The combined success of the open-source ecosystem, decentralized file-sharing, and public cryptocurrencies has inspired an understanding that decentralized internet protocols can be used to radically improve socio-economic infrastructure. We have seen specialized blockchain applications like Bitcoin (a cryptocurrency), Zerocash (a cryptocurrency for privacy), and generalized smart contract platforms such as Ethereum, with countless distributed applications for the Ethereum Virtual Machine (EVM) such as Augur (a prediction market) and TheDAO (an investment club).
To date, however, these blockchains have suffered from a number of drawbacks, including their gross energy inefficiency, poor or limited performance, and immature governance mechanisms. Proposals to scale Bitcoin’s transaction throughput, such as Segregated-Witness and BitcoinNG, are vertical scaling solutions that remain limited by the capacity of a single physical machine, in order to ensure the property of complete auditability. The Lightning Network can help scale Bitcoin transaction volume by leaving some transactions off the ledger completely, and is well suited for micropayments and privacy-preserving payment rails, but may not be suitable for more generalized scaling needs.
An ideal solution is one that allows multiple parallel blockchains to interoperate while retaining their security properties. This has proven difficult, if not impossible, with proof-of-work. Merged mining, for instance, allows the work done to secure a parent chain to be reused on a child chain, but transactions must still be validated, in order, by each node, and a merge-mined blockchain is vulnerable to attack if a majority of the hashing power on the parent is not actively merge-mining the child. An academic review of alternative blockchain network architectures is provided for additional context, and we provide summaries of other proposals and their drawbacks in Related Work.
Here we present Cosmos, a novel blockchain network architecture that addresses all of these problems. Cosmos is a network of many independent blockchains, called zones. The zones are powered by Tendermint Core, which provides a high-performance, consistent, secure PBFT-like consensus engine, where strict fork-accountability guarantees hold over the behaviour of malicious actors. Tendermint Core’s BFT consensus algorithm is well suited for scaling public proof-of-stake blockchains.
The first zone on Cosmos is called the Cosmos Hub. The Cosmos Hub is a multi-asset proof-of-stake cryptocurrency with a simple governance mechanism which enables the network to adapt and upgrade. In addition, the Cosmos Hub can be extended by connecting other zones.
The hub and zones of the Cosmos network communicate with each other via an inter-blockchain communication (IBC) protocol, a kind of virtual UDP or TCP for blockchains. Tokens can be transferred from one zone to another securely and quickly without the need for exchange liquidity between zones. Instead, all inter-zone token transfers go through the Cosmos Hub, which keeps track of the total amount of tokens held by each zone. The hub isolates each zone from the failure of other zones. Because anyone can connect a new zone to the Cosmos Hub, zones allow for future-compatibility with new blockchain innovations.