Cosmos Summer coming? Sort out the recent important upgrades and ecological progress of Cosmos

The consumer chain is online, the first shot in the ATOM 2.0 economic zone?

Written by: flowie

At the end of September last year, at the Cosmoverse Conference, Cosmos released an exciting 2.0 white paper, planning to change the Cosmos Hub network and the plight of low utilization of ATOM tokens.

For more than half a year since then, Cosmos has successively announced some progress around the above issues. For example, the Cosmos Hub upgraded the original Interchain Security (interchain security) to "Replication Security" (replication security), and passed the Liquid Staking Module (LSM) proposal. , but none of them seem to have aroused large market discussions.

With the recent launch of the Neutron mainnet of the Cosmos ecological chain, Neutron used the upgraded security mechanism "Replication Security" for the first time, and announced that it will airdrop to Cosmos Hub pledgers. The discussion on Cosmos, ATOM value capture and its ecology has gradually heated up.

In fact, since 2023, the Cosmos ecology has actually performed well overall. First, the daily trading volume of the ecological public chain Canto once surpassed Solana, which made Cosmos a good start. Later, the liquidity staking protocol Stride, Layer1 public chain Injective and Kujira TVL continued to rise, ranging from 2-6 times compared to January. Stride and Injective tokens also rose almost 10 times at one point. In April of this year, according to token terminal data monitoring, the number of active developers on the Cosmos SDK once surpassed that of Ethereum, and currently ranks second slightly below Ethereum.

And many users also expressed high expectations for the implementation of Cosmos' many plans in the second half of the year. There are many voices in the market that "Cosmos Summer is coming" and "the flywheel effect is turning". Among them, José Maria Macedo, a partner of Delphi Ventures, recently listed the representative promotion events of the Cosmos ecology to express his optimism for Cosmos, such as the launch of the v4 version of dYdX, the launch of two permissionless chains, Neutron and Sei, and the support of Metamask.

This article summarizes and analyzes the important progress of Cosmos after the release of the 2.0 white paper, as well as the dynamic and hot ecological projects of Cosmos in the second half of the year.

1. The consumption chain is online, and the first shot of the ATOM 2.0 economic zone is launched

Neutron, which went live on the mainnet on May 10, is a CosmWasm (Cosmos virtual machine) platform with both Cosmos SDK and IBC. As the first "Replication Security" consumer chain using Cosmos, it fired the first shot in the ATOM 2.0 economic zone.

To understand this logic, we need to start with Cosmos’ long-standing dilemma and Cosmos 2.0. For a long time, Cosmos has been ridiculed as a beggar chain, and its ecological prosperity has no direct relationship with its token ATOM. Polkadot, which is also known as the "cross-chain duo" with Cosmos, has twice the market value of Cosmos despite its weak ecological performance.

The reason for this situation lies in the low utilization rate of Cosmos' CosmosHub network and the ATOM tokens pledged on it.

Cosmos is a blockchain network composed of multiple "blockchains". Unlike a single blockchain such as Ethereum, there are countless blockchains optimized for specific applications. These blockchains can quickly build their own chains through the Cosmos consensus mechanism Tendermin and the open-source modular development tool Cosmos SDK, and achieve interoperability between multiple chains through the inter-chain communication standard IBC protocol.

But in terms of communication, after hundreds of blockchains are formed, connecting each blockchain directly to each other not only takes up a lot of resources, but also may be very inefficient. Therefore, Cosmos uses the hub chain Hub to open the channels between the chains, and CosmosHub is the first and most important hub chain at present. ATOM is the native token on the CosmosHub network.

However, although these application chains are based on Cosmos Hub communication, they can have their own independent validator network and do not have to use the Cosmos Hub network verification set, so they do not need ATOM as a payment token. As a result, Cosmos' ATOM has little practicality, and the price has not been able to rise.

In addition, ATOM 1.0 is highly inflationary, with a minimum inflation limit of 7% and an upper limit of 20%. ATOM holders who want to gain benefits in the Cosmos ecosystem can only pledge to the network, but the value of tokens is diluted due to high inflation rates.

In order to solve the above problems, Cosmos2.0 first improves the practicality and value capture of ATOM through interchain security ICS (Interchain Security).

As mentioned earlier, because many chains on Cosmos do not use the verification network of CosmosHub, the adoption rate of ATOM is low, so the larger chains (called provider chains) such as Cosmos Hub (ATOM) are converted into smaller chains (called provider chains). For consumer chains) such as Neutron renting a verification network to share security can solve this problem?

Therefore, on March 15th, Cosmos launched the "Replication Security" function, which allows other chains in the Cosmos ecosystem to abandon their validators and switch to the validator set of the Cosmos Hub, thus having the full security of the Cosmos Hub sex.

As the first Cosmos ecological chain to use "Replication Security", Neutron has become the most secure CosmWasm platform in Cosmos by using the security of the Hub. The Cosmos Hub will receive benefits from Neutron: 25% transaction fees, 25% MEV revenue, 7% NTRN supply as initial distribution, and more importantly, strengthen ATOM's status as a cross-chain reserve currency.

The Cosmos Hub mentioned on the official Twitter how Neutron will help strengthen ATOM's status as the Interchain reserve currency.

On the one hand, it is to improve the application of ATOM in the NeutronDeFi ecosystem. Applications built on Neutron will enable ATOMs to use native and liquidity-collateralized ATOMs to provide liquidity, borrow money, exercise governance rights, divest bonds, etc., to drive demand for ATOMs, and by enabling Cosmos to be used in DeFi protocols Lock their tokens to earn rewards for reducing the circulating supply. At present, nearly 10 projects such as Astroport have announced cooperation with Neutron. On the other hand, Neutron provides services for large treasuries, which can help Cosmos Hub link with other chains, protocols and treasuries to increase the use cases and liquidity of ATOM.

After Neutron launched the first shot in the ATOM 2.0 economic zone as a consumption chain, Cosmos ecology also has multiple consumption chains or It will be launched one after another to consolidate ATOM's value capture capability and its status as a cross-chain reserve currency.

2. Cosmos events worthy of attention in the second half of the year

In addition to multiple consumption chains bringing vitality to Cosmos, Cosmos also has a number of developments worthy of attention in the second half of this year.

1. The original stable currency USDC enters, which promotes liquidity

The demand for stablecoins within the Cosmos ecosystem has previously relied heavily on the algorithmic stablecoin UST on the Terra chain. Therefore, after the collapse of UST in May last year, the Cosmos ecology suffered a lot. Since then, Cosmos's native stablecoin has been vacant. Its internal stablecoins are mapped tokens from other networks through cross-chain bridges, such as USDC cross-chain through Axelar, USDT cross-chain through Nomad bridge, USDC etc. Due to the inconsistency of the mapping format, this kind of stable currency through cross-chain mapping leads to the dispersion of liquidity. In addition, due to the security of the cross-chain bridge, it will increase the user's asset risk.

Therefore, Cosmos is almost in need of native stablecoins. In March of this year, Noble, the Cosmos ecological native asset issuance platform, officially announced its cooperation with Circle to bring native USDC into Cosmos. Noble claims this integration will generate hundreds of millions of dollars of liquidity in Cosmos in the coming months.

About the release time of Cosmos native USDC on Noble. In early May, Noble co-founder Jelena revealed in a Yutube video interview that it is expected to be officially released at the end of May or June. In addition, Jelena also boldly predicts that ATOM will have the opportunity to reach a price of 20-30 U by the end of 2023.

2. The Liquidity Staking Module (LSM) promotes the prosperity of Cosmos DeFi

Liquidity staking, like the cross-chain security mentioned above, is one of the core strategies of Cosmos2.0 to solve the value capture of Cosmos Hub and ATOM.

Cosmos has always had a pain point, that is, the low utilization rate of ATOM in DeFi. The core reason is that ATOM has a high pledge rate (about 20%), and pledgers tend to choose pledge incentives with definite returns rather than earning returns by providing liquidity. In addition to ATOM, many tokens in the Cosmos ecosystem such as OSMO and JUNO also face similar problems, which has caused Cosmos to be greatly restricted in asset liquidity and usage, so that it lags far behind Ethereum.

In early May, the Cosmos Hub has passed a new proposal on liquidity staking to address the above issues. The proposal would replace the existing Cosmos Hub staking, allocation, and slashing modules with LSMs. ATOM holders are no longer restricted by the previous 21-day lock-up period, but can liquidly mortgage their ATOMs, enjoy the pledge benefits on the one hand, and use ATOMs for other use cases on the other hand.

However, it is worth noting that Cosmos’ launch of liquidity staking will also increase the leverage risk of user assets. In order to mitigate liquidity staking risks, Cosmos’ LSM introduces governance control parameters, the initial upper limit of the total amount of ATOMs that can be liquidated is set at 25% of all staked ATOMs, and can be changed through governance. At the same time, as an additional security feature, validators who want to get delegation from liquid staking providers will need to bond a certain amount of ATOMs themselves.

At present, the three major liquidity staking agreements in the Cosmos ecosystem, Stride, pSTAKE, and Quicksilver, have pledged ATOM values of US$26.35 million, US$4.57 million, and US$1.67 million, respectively. ATOM pledged through liquidity only accounts for 1.3% of the total pledged amount of ATOM. While a single Lido on Ethereum accounts for 30% of the total ETH pledge, there is still a lot of room for growth in ATOM's liquidity pledge.

3. Enter the top streaming application and inject new traffic into Cosmos

According to the encrypted data platform RootData, nearly 20 projects are about to launch the mainnet on Cosmos. Among them, the entry of leading projects such as dYdX into Cosmos has attracted much attention.

In June last year, dYdX announced that it plans to transfer to the Cosmos ecosystem. It will develop a custom application chain based on the Cosmos SDK and implement the migration in the upcoming dYdX V4 version. As the leading decentralized exchange, dYdX has a daily trading volume of more than 3 billion US dollars. There is no doubt that its migration will bring a large number of new users and liquidity to Cosmos.

As for the progress of the migration, dYdX announced in a blog in March this year that the private testnet will be launched on March 28. The goal is to launch a fully public testnet before the end of July, and launch the mainnet in September, officially transitioning from Ethereum to the universe.

Some top wallet applications will also support Cosmos in succession. Since Cosmos users need to use wallets specific to the Cosmos ecosystem, some Cosmos contributors are developing a feature called Metamask snaps to allow users to use their Metamask wallets to sign Cosmos transactions, lowering the barrier to entry for new Cosmos users.

In addition, Ledger, the largest hardware wallet, recently announced the expansion of its integration with Cosmos. The new compatibility will allow Ledger Live to allow users to send, receive and stake Cosmos’ native ATOM token as well as three other Cosmos-based projects Onomy, Quicksilver and Persistence, with plans to add over 20 new Cosmos projects by the end of the year.

3. Hot projects of Cosmos ecology

Since the beginning of this year, Cosmos ecological Canto, Injective, and Kujira and other Layer 1 and liquidity staking protocol Stride have ushered in a good rise in both TVL and token prices.

In addition, the financing of the Cosmos ecological project also performed well. According to incomplete statistics, nearly 10 projects in the Cosmos ecosystem have received financing so far in 2023, among which Layer1's Sei Network and Berachain have received large-scale financing of tens of millions of dollars.

This year's Cosmos ecological discussions are relatively hot projects focused on Layer1, LSD, modular blockchain, privacy and other fields, especially after star projects in the Layer1 field and frequent large-scale financing.

Layer1

Corner

Canto is an EVM-compatible Layer1 public chain based on the Cosmos SDK, and it is an EVM-compatible network specially designed for DeFi. In addition, compared with other emerging EVM chains, Canto pursues a high degree of decentralization, has no investors, does not set up foundations, and relies more on the community, while providing free public infrastructure (FPI) and contract revenue distribution for developers ( CSR).

According to DefiLlama data, the current TVL of Canto is 85 million US dollars. Around January this year, Canto’s TVL once rose to 125 million US dollars. The 24-hour transaction volume on the Canto chain once surpassed Solana to become the fourth largest Layer 1 in transaction volume, and the token price also skyrocketed by nearly 50%.

Injective

Injective is an interoperable L1 blockchain optimized for DeFi. The main feature of Injective is that it uniquely provides plug-and-play financial infrastructure, such as high-performance on-chain decentralized exchange infrastructure, decentralized bridges, oracles and Composable smart contract layer for CosmWasm.

In January this year, Injective announced the establishment of a USD 150 million ecological fund to promote ecological development. According to the encrypted data platform RootData, there are currently 20 projects in the Injective ecosystem, including Astroport, Celer Network, and Helix. In April, Injective announced a partnership with Tencent Cloud to support developers on Injective.

You are Network

Sei Network is also a DeFi-specific Layer1 on Cosmos with a built-in Central Limit Order Book (CLOB) module. Decentralized applications built on Sei can be built on top of CLOB, and other Cosmos-based blockchains can utilize Sei's CLOB as a shared liquidity center and create a market for any asset.

Recently, the Airdrop button appeared on the official website of the Sei Foundation, and it is suspected that the airdrop details will be announced soon. When the white paper was released at the end of October last year, the airdrop was announced, saying that 1% of the total supply of SEI would be used to reward testnet participants. In February of this year, Sei Labs co-founder Jayendra Jog also said that he expects to launch the Sei Network mainnet and conduct airdrops in the next few months.

In the first half of this year, Sei made frequent moves. In addition to the progress of the test network, the Sei Foundation was also established. In April, Sei Network and its ecological fund received US$30 million and US$50 million in financing respectively. The scale of Sei's ecological funds has exceeded 120 million US dollars, and there are more than 120 ecological cooperation projects, focusing on decentralized exchanges, infrastructure, wallets and cross-chain bridges.

Wealth

Berachain is also an EVM-compatible Layer 1 blockchain built on the Cosmos SDK and protected by the Proof of Liquidity consensus mechanism. The Berachain token economy introduces the Bera network of the three-token system for the first time, with the network gas token BERA, the ecological algorithm stable currency HONEY and the non-transferable Bera governance token BGT.

Berachain co-creation Smokey the Bera wrote in the article about the founding opportunity of Berachain that the characteristics of Berachain are to systematically establish liquidity/incentive agreements and verifiers to participate in the chain infrastructure, redefine the cost of bribery, and solve the problem of centralization of pledges.

It is worth mentioning that Berachain completed its A-round financing of US$42 million in April, with a valuation of US$420 million. Polychain and OKX Ventures both participated in the investment. Berachain said it will also launch a public testnet in the near future.

included

Kujira used to be a subsidiary product of Terra. After Terra's death spiral, it migrated to Cosmos to build its own sovereign blockchain, and quickly created an on-chain order book DEXFIN, a clearing market ORCA, a pledge and earn application BLUE, and launched The stable currency USK was launched.

Kujira's TVL more than tripled from $3.5 million at the beginning of the year to over $11 million. And its ecology currently has 6 joint projects.

Babylon

Babylon is also a Layer1 dedicated to leveraging the security of Bitcoin PoW to enhance the security of other PoS blockchains. Babylon works by acting as an intermediary between chains that need extra security and Bitcoin, fetching Block headers from chains that use its services, and writing those Block headers to the Bitcoin blockchain.

Babylon's team consists of consensus protocol researchers from Stanford's Tse Lab and experienced Layer 1 blockchain developers from around the world.

In March of this year, Babylon launched the test network, and will launch the second test network this summer before launching the main network at the end of the year.

LSD

Stride

Stride is a multi-chain liquidity staking protocol in the Cosmos ecosystem, and is currently the largest liquidity staking protocol in the Cosmos ecosystem. Stride already supports the liquidity staking of Cosmos ecology ATOM, OSMO, JUNO, STARS, EVMOS, LUNA, INJ, and plans to support all IBCv3-compatible Cosmos ecology.

The current StrideTVL has reached 34.68 million US dollars, mainly for the 26.35 million US dollars of ATOM.

Modular Blockchain

Celestia

Celestia is the first modular blockchain. It is a modular data availability layer based on the Cosmos SDK. It only verifies data availability and transaction ordering, allowing anyone to quickly deploy a decentralized blockchain without additional The cost of the consensus layer, which is currently launching the second phase of the testnet Blockspace Race.

In October last year, Celestia completed a financing of US$55 million, backed by well-known investors Bain Capital Crypto, Polychain, Placeholder, Delphi Digital, Spartan Group, FTX Ventures, Jump Crypto and other investors.