11Welcome to this week's Just The Metrics

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Happy Sunday Crypto Enthusiasts,

here is Just The Metrics - your newsletter with the latest updates from the Cryptoverse, Crypto Metrics, L1 Comparisons, and all about Cardano.

This week we will extend our delivery promise a bit:

We will not only look at L1 Blockchain Networks but at Networks of Blockchains.

Curious?

Ok, let's dig in!

Cosmos vs. Cardano

An Fundamental Analysis Based On The Blockchain Trilemma

The Architecture of Cosmos in comparison to a classic L1

What is Cosmos?

Cosmos is not a single blockchain but a network of blockchains. The Cosmos Ecosystem was developed to create an interoperable platform of open-source blockchains that could streamline transactions between them.

The Cosmos SDK (Software Developer Kit aka the toolbox for Developers) is a generalized framework that simplifies the process of building secure blockchain applications. Through the Cosmos SDK framework, developers can quickly build custom application-specific blockchains called Zones. These Zones connect to Hubs that are specifically designed to connect Zones.

What is Cosmos Hub and Spoke Typology?

• The vision of Cosmos is to have thousands of Zones and Hubs that are Interoperable through the Inter-Blockchain Communication Protocol (IBC).

Cosmos can also connect to other systems through peg zones, which are specifically designed zones that each is custom-made to interact with another ecosystem such as Ethereum and Bitcoin. Each Zone and Hub in Cosmos act as sovereign with their own validator set.

Consensus Mechanism

Cosmos uses Tendermint BFT consensus, which provides fast finality. However, because each node has to communicate with one another, it has quadratic messaging complexity that limits the number of validators participating in the consensus.

Tendermint BFT can handle up to thousands of transactions per second, depending on the number of validators. More validators would result in low throughput due to the quadratic messaging complexity.

The Tendermint BFT engine is connected to the application by a socket protocol called the Application Blockchain Interface (ABCI). This protocol can be wrapped in any programming language, making it possible for developers to choose a language that fits their needs.

Internet of Blockchains

The founding goal of Cosmos is to create an internet of blockchains or an interoperable network of sovereign, application-specific blockchains, which can accommodate millions of active users per day.

Application-specific blockchains are an emerging concept where blockchains are customized to operate a single application.

In contrast to blockchains like Cardano and Ethereum, with application-specific blockchains, developers build their own blockchains from the ground up. This allows for more flexibility, better UX, sovereignty, and performance.

The trade-offs come in the form of decent realization and security, where L1s like Cardano and Ethereum have a clear upper hand.

Cosmos 2.0

As of now, Cosmos's own Hub does not have any privilege over other application-specific blockchains. ATOM, the primary token of the Cosmos Hub, does not enjoy any privileges compared to the primary tokens of other application-specific blockchains in the Cosmos ecosystem.

All of this is set to change with Cosmos 2.0.

At the Cosmoverse conference in Columbia this week, the Cosmos team released a white paper setting out a three-year roadmap of changes that brings radical changes to the Cosmos ecosystem.

This new roadmap envisions the transition to the next phase of the Cosmos Hub as an infrastructure service platform and a renewed role for ATOM as preferred collateral within the Cosmos Network.

The four significant changes envisioned in the new roadmap are described below:

1. Interchain Security: This would allow other Cosmos application-specific blockchains to “rent” security from Cosmos Hub for a fee, of which 25% is paid to ATOM stakers.

2. Interchain Scheduler: a cross-chain blockspace marketplace that generates revenues from cross-chain MEV(maximal extractable value). The Interchain Scheduler will allow application-specific blockchains to formally sell a portion of their blockspace in the form of (tradable) tokenized NFTs, allowing users to execute block transactions in a trust-minimized manner.

3. Interchain Allocator: Cosmos Hub’s treasury funds will be used to invest and fund new Cosmos chains through on-chain agreements. This would help to capitalize on new Cosmos chains, foster interchain collaboration, and thereby expand the total addressable market of the Scheduler.

4. A new issuance regime optimized for Liquid Staking: this new step will change the issuance of ATOM into a deflationary direction over 36 months.

All of these changes will change the current “equal playing field” in the Cosmos ecosystem. This would result in more value accrual towards ATOM and Cosmos Hub as an infrastructure service platform, providing security to other application-specific blockchains.

With the perspective of all of these changes, Cosmos Hub will eventually act like an L0/L1 powering application-specific blockchains, and comparisons will be made with L1s like Cardano.

So let's move on to the next section, where we compare Cardano with Cosmos Hub through the prism of blockchain trilemma.

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So, once we have understood Cosmo's architectural setup let's have a look at our well-known Assessment Framework comparing Cosmos Hub to Cardano and their performance in the 3 dimensions of the blockchain trilemma.

So here is the Blockchain Trilemma as Assessment Framework

Let's take a look at certain metrics of Cosmo Hub that determine its degree of

• Security

• Scalability &

• Decentralization

General Decentralization Metrics:

Initial Token Distribution:

Cosmos had an initial Token distribution with 31 % going towards insiders and the foundation.

Compared to other Layer 1 chains like Ethereum and Cardano, the token allocation for insiders is marginally high. For example, Ethereum and Cardano distributed around 80% of their tokens through a public sale.

Compared to L1 like Solana & Avalanche, Cosmos allocated 69% to the public, whereas Solana just distributed 1% and Avalanche allocated 16%

So overall, the fairness and decentralization of Cosmos's initial token distribution are somewhat similar to Cardano or Ethereum than to chains like Solana or Avalanche.

The number of individual staked wallets & staking ratio:

• Cosmos has over 526,355 unique staked wallets with a staking ratio of 66.24%, which reflects a relatively high degree of decentralization.

Even though Cosmos is way behind Cardano in this metric, it has a decent amount of unique wallets compared to blockchains like Polkadot and Avalanche.

Permissioned vs Permissionless Node (Yes/No):

• Cosmos allows for the creation of both permissioned and permissionless Hubs and Zones. Cosmos Hub is permissionless.

The total number of active validator nodes/relay nodes/stake pools:

• Due to the tradeoffs of the Tendermint BFT consensus protocol, the active validator set is limited to 175. This is one of the lowest validator numbers among the top blockchain networks out there. This low number certainly hampers the decentralization of Cosmos Hub.

Factors Enabling Decentralization:

Size of a full node: 

• The requirement to run a full node is RAM: 16 GB and storage of 2 TB

Minimum hardware & connectivity requirements for running a validator node/relay nodes/stake pool:

• Storage: 500GB-2TB

• Memory: 32 GB

 Source

There is no minimum ATOM required to be a validator. The top 175 validator candidates with the highest total stake (where total stake = self-bonded stake + delegators stake) are the active validators.

General Security Metrics:

Cost of 51% attacks:

• For an attacker to control 51% of the Cosmos Network, it will cost over $1.8 billion, not factoring in the price appreciation that will occur with a buyer trying to purchase that much ATOM.

Vulnerability to denial-of-service (DoS) and distributed denial-of-service (DDoS) attacks:

• Cosmos Hub has a low vulnerability to such attacks.

Propagation network types (a peer-to-peer propagation network or a relay propagation)

• Cosmos has a Peer-to-Peer propagation network.

Factors Enabling Security:

Full Node/Partial Node Ratio:

• Low, considering the relatively high requirements to run a full node. Most personal computers won't be able to host a full node of Cosmos Hub.

Client Diversity:

• No client diversity

General Scalability Metrics:

Transaction throughput:

• Each Zone and Hub in Cosmos is capable of up to around 500-1000 transactions per second with bandwidth being the bottleneck in consensus.

Transaction latency & finality time:

• Tendermint consensus used in Cosmos reaches finality within 6,58 seconds.

Active Zones/application-specific blockchains:

• There are a total of 47 active zones

Factors Enabling Scalability:

Status of data availability that enables rollups:

• Not relevant considering the horizontal scalability approach of Cosmos

So what does now the overall verdict look like:

Decentralization: Moderate (low validator count)

Security: High

Scalability: High

Cosmos Hub could be seen as a secure L0/L1.

It shows a relatively high degree of decentralization in its token distribution and in the number of wallets participating in staking but falls short in the number of validators when compared to public blockchains like Cardano.

Cosmos's horizontal scaling model could enable many Zones/application-specific blockchains that share security with the Cosmos hub. The limited number of validators of Cosmos Hub may become a critical limitation in decentralization in a world where rollups could scale decentralized and secure L1s Cardano and Ethereum, which allows for a much higher number of validator participation.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.