apps through the Cosmos Hub. (And skip those questionable “bridges” between chains!)
Cosmos Hub is the original blockchain, where people stake the native ATOM crypto to help validate network transactions. Its website calls Cosmos Hub the “router” for the “internet of blockchains,” but a better comparison might be to an airport or a port city.
“The internet isn’t every computer directly connected to every computer, [like] not every city has a direct flight to every city,” Billy Rennekamp pointed out on Untold Stories. “You have flights to these hubs, and those hubs direct you: more efficient. The Cosmos Hub is an infrastructure-level blockchain [that] makes transporting these data packets between blockchains simpler.”
But Isn’t This a Security Risk? (You Might Ask)
At the end of the day, you’re not building “on Cosmos” – you’re launching your own, new blockchain in the Cosmos ecosystem. (That can talk to all the other little chains.)
So, when someone like dYdX plans to ditch Ethereum for its own (smaller) blockchain there… Won’t it be at greater risk of a bad actor being able to take it over, steal crypto, and cause havoc?
Well, the security of the Cosmos ecosystem was severely tested in May – with the collapse of its (now) most infamous member: Terra (LUNA-USD).
Ethan Buchman tweeted extensively on “Terra and what it all means for Cosmos” just a couple of days into the mayhem. For individual projects within Cosmos, the fallout depended on how much LUNA – or the stablecoin, TerraUSD – they had brought onto their chain. Just like all “those holding natively on Terra,” these people lost a lot of money…
Luckily, though, “the various Cosmos chains, including the Cosmos Hub, are unaffected by the collapse of Terra,” themselves. That’s because, while crypto and data can flow through the hub, “sovereign Cosmos chains are independent from each other – they each have their own validator set and political economic security.”
“The Cosmos Hub itself had little risk exposure” to Terra and its financial schemes. “Validators kept processing [network transactions], and relayers kept processing IBC transfers… This was one of the biggest crises to affect a live chain, and the tech held up throughout,” Buchman concludes.
Next Major Catalyst for Cosmos/ATOM
There’s a big upgrade in the works, aiming for this quarter. It’s called “Lambda,” and it’s “big” because it introduces a key new feature: Interchain Security.
“This is Cosmos’ approach to shared security,” Billy Rennekamp explained on Untold Stories. “When you look at all these new blockchains, they had to recruit node operators. Basically miners. And those are the ones who actually produce the blocks. With Interchain Security, the Cosmos Hub – the oldest, strongest validator set out of any Cosmos chain – they will produce your blocks. All you have to do is write the application you want.
“So, sort of the same experience as deploying a dApp to Ethereum: You don’t have to worry about securing your network. Cosmos Hub, which has one of the highest market cap security chains in the Cosmos ecosystem, will secure it for you,” says Rennekamp – and you still get the flexibility of all the fancy technology I alluded to earlier.
As we’ve seen with Cardano (ADA-USD), these innovation milestones can yield nice buying pressure to the crypto price – paying no mind to any drama the founders want to start on Twitter. It’s why Cosmos is the project most worthy of your attention…while it flies under most other people’s radar.
Cosmos has been on Luke Lango and Charlie Shrem’s list for their Crypto Investor Network for months. And right now, their team’s putting together a whole list of Top Picks in this wild market.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.