Convergence: Cosmos and Ethereum Collide

Techub News · 2024-03-21T08:50:15.000Z

Original title: "How Cosmos & Ethereum are converging" Written by: Sebastien Couture, Partner at Interop Ventures Compiled by: Tia, Techub News In March 2023, when cryptocurrency researcher Hasu attended the Bell Curve podcast, he talked about the relationship between Cosmos and Ethereum. The lines are blurring, arguing that the Ethereum community is excelling in execution and disruption, while praising Cosmos’ technology stack. Convergence: The Collision of Cosmos and Ethereum Symposium at ETHDenver on February 29, 2024 Interop Ventures has thought a lot about this topic, and we held the themed event "Convergence: The Collision of Cosmos and Ethereum" during ETHDenver 2044. The event, in partnership with Polygon and Noble, featured Noble co-founder Jelena Djuric, Polygon co-founder Sandeep Nailwal, Union co-founder Karel Kubat, Movement Labs and 0xMuto co-founder Rushi Manche. Sebastien Couture, Partner at Interop Ventures, moderated the panel. Understanding Cosmos For many Cosmonauts and those outside the community, Cosmos seems to be in a permanent identity crisis. There are many ways to look at Cosmos, and different people understand Cosmos differently: as a technology stack, as a chain (and its staking assets), and as a community. Since its inception, multi-chain theory has been the cornerstone of the Cosmos community spirit. As Ethereum users struggled with rising gas costs, the community iterated on several scalability paths before settling on a Rollup-centric roadmap. Before this was generally accepted, Cosmos and Polkadot had moved away from the concept of a single chain and proposed a new model of a sovereign application chain formed through a trust-minimized interoperability protocol - like Cosmos and IBC. Cosmos was originally synonymous with ATOM and Cosmos Hub. As the most secure chain built on the Cosmos SDK, the Hub is fully capable of becoming the focus of the IBC network and acting as a port city between the IBC connection chain and the outside world. Over time, as new chains emerged, the importance of the Hub waned, and the definition of Cosmos shifted to include a powerful and versatile technology stack: Cosmos SDK, CometBFT (aka Tendermint), and IBC. At the heart of the Cosmos philosophy is sovereignty, where chains choose their own set of validators, are governed by token holders, and can be customized to the needs of the application. Another significance of the existence of sovereignty is to oppose the single-chain L1 model, in which applications must pay high gas fees, but users and stakeholders can capture very little direct value. "I've always thought of Cosmos as a team that values sovereignty. To me, that's the most defining thing in the Cosmos community." - Sandeep Nerwal As the Cosmos stack becomes more widespread, the focus on Cosmos The consensus becomes the world connected by IBC - the blockchain Internet. Consistency meme There are two ways to observe the consistency of Ethereum. One is to choose to be consistent with Ethereum’s Gas token ETH. In this paradigm, anything that brings value to ETH is considered aligned with it. Maximalists fall into this category, according to Sandeep, who believes that this form of conformity is purely profit-driven. Karel noted that EigenLayer is popular among ETH holders because it aligns with the asset and brings value to token holders. Another option is consistent with the Ethereum philosophy. Underlying this is the belief that trust-minimized, open, and censorship-resistant systems are a net good for society, and that building Web3 is noble and just. Those aligned in this way do not care about money, but rather want to see the Ethereum project achieve its ultimate goals. According to Sandeep, there are only a few who fall into this category. Jelena Djuric, Sandeep Nailwal, and Karel Kubat at the Convergence Breakfast in Denver For a Cosmos chain like Noble that places a heavy emphasis on sovereignty, aligning with the ETH asset makes sense because it means being able to operate on the most decentralized and Benefit from the safest chain. Jelena’s insights provide a different perspective, showing that off-protocol consensus chains can align with assets purely for practical and functional reasons, without falling into either of the previous camps. For 0xMuto, consistency helps business development and community building, and is strongest in bear markets with low liquidity.Consistency is a meme that fades away in bull markets where liquidity is high and incentives to chase yield are abundant. Ultimately, consistency should be used as a community-building tool, but never a hindrance. Cosmos Consistency = IBC Consistency While Ethereum’s consistency issues run counter to its native assets and ideas, Cosmos’ consistency takes a different form. Since there is no canonical Gas token or central value accumulation mechanism, the chain is only aligned with Cosmos in a technical sense. Being aligned with Cosmos means being aligned with the stack and the tools that tie it together: IBC. Teams like Neutron, Stride, and Aether are leading the way in aligning with the Cosmos Hub and accruing value for ATOM. Their efforts represent an optimistic exploration of the Hub as a potential security provider. While the Hub continues to evolve on its path to long-term success and sustainable value, these initiatives mark good progress towards realizing its significant potential. In fact, Cosmos consistency seems to mean choosing technical solutions rather than helping others carry their luggage. For those who want to build cutting-edge applications outside of the protocol, there are few viable options, and the Cosmos stack is the most mature and versatile. Take Celestia as an example. Its modularity thesis is based on the idea that Rollups will outperform application chains. For the Rollups ecosystem to become a reality, data availability is required. Ethereum DA is insufficient and scaling is too expensive. The conclusion from this logic is that you should build outside of the protocol, and the best stack for the task is the Cosmos SDK. Sebastien Couture, 0xMuto, and Rushi Manche attend Denver Convergence Breakfast dYdX has a single orderer Rollup on StarkNet, but it is not decentralized enough. Getting the order book on-chain while keeping gas costs low requires consensus among multiple nodes. CometBFT is the right tool for the job and is built to work with the Cosmos SDK. Echoing what Ethan Buchman and Sam Hart said in a recent episode of Empire, the endgame for Cosmos is for every chain to be connected to IBC. The future of Cosmos In its early stages, Cosmos is a means to launch sovereign L1.But with the advent of the bear market in 2022 and 2023 and the decline in asset prices, market capitalization has begun to decline, the value of pledged assets has dropped significantly, and many chains are struggling to maintain operations. At the same time, many L2s emerged - which were the easier and more attractive option. Part of the problem is that building L1 is very difficult. The chain must establish a validator set, which means increasing the token supply by 20% on TGE to obtain a secure set. This puts pressure on tokens and chains to find PMFs and generate revenue quickly. Last year, rolling out L2 proved to be much easier than rolling out L1. Many L2s have chosen to delay token issuance and implement points and airdrop systems to distribute tokens to the community. This led to innovations like yield stacks and other long-term aligned incentives that led to this bull run. The Cosmos stack gives blockchains the flexibility to choose their execution environment (Cosmos SDK modules, CosmWasm, Move, EVM) and the freedom to build the underlying security layer that best suits their applications. Ethos solves the cold start problem, making launching L1 as easy as launching L2 while maintaining most of the sovereign benefits. With Ethos, blockchains have access to high-quality, cheap, and liquid security in the form of re-pledged ETH. In this sense, the Cosmos stack is modular, allowing chains to leverage different infrastructure components, including external DA and security, to provide a superior user experience at a lower cost. Rushi noted that alternative VMs are an important part of the modular narrative, as chains can be built on top of more secure and scalable VMs like Move. With EVM smart contract bugs leading to billions of dollars in lost funds, adoption and TLV of emerging virtual machines with features such as formal verification and parallelization are growing. The future of Cosmos is modular. Cosmos + Ethereum: The Positive-Sum End Game The ultimate goal of Cosmos is to allow developers to build sovereign applications that interoperate with other cryptocurrencies. From this perspective, Ethereum needs IBC. In a Rollup-centric world with thousands of chains and applications, atomic composability is broken and interoperability becomes a key principle of cryptocurrency.At the same time, Cosmos requires Ethereum and possibly Bitcoin for security. The Cosmos stack has no opinion on which underlying chain to utilize as the security layer. The consistency of Cosmos and Ethereum is reflected in horizontal expansion and a modular stack that is technically superior to single-chain L1. Hopefully we can move towards a future where blockspace is fungible and secured by a large number of validators connected through IBC.