If we think of Ethereum as a mainframe computer, a public, censorship-resistant, anonymous and secure super ledger for computing large sets of data, then all applications built on it run on the shared state machine and share its security. Despite its advantages for localized applications, the approach limits the number of applications that can be built on top of it. Most monolithic chains would love to achieve the vision for decentralization, so they want full nodes to run on user-side hardware, such as cell phones, PCs and etc. Moreover, they limit the rate of state growth through the block size/gas fee limits, which significantly affects its scalability and other aspects. Therefore, it is understandable that ETH 2.0 was created to solve the issues. On the other side, the inter-chain communication of these monolithic chains requires a centralized trusted inter-chain communication protocol, which has security risks to some extent.

If Ethereum is a mainframe computer, Cosmos is a protocol for networking independent servers.Cosmos, on the other hand, offers a complementary, inclusive and non-competitive solution where  you can understand as a protocol for networking independent servers. Its core idea is interoperability. It is not a blockchain but rather a basket of application sovereign chains called "Zones". It is not possible to achieve the internet of everything if building every chain would need to start from network deployment and coding consensus. Cosmos makes deploying application sovereign chains as easy as deploying smart contracts through the development of Cosmos technology stacks, such as Cosmos SDK, Tendermint and IBC. Also, it enables homogeneous communication between different sovereign chains.  Other chains such as Ethereum can also integrate their interoperability models.

You may understand Cosmos in three aspects. The first is Cosmos’ philosophy, such as how to build a blockchain in the first place. The second one is the technology stack of Cosmos, which is a general term for a series of modular products/technologies, with Tendermint at the bottom and the Cosmos SDK on top of it. Anyone can build applications with them on the platform. It also includes IBC, which is the inter-chain communication protocol. The third one is Cosmos Hub, a sovereign chain in the Cosmos ecosystem, which provides various inter-chain services for other chains and can be understood as the infrastructure of Cosmos. Let’s take an example of Web2.0. If you understand these chains built on Tendermint as the Linux or personal computers, Cosmos, as a general name for a basket of chains, can be understood as the Internet that connects these different chains. There will be different computers and operating systems in the world of internet of everything, and they can communicate to each other with no barrie.

For monolithic chains represented by Ethereum, each application deployed on Ethereum shares the security of the Ethereum ledger. Each application sovereign chain in Cosmos, on the other hand, must choose a level of security sufficient for its purpose and incentivize validators to participate in security maintenance. Each application chain has its own operational mechanism, so interoperability between them is not achieved by default, but requires connection through a shared inter-chain communication standard.

Through mapofzones.com, we can see IBC and all Cosmos blockchains, and their communication with each other. The number of transactions in the network over the last 30 days peaked at 13 million in April this year, and this latest figure is currently holding at 3.7 million due to the recent macro market and Terra events. In terms of both the number of transactions and the volume of transactions, we see that Osmosis, the main AMM application chain in Cosmos, has 85-90% of the market share. Osmosis’ products have an excellent user experience. You may send ATOM to Osmosis and everyone can deposit/withdraw, trade and provide liquidity on Osmosis. Unlike the Keplr wallet, they use their own design to adopt the complex IBC underlying logic and provide a convenient and smooth-UX experience.It recently comes with a number of highly-requested features like pool sorting and searching, hiding 0 balances, and more! Please go check it out when you get a chance.

So how does Osmosis ensure its security? The application chains have their own validators, governance and tokens. OSMO is Osmosis' governance token, which you can currently purchase on Osmosis.Zone. The new Superfluid Staking is innovative. In the past, node service providers and liquidity providers were two completely separate parties in the Defi space. However, under the Superfluid Staking mechanism, if you are a liquidity provider on Osmosis, you can stake your bounded LP to different Osmosis validators. The main benefits include staking revenue and transaction fees, liquidity incentives and so on. However, there is always the risk of being Slashed. As with other DEX, LPs in Osmosis must lock LP tokens in order to receive rewards. Rewards increase as the unbonding period gets longer. The locked period of Superfluid staking is at least14 days, which is compliant with the validators’ unbonding period (other unbonding period lengths include 1, 7 and 14 days).

Another point to mention is that the POS mechanism has facilitated the  Proof of Stake operators . They are the companies which are independent of the POS blockchain and provide node services, who maintain the security of the network  by purchasing and staking governance tokens. It means that they must understand protocol developments, actively participate in governance, vote, and make relevant updates. These nodes can be centralized service providers, white label nodes (mainly providing services to institutions) and third-party service protocols (similar to Lido, Stakefish, Rockt Pool, etc.). White label service providers are the centralized institutions which provide technological service, also understood as “nodes as services”. ChorusOne provides white-label services, but it is controversial in the community as to whether the names of these white-label providers should be publice. It is very controversial. We see that many nodes in Osmosis simultaneously operate nodes in Cosmos Hub, or other application chains, for example, a relatively large node such as Citadel.one provides services for more than ten Cosmos chains, which reflects the Cosmos values of permissionless and sovereignty.

For the Tendermint chain, if 2/3 of the nodes validate, the network can be controlled. And if you want to attack the network, you need to control 1/3 of the nodes. Then you need to go to the market to buy and stake a large amount of OSMO. This is actually not only for Cosmos sovereign chains but also for all the chains that implemented the  POS mechanism. As long as you control a large part of the supply, you can control the network. In Cosmos, we have seen examples represented by Juno where the community organized itself to deal with such problems/attacks. Juno is a permissionless sovereign chain built on Cosmos. At the early stage, it airdropped most of its governance tokens to ATOM holders and pledgers. However, in order to prevent gwhale attacks, it limited the number of airdrops to 50,000 Juno per account and distract inactive exchange nodes like Binance. As a result, the community discovered that a Japanese MLM team obtained 2.5 million Juno through 50 accounts and sold some in the secondary market, which quickly caused dramatic price fluctuations. At the same time, they could also have attacked the network through a large number of governance tokens. So the community issued a relevant proposal to try to solve this problem.

As mentioned before in Osmosis 2022, Cosmos, Osmosis and ETH 2.0 are all based on POS consensus mechanism. So only staked tokens represent voting rights, while liquid tokens cannot. Ethereum and other chains still operate off-chain governance (e.g., through Snapshot) because of high gas costs. Unlike them, Osmosis and Cosmos as a whole is governed through an on-chain approach. In Cosmos, average turnout rate ( participating the voting / total locked, % participation rate ) is high, ranging from 50%-95%, while this number is only single digital in Ethereum. Osmosis uses DPOS, where the delegator can delegate tokens and voting rights to the validator node. The percentage of voting power is determined by the proportion of all tokens delegated to the validators. When the validator’s voting result does not match that of the delegator’s, the delegator can always override its voting result and vote on its own, which works  quite similar to liquid democracy mechanism. If you want to issue a proposal, you need to pay a deposit first. The deposit can be collected in the form of crowdfunding, and once the threshold is reached, the governance is activated and the validators and pledgers can vote. Currently, there are 4 options for voting: yes, no, no with veto and abstain. Like other governance, governance sets parameters, for example the minimum governance participation rate is 40%, which means that more than 40% of delegators s must vote to be effective and the proposal will pass if more than 50% of delegators vote yes. If one third of them vote with no with veto, it will not proceed. (The difference between a no with veto and a no: a no with veto indicates strong opposition to the idea which they think would cause significant harm to the network, and a proposal which fails with a 1/3 vote with veto will also loses the upfront deposit.) Abstain is also very important because many centralized exchange staking nodes do not participate in the vote, and abstain represents t you do participate in governance. The current governance proposals include 1) Taxed governance, 2) Liquidity parameter adjustment governance 3) Software upgrade governance, etc. We should note Parameter changes go into effect immediately after voting. The vote itself implements them. For software upgrades, the vote simply signals to validators when they should upgrade, and to what binary, and it's up to the manual intervention of the validators to do so.

For the future governance of Osmosis, there are several aspects to discuss. 1) Different weights should be allocated between active vote and passive vote.The active voting can be understand that the delegators will vote themselves while the passive voting is rather the default node voting, but should be with discounted weights, say for example, 20% off, 80% weights; 2) The governance proposal will diversify in contents, such as which token should be involved in the default token lists , to be launched  applications, Cosmwasm smart contract updates, etc. For Example,Parameters can be adjusted automatically through governance, and the default token list can be automatically updated. Also, there are discussions about the the minimum discussion period required for the Commonwealth forum and spot of auto trading bots etc, which have been proposed through governance such as #188 and #199 etc. It should be emphasized here that the nature of Osmosis' AMM application chain determines that it will be governance gated and ensure that the applications built on the Osmosis Protocol should be as minimal as possible (not being congested by thousands of applications) and complement with its core function of AMM.

For example, Cosmwasm built on Osmosis is permissioned and aims to  extend its core functionalities such as AMM and  superfluid staking while the integrations of Juno is rather permissionless. Any application can be built on it without governance and can be seen as a home for long-tail applications that do not fit the specific needs of app-specific zonese.g., Osmosis). 3) It will take into account Optimism's Two House model, which works through a groups of experts and community core members as well as token holders to achieve two-way governance. In terms of public goods, Cosmos Hub is also developing tools and features  (DAODAO, Interchain Accounts) etc that will allow applications to be built, raise development funds and use the funds to fund public goods in the Cosmos ecosystem. We've seen Tendermint, SDK, IBC, IBC Relay Node, Cosmwasm, etc. These are general public goods that benefit the entire ecosystem.

How Cosmos implements different security assumptions in inter-chains by making interoperability an option in the market. IBC can be applied to everything from simple asset transfers, to cross-Zone data availability proofs, to slashing validators on remote Zones (i.e., fully shared security).. The asset transfer function is the most fundamental one and is also sufficient for most Defi apps. For example, you transfer OSMO from Osmosis to Cosmos Hub. You essentially lock the asset on Osmosis and mint the proof on Cosmos Hub throughIBC. The proof can be used anywhere. When you send that proof back, the proof is destroyed and your asset on Osmosis is unlocked. This is a basic bridge design. We have seen the success of Osmosis, and the creation of various Defi applications on it. But this is still far from the vision of the Internet of Everything and  hence we will introduce  two more features that are coming soon to Cosmos: inter-chain accounts and interchain security.

Inter-chain account means that you can control an account on another chain through an account on one chain. For example, I can send a transaction on Osmosis through an account on Cosmos Hub. Meanwhile, I do not need to deposit assets to the Osmosis network first through the Keplr wallet or the Osmosis dashboard. I can send on the Cosmos Hub without moving the page when the asset moves.Another example is that you can build a liquidity staking protocol based on inter-chain account functionality. We saw that Lido attempted to build on top of Cosmos Hub through Cosmwasm and access functionality of Cosmos Hub. However, considering that Cosamwasm VMs would increase the technical cost of the nodes, deploying updates proposal would be troublesome, and there would be smart contract risks attacking the nodes' physical machines and other security issues, and most importantly, in order to maintain the hub minimalism,he the proposal which implements CosmWasm to the Cosmos Hub was eventually rejected by the community. We have also seen the possibility to build liquid staking protocol such as Quicksilver using the interchain accounts. You can use the Atom in the Osmosis and deposit the Atom back to the Cosmos Hub validators, and uses the staked atom as a proof to further earn interests on the Quicksilver derivatives protocol, or participate in the votes /governance if you would like to.

The interchain security model is quite similar to the ones for ETH 2.0 and Polkadot. It allows a validator set on one blockchain to provide security/validation services to another blockchain through the node sets  updates. So you can understand Cosmos' interchain security as a protocol for different node-sets to validate blocks .In Polkadot, the parachains are similar to consumer chains. The difference between consumer chains and application sovereign chains is that consumer chains are validated through Cosmos Hub's nodes and share security (Full or partial depending on the version) with each other, while application chains are completely validated through their own validator sets. A consumer chain can turn to the application sovereign chain later on, but an application sovereign chain is not necessarily a consumer chain. So in this way, Cosmos provides a lot of choice and flexibility. The relay chains in Polkadot are similar to Cosmos Hub, maintaining the basic security of the network and providing inter-chain functions and other services to other consumer chains. However, the security of parachains in Polkadot depends entirely on the security of relay chains, which will put more pressure on the scalability of relay chains. And the cost of parachains is also relatively high (no more than 100 chains). There are two types of consumer chains: contract consumer chain and custom consumer chain. Contract consumer chain is actually what we usually refer to as an inter-chain security product, which requires the Cosmos Hub's validators to validate the blocks for the consumer chainThe integration of Cosmwasm VM further makes it easier to deploy smart contracts in consumer chains. The consumer chain will distribute 25% of the gas fee to Cosmos Hub and Atom stakers. Another category is the custom consumer chain. This can be combined with Celestia's data availability  layer to be built on the existing architecture, greatly reducing development costs while allowing developers to achieve simpler and faster deployment.

The consumer chain is the same as the application chain in the sense that their nodes can decide whether to stop a consumer chain by initiating a governance proposal. If 1/3 of the validators vote to stop the validation and the chain stops for more than a week, the corresponding IBC channel will also stop because of expiration. Then the consumer chain will stop producing block and die. And the data from the previous storage chain will need to be filtered out through validators and governance. Similarly, the validators can initiate a proposal to restart the consumer  chain and this will have no effect on other chains.

The recent attack caused by Terra/UST is a good example. Terra's locked volume was onced ranked as the  second only after Ethereum. Despite its severe attack, it did not affect Cosmos and other application chains. Currently all of Terra's IBC relay nodes have stopped validating, so the corresponding IBC channels have also been stopped. For the IBC channel between Terra and Osmosis, Osmosis did not disable the deposit/withdrawal function with Terra, but Terra disabled their IBC customer-end. So the access to LUNA and UST is not available on Osmosis. Terra had to re-enable their IBC customer-end in order for Osmosis users to access the tokens again.  Although the related proposal was submitted but didn’t get implemented finally because it was not written properly.

The first consumer chain, Quicksilver, is expected to launch in August-September this year, with extensive testing and code audits before going live.Cosmos Hub will also need to be updated. The consumer chain will also continue with the stakedrop events, which is the  culture within the Cosmos ecosystem, aiming to  incentivise  Atom stakers and provide additional incentives along with the core value of Atom. We expect that ecosystem trailblazers like Osmosis and Stargaze will also be interested in joining soon. There will be a number of new consumer chains expected for the second half of the year. Once that scales to multiple applications and chains later, we can also think about its potential in the future and see whether it is possible to implement it into the real world  using the inter-chain security functions, such as products with monetary functions, such as credit clearing, mutual credits and others for SME enterprises.

To sum up, the appearance of inter-chain service will bring the Osmosis, and Cosmos as a whole to the next level. and bring interoperability and scalability more easily to different zones and applications.Cosmos Hub, works as the infrastructure of the ecosystem and provides services to this emerging inter-chain, focusing on what cross-chain functionality can provide to make it easier and improve the UX for all the blockchains coming on chain and starting to connect to each other.

Cosmos Zones scale out “horizontally” through dynamic setpoints on acceptable counterparty safety assumptions.The application chains can choose VMs, node requirements, fee models and governance, security assumptions, etc., so they are more difficult to be forked. A sovereign application-specific chain has access to powerful MEV mitigations and fine-grained control over the incentives it is exposed to compared with applications on monolithic chains. . Developers can customize/optimize the operating environment for specific applications instead of building a generic optimization environment similar to EVM. Developers can choose their own programming language and tools. For example, Cosmos SDK is written in Go language, which is just a way to build on Tendermint. For example, Nomic, a Bitcoin bridge project. Although it is built on Tendermint, it uses its own system to develop applications in Rust language without necessarily using Cosmos SDK which supports Go language. It can still access IBC and other related application chains. IBC does not only support Tendermint chain, but also any chain that can access IBC client dashboard, including Polkadot, Ethereum and Celo etc.

For a monolithic chain like Ethereum, its applications can rely on its security and avoid the problems of rollback and invalid state transition. Whereas on Cosmos, each chain is responsible for its own security and so is more prone to failure, such as the recent Terra incident. This is a profound governance and economic conundrum, and not all of the world's security problems can be solved by a single global blockchain. The solution to this problem is good governance, citizenship and governance solutions. As we have mentioned before, such attackers are often "State Actors" who simply want to destroy existing eco-economies with relatively low attack costs. And Solana founder Anatoly has mentioned that the economies to consider include China, the US and Europe. Considering the high-profile character of the founder, the pegged stablecoins threat to the USD/KRW sovereign currency and  its ecological monopoly and the drawbacks such as the death spiral brought by the protocol mechanism design, and of course risk management frameworks considered by smart money under the current unstable macro environment, the attack is inevitable.

Shared security protocol on Cosmos is also coming online soon. Through the IBC, Cosmos hub will be able to provide block verification for different chains similar as ETH2.0 and Polkadot. At the same time, the emergence of data avaibility layers  such as Celestia that provide autonomous sovereign execution environments will help Cosmos to achieve its ultimate vision of interoperability.

Monolithic chains like Ethereum have a big effective resource pricing problem, every application either overpays for security or does not contribute its fair share, and all applications share the risk of a catastrophic correlated security failure.In the Cosmos ecosystem, on the other hand, it is healthier for applications that are unable to pay for their own security to fair quickly. .

At the same time, many applications on Ethereum (such as Maker and Compound, though not Uniswap) already trust governance tokens for safety. They might as well use them for consensus, too. Scoping governance token permissions is a similar problem to designing application-specific shared-security layers.

synchronous interaction is  possible within a single Cosmos chain. Synchronous interaction with all other applications is ultimately impossible to maintain at scale. As a result, sharded platforms like Ethereum 2.0 and Polkadot trade synchronous communication for scalability, as do rollups and other layer-2 architectures.While in Cosmos, IBC and interchain accounts allows Cosmos chains to achieve scalability without sacrificing the synchronous interaction.

What is the future of sovereign chains’ development? We are not really rescued from the global financial crisis in 2008. Global central banks keep printing money and the price of goods keep rising. More and more large enterprises can get a bunch of low-cost borrowing, while the market for small and mid-size enterprises and small and mid-size enterprises loans is being crushed. Can we truly implement blockchain technology to disrupt the world? Should monetary policy be implemented by local governance? The world should not be dominated by economics. Politics, governance, and legal systems should play a more important role. The blockchain ecosystem will gradually evolve into a microcosm of political governance, communities, and organisms, and the questions should be how to better empower them to maintain their activeness, sustainability and value. For example, should cities and local jurisdictions have more autonomy to control their monetary policies and participate . We look forward to seeing more sovereign chains in the future and more company is to transform what we feel are three really Ill but really important institutions of society: in terms of software, such as how they are deployed, how they are issued and distributed in terms of currency, and how they are established and governed in terms of institutions. The consensus mechanism of POS may also be just a stepping stone in the whole journey, we have experienced the evolution from Proof of Work to Proof of Stake or Proof of Bandwidth. Eventually, we will realize the era of Proof of Care or Proof of Plant, where we connect things in reality with the blockchain. The society will be built in the way and behavior that the community finds valuable.

A Cosmos Thesis

Nansen alpha

Cosmos Co-Founder Ethan Buchman on Building an Internet of Sovereign Blockchains

If we think of Ethereum as a mainframe computer, a public, censorship-resistant, anonymous and secure super ledger for computing large sets of data, then all applications built on it run on the shared state machine and share its security. Despite its advantages for localized applications, the approach limits the number of applications that can be built on top of it. Most monolithic chains would love to achieve the vision for decentralization, so they want full nodes to run on user-side hardware, such as cell phones, PCs and etc. Moreover, they limit the rate of state growth through the block size/gas fee limits, which significantly affects its scalability and other aspects. Therefore, it is understandable that ETH 2.0 was created to solve the issues. On the other side, the inter-chain communication of these monolithic chains requires a centralized trusted inter-chain communication protocol, which has security risks to some extent.

If Ethereum is a mainframe computer, Cosmos is a protocol for networking independent servers.Cosmos, on the other hand, offers a complementary, inclusive and non-competitive solution where  you can understand as a protocol for networking independent servers. Its core idea is interoperability. It is not a blockchain but rather a basket of application sovereign chains called "Zones". It is not possible to achieve the internet of everything if building every chain would need to start from network deployment and coding consensus. Cosmos makes deploying application sovereign chains as easy as deploying smart contracts through the development of Cosmos technology stacks, such as Cosmos SDK, Tendermint and IBC. Also, it enables homogeneous communication between different sovereign chains.  Other chains such as Ethereum can also integrate their interoperability models.

You may understand Cosmos in three aspects. The first is Cosmos’ philosophy, such as how to build a blockchain in the first place. The second one is the technology stack of Cosmos, which is a general term for a series of modular products/technologies, with Tendermint at the bottom and the Cosmos SDK on top of it. Anyone can build applications with them on the platform. It also includes IBC, which is the inter-chain communication protocol. The third one is Cosmos Hub, a sovereign chain in the Cosmos ecosystem, which provides various inter-chain services for other chains and can be understood as the infrastructure of Cosmos. Let’s take an example of Web2.0. If you understand these chains built on Tendermint as the Linux or personal computers, Cosmos, as a general name for a basket of chains, can be understood as the Internet that connects these different chains. There will be different computers and operating systems in the world of internet of everything, and they can communicate to each other with no barrie.

For monolithic chains represented by Ethereum, each application deployed on Ethereum shares the security of the Ethereum ledger. Each application sovereign chain in Cosmos, on the other hand, must choose a level of security sufficient for its purpose and incentivize validators to participate in security maintenance. Each application chain has its own operational mechanism, so interoperability between them is not achieved by default, but requires connection through a shared inter-chain communication standard.

Through mapofzones.com, we can see IBC and all Cosmos blockchains, and their communication with each other. The number of transactions in the network over the last 30 days peaked at 13 million in April this year, and this latest figure is currently holding at 3.7 million due to the recent macro market and Terra events. In terms of both the number of transactions and the volume of transactions, we see that Osmosis, the main AMM application chain in Cosmos, has 85-90% of the market share. Osmosis’ products have an excellent user experience. You may send ATOM to Osmosis and everyone can deposit/withdraw, trade and provide liquidity on Osmosis. Unlike the Keplr wallet, they use their own design to adopt the complex IBC underlying logic and provide a convenient and smooth-UX experience.It recently comes with a number of highly-requested features like pool sorting and searching, hiding 0 balances, and more! Please go check it out when you get a chance.

So how does Osmosis ensure its security? The application chains have their own validators, governance and tokens. OSMO is Osmosis' governance token, which you can currently purchase on Osmosis.Zone. The new Superfluid Staking is innovative. In the past, node service providers and liquidity providers were two completely separate parties in the Defi space. However, under the Superfluid Staking mechanism, if you are a liquidity provider on Osmosis, you can stake your bounded LP to different Osmosis validators. The main benefits include staking revenue and transaction fees, liquidity incentives and so on. However, there is always the risk of being Slashed. As with other DEX, LPs in Osmosis must lock LP tokens in order to receive rewards. Rewards increase as the unbonding period gets longer. The locked period of Superfluid staking is at least14 days, which is compliant with the validators’ unbonding period (other unbonding period lengths include 1, 7 and 14 days).

Another point to mention is that the POS mechanism has facilitated the  Proof of Stake operators . They are the companies which are independent of the POS blockchain and provide node services, who maintain the security of the network  by purchasing and staking governance tokens. It means that they must understand protocol developments, actively participate in governance, vote, and make relevant updates. These nodes can be centralized service providers, white label nodes (mainly providing services to institutions) and third-party service protocols (similar to Lido, Stakefish, Rockt Pool, etc.). White label service providers are the centralized institutions which provide technological service, also understood as “nodes as services”. ChorusOne provides white-label services, but it is controversial in the community as to whether the names of these white-label providers should be publice. It is very controversial. We see that many nodes in Osmosis simultaneously operate nodes in Cosmos Hub, or other application chains, for example, a relatively large node such as Citadel.one provides services for more than ten Cosmos chains, which reflects the Cosmos values of permissionless and sovereignty.

For the Tendermint chain, if 2/3 of the nodes validate, the network can be controlled. And if you want to attack the network, you need to control 1/3 of the nodes. Then you need to go to the market to buy and stake a large amount of OSMO. This is actually not only for Cosmos sovereign chains but also for all the chains that implemented the  POS mechanism. As long as you control a large part of the supply, you can control the network. In Cosmos, we have seen examples represented by Juno where the community organized itself to deal with such problems/attacks. Juno is a permissionless sovereign chain built on Cosmos. At the early stage, it airdropped most of its governance tokens to ATOM holders and pledgers. However, in order to prevent gwhale attacks, it limited the number of airdrops to 50,000 Juno per account and distract inactive exchange nodes like Binance. As a result, the community discovered that a Japanese MLM team obtained 2.5 million Juno through 50 accounts and sold some in the secondary market, which quickly caused dramatic price fluctuations. At the same time, they could also have attacked the network through a large number of governance tokens. So the community issued a relevant proposal to try to solve this problem.

As mentioned before in Osmosis 2022, Cosmos, Osmosis and ETH 2.0 are all based on POS consensus mechanism. So only staked tokens represent voting rights, while liquid tokens cannot. Ethereum and other chains still operate off-chain governance (e.g., through Snapshot) because of high gas costs. Unlike them, Osmosis and Cosmos as a whole is governed through an on-chain approach. In Cosmos, average turnout rate ( participating the voting / total locked, % participation rate ) is high, ranging from 50%-95%, while this number is only single digital in Ethereum. Osmosis uses DPOS, where the delegator can delegate tokens and voting rights to the validator node. The percentage of voting power is determined by the proportion of all tokens delegated to the validators. When the validator’s voting result does not match that of the delegator’s, the delegator can always override its voting result and vote on its own, which works  quite similar to liquid democracy mechanism. If you want to issue a proposal, you need to pay a deposit first. The deposit can be collected in the form of crowdfunding, and once the threshold is reached, the governance is activated and the validators and pledgers can vote. Currently, there are 4 options for voting: yes, no, no with veto and abstain. Like other governance, governance sets parameters, for example the minimum governance participation rate is 40%, which means that more than 40% of delegators s must vote to be effective and the proposal will pass if more than 50% of delegators vote yes. If one third of them vote with no with veto, it will not proceed. (The difference between a no with veto and a no: a no with veto indicates strong opposition to the idea which they think would cause significant harm to the network, and a proposal which fails with a 1/3 vote with veto will also loses the upfront deposit.) Abstain is also very important because many centralized exchange staking nodes do not participate in the vote, and abstain represents t you do participate in governance. The current governance proposals include 1) Taxed governance, 2) Liquidity parameter adjustment governance 3) Software upgrade governance, etc. We should note Parameter changes go into effect immediately after voting. The vote itself implements them. For software upgrades, the vote simply signals to validators when they should upgrade, and to what binary, and it's up to the manual intervention of the validators to do so.

For the future governance of Osmosis, there are several aspects to discuss. 1) Different weights should be allocated between active vote and passive vote.The active voting can be understand that the delegators will vote themselves while the passive voting is rather the default node voting, but should be with discounted weights, say for example, 20% off, 80% weights; 2) The governance proposal will diversify in contents, such as which token should be involved in the default token lists , to be launched  applications, Cosmwasm smart contract updates, etc. For Example,Parameters can be adjusted automatically through governance, and the default token list can be automatically updated. Also, there are discussions about the the minimum discussion period required for the Commonwealth forum and spot of auto trading bots etc, which have been proposed through governance such as #188 and #199 etc. It should be emphasized here that the nature of Osmosis' AMM application chain determines that it will be governance gated and ensure that the applications built on the Osmosis Protocol should be as minimal as possible (not being congested by thousands of applications) and complement with its core function of AMM.

For example, Cosmwasm built on Osmosis is permissioned and aims to  extend its core functionalities such as AMM and  superfluid staking while the integrations of Juno is rather permissionless. Any application can be built on it without governance and can be seen as a home for long-tail applications that do not fit the specific needs of app-specific zonese.g., Osmosis). 3) It will take into account Optimism's Two House model, which works through a groups of experts and community core members as well as token holders to achieve two-way governance. In terms of public goods, Cosmos Hub is also developing tools and features  (DAODAO, Interchain Accounts) etc that will allow applications to be built, raise development funds and use the funds to fund public goods in the Cosmos ecosystem. We've seen Tendermint, SDK, IBC, IBC Relay Node, Cosmwasm, etc. These are general public goods that benefit the entire ecosystem.

How Cosmos implements different security assumptions in inter-chains by making interoperability an option in the market. IBC can be applied to everything from simple asset transfers, to cross-Zone data availability proofs, to slashing validators on remote Zones (i.e., fully shared security).. The asset transfer function is the most fundamental one and is also sufficient for most Defi apps. For example, you transfer OSMO from Osmosis to Cosmos Hub. You essentially lock the asset on Osmosis and mint the proof on Cosmos Hub throughIBC. The proof can be used anywhere. When you send that proof back, the proof is destroyed and your asset on Osmosis is unlocked. This is a basic bridge design. We have seen the success of Osmosis, and the creation of various Defi applications on it. But this is still far from the vision of the Internet of Everything and  hence we will introduce  two more features that are coming soon to Cosmos: inter-chain accounts and interchain security.

Inter-chain account means that you can control an account on another chain through an account on one chain. For example, I can send a transaction on Osmosis through an account on Cosmos Hub. Meanwhile, I do not need to deposit assets to the Osmosis network first through the Keplr wallet or the Osmosis dashboard. I can send on the Cosmos Hub without moving the page when the asset moves.Another example is that you can build a liquidity staking protocol based on inter-chain account functionality. We saw that Lido attempted to build on top of Cosmos Hub through Cosmwasm and access functionality of Cosmos Hub. However, considering that Cosamwasm VMs would increase the technical cost of the nodes, deploying updates proposal would be troublesome, and there would be smart contract risks attacking the nodes' physical machines and other security issues, and most importantly, in order to maintain the hub minimalism,he the proposal which implements CosmWasm to the Cosmos Hub was eventually rejected by the community. We have also seen the possibility to build liquid staking protocol such as Quicksilver using the interchain accounts. You can use the Atom in the Osmosis and deposit the Atom back to the Cosmos Hub validators, and uses the staked atom as a proof to further earn interests on the Quicksilver derivatives protocol, or participate in the votes /governance if you would like to.

The interchain security model is quite similar to the ones for ETH 2.0 and Polkadot. It allows a validator set on one blockchain to provide security/validation services to another blockchain through the node sets  updates. So you can understand Cosmos' interchain security as a protocol for different node-sets to validate blocks .In Polkadot, the parachains are similar to consumer chains. The difference between consumer chains and application sovereign chains is that consumer chains are validated through Cosmos Hub's nodes and share security (Full or partial depending on the version) with each other, while application chains are completely validated through their own validator sets. A consumer chain can turn to the application sovereign chain later on, but an application sovereign chain is not necessarily a consumer chain. So in this way, Cosmos provides a lot of choice and flexibility. The relay chains in Polkadot are similar to Cosmos Hub, maintaining the basic security of the network and providing inter-chain functions and other services to other consumer chains. However, the security of parachains in Polkadot depends entirely on the security of relay chains, which will put more pressure on the scalability of relay chains. And the cost of parachains is also relatively high (no more than 100 chains). There are two types of consumer chains: contract consumer chain and custom consumer chain. Contract consumer chain is actually what we usually refer to as an inter-chain security product, which requires the Cosmos Hub's validators to validate the blocks for the consumer chainThe integration of Cosmwasm VM further makes it easier to deploy smart contracts in consumer chains. The consumer chain will distribute 25% of the gas fee to Cosmos Hub and Atom stakers. Another category is the custom consumer chain. This can be combined with Celestia's data availability  layer to be built on the existing architecture, greatly reducing development costs while allowing developers to achieve simpler and faster deployment.

The consumer chain is the same as the application chain in the sense that their nodes can decide whether to stop a consumer chain by initiating a governance proposal. If 1/3 of the validators vote to stop the validation and the chain stops for more than a week, the corresponding IBC channel will also stop because of expiration. Then the consumer chain will stop producing block and die. And the data from the previous storage chain will need to be filtered out through validators and governance. Similarly, the validators can initiate a proposal to restart the consumer  chain and this will have no effect on other chains.

The recent attack caused by Terra/UST is a good example. Terra's locked volume was onced ranked as the  second only after Ethereum. Despite its severe attack, it did not affect Cosmos and other application chains. Currently all of Terra's IBC relay nodes have stopped validating, so the corresponding IBC channels have also been stopped. For the IBC channel between Terra and Osmosis, Osmosis did not disable the deposit/withdrawal function with Terra, but Terra disabled their IBC customer-end. So the access to LUNA and UST is not available on Osmosis. Terra had to re-enable their IBC customer-end in order for Osmosis users to access the tokens again.  Although the related proposal was submitted but didn’t get implemented finally because it was not written properly.

The first consumer chain, Quicksilver, is expected to launch in August-September this year, with extensive testing and code audits before going live.Cosmos Hub will also need to be updated. The consumer chain will also continue with the stakedrop events, which is the  culture within the Cosmos ecosystem, aiming to  incentivise  Atom stakers and provide additional incentives along with the core value of Atom. We expect that ecosystem trailblazers like Osmosis and Stargaze will also be interested in joining soon. There will be a number of new consumer chains expected for the second half of the year. Once that scales to multiple applications and chains later, we can also think about its potential in the future and see whether it is possible to implement it into the real world  using the inter-chain security functions, such as products with monetary functions, such as credit clearing, mutual credits and others for SME enterprises.

To sum up, the appearance of inter-chain service will bring the Osmosis, and Cosmos as a whole to the next level. and bring interoperability and scalability more easily to different zones and applications.Cosmos Hub, works as the infrastructure of the ecosystem and provides services to this emerging inter-chain, focusing on what cross-chain functionality can provide to make it easier and improve the UX for all the blockchains coming on chain and starting to connect to each other.

Cosmos Zones scale out “horizontally” through dynamic setpoints on acceptable counterparty safety assumptions.The application chains can choose VMs, node requirements, fee models and governance, security assumptions, etc., so they are more difficult to be forked. A sovereign application-specific chain has access to powerful MEV mitigations and fine-grained control over the incentives it is exposed to compared with applications on monolithic chains. . Developers can customize/optimize the operating environment for specific applications instead of building a generic optimization environment similar to EVM. Developers can choose their own programming language and tools. For example, Cosmos SDK is written in Go language, which is just a way to build on Tendermint. For example, Nomic, a Bitcoin bridge project. Although it is built on Tendermint, it uses its own system to develop applications in Rust language without necessarily using Cosmos SDK which supports Go language. It can still access IBC and other related application chains. IBC does not only support Tendermint chain, but also any chain that can access IBC client dashboard, including Polkadot, Ethereum and Celo etc.

For a monolithic chain like Ethereum, its applications can rely on its security and avoid the problems of rollback and invalid state transition. Whereas on Cosmos, each chain is responsible for its own security and so is more prone to failure, such as the recent Terra incident. This is a profound governance and economic conundrum, and not all of the world's security problems can be solved by a single global blockchain. The solution to this problem is good governance, citizenship and governance solutions. As we have mentioned before, such attackers are often "State Actors" who simply want to destroy existing eco-economies with relatively low attack costs. And Solana founder Anatoly has mentioned that the economies to consider include China, the US and Europe. Considering the high-profile character of the founder, the pegged stablecoins threat to the USD/KRW sovereign currency and  its ecological monopoly and the drawbacks such as the death spiral brought by the protocol mechanism design, and of course risk management frameworks considered by smart money under the current unstable macro environment, the attack is inevitable.

Shared security protocol on Cosmos is also coming online soon. Through the IBC, Cosmos hub will be able to provide block verification for different chains similar as ETH2.0 and Polkadot. At the same time, the emergence of data avaibility layers  such as Celestia that provide autonomous sovereign execution environments will help Cosmos to achieve its ultimate vision of interoperability.

Monolithic chains like Ethereum have a big effective resource pricing problem, every application either overpays for security or does not contribute its fair share, and all applications share the risk of a catastrophic correlated security failure.In the Cosmos ecosystem, on the other hand, it is healthier for applications that are unable to pay for their own security to fair quickly. .

At the same time, many applications on Ethereum (such as Maker and Compound, though not Uniswap) already trust governance tokens for safety. They might as well use them for consensus, too. Scoping governance token permissions is a similar problem to designing application-specific shared-security layers.

synchronous interaction is  possible within a single Cosmos chain. Synchronous interaction with all other applications is ultimately impossible to maintain at scale. As a result, sharded platforms like Ethereum 2.0 and Polkadot trade synchronous communication for scalability, as do rollups and other layer-2 architectures.While in Cosmos, IBC and interchain accounts allows Cosmos chains to achieve scalability without sacrificing the synchronous interaction.

What is the future of sovereign chains’ development? We are not really rescued from the global financial crisis in 2008. Global central banks keep printing money and the price of goods keep rising. More and more large enterprises can get a bunch of low-cost borrowing, while the market for small and mid-size enterprises and small and mid-size enterprises loans is being crushed. Can we truly implement blockchain technology to disrupt the world? Should monetary policy be implemented by local governance? The world should not be dominated by economics. Politics, governance, and legal systems should play a more important role. The blockchain ecosystem will gradually evolve into a microcosm of political governance, communities, and organisms, and the questions should be how to better empower them to maintain their activeness, sustainability and value. For example, should cities and local jurisdictions have more autonomy to control their monetary policies and participate . We look forward to seeing more sovereign chains in the future and more company is to transform what we feel are three really Ill but really important institutions of society: in terms of software, such as how they are deployed, how they are issued and distributed in terms of currency, and how they are established and governed in terms of institutions. The consensus mechanism of POS may also be just a stepping stone in the whole journey, we have experienced the evolution from Proof of Work to Proof of Stake or Proof of Bandwidth. Eventually, we will realize the era of Proof of Care or Proof of Plant, where we connect things in reality with the blockchain. The society will be built in the way and behavior that the community finds valuable.

A Cosmos Thesis

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Cosmos Co-Founder Ethan Buchman on Building an Internet of Sovereign Blockchains