“We will see around 200 chains connected via the Cosmos IBC next year,” said Peng Zhong., CEO of Tendermint
Since the introduction of the inter-blockchain communication or IBC protocol in March, which enabled the communication and transmission of digital assets across different blockchains, development activities in the Cosmos (ATOM) network seem to have picked up speed.
The transaction volume, the creation of decentralized applications and the number of chains connected via IBC have shown an upward trend in recent months. Speakers at the Cosmoverse Conference, held last week, featured many of the latest technologies on the blockchain that are in development. The biggest hackathon of all time to date will also take place tomorrow in Lisbon.
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Tendermint is the core developer of the Cosmos blockchain and serves as a gateway to the ecosystem. On Wednesday morning, Peng Zhong, the company’s CEO, had an exclusive interview with Cointelegraph to talk about the future of the Cosmos network.
Cointelegraph: What are some of the development highlights around the Cosmos blockchain in relation to the decentralized financial or DeFi ecosystem?
Peng Zhong: I think the biggest highlight was earlier this year when Inter-Blockchain Communications (IBC) first launched on the Cosmos hub. Not much happened after that. People said: Okay, IBC is live, what should I do now? But now we see 22 blockchains supporting IBC. They have all been able to connect to various decentralized exchanges (DEXs) available in the Cosmos ecosystem, such as Osmosis, Gravity DEX. So there was a lot of cross-chain activity going on, a lot more than anyone expected. And we’re seeing a very positive growth cycle with the IBC activated.
Total transaction volume on the Cosmos blockchain in the last 30 days. | Source: ATOMSc
CT: Interesting, where do you see the IBC ecosystem, say, in five years?
PZ: That is very far in the future. I wanted to present tomorrow that we will see 22 chains today, and next we will see about 200 chains connected via IBC next year. I haven’t thought about five years but my long-term vision to run Tendermint and with our focus on bringing more users to Cosmos and a better development experience for the Cosmos Stack. We will see a million blockchains in the future. Five years from now, I would expect that number to be tens of thousands, if not hundreds of thousands, of chains connected through IBC. And it’s going to be absolutely spectacular, but we still have a lot to do on the infrastructure side to process all of this encrypted data.
CT: In relation to the recent cosmos verse, a fascinating development has been the concept of liquid staking. Would you mind providing more information on this?
PZ: I believe there are at least three different implementations of liquid staking as featured at Cosmoverse. It was a fantastic conference; I have met many people who have worked in this area during the pandemic and have not yet had a chance to see them face to face. And then people have been working at Cosmos for over five years and are still there – and that speaks to the strength of the ecosystem. So high level liquid staking is the ability to allow users to double up on their assets. Most often with proof-of-stake protocols (PoS) you have to stake out your tokens in order to protect the network as a user. And by staking your tokens, you earn income. For the Cosmos Hub, it is generally between 7 and 20% APY. But then you look at some DeFi protocols, for example Osmosis or other Cosmos based DEXs, and you can see that when you start those DEXs [the developers] Want to increase liquidity.
For example, APYs can be thousands of percent within a few weeks or hundreds of percent for a few months. And they’re much higher than the staking return. So there’s this constant battle or tug-of-war between incentives for staking, which is to keep the network safe and good for everyone, but you will earn minimal returns. This is compared to incentives provided by DEXs to act as liquidity providers, which is very tempting. So liquid staking is the ability to allow you as a staker to wager your wealth, but at the same time you receive a token that represents your staked position.
So if you wager 100 ATOM, all you get in return is a steady stream of staking rewards [both] Staking rewards in ATOM and you’d get a staked version of your ATOM, say sATOM. And that’s only IBC-enabled, which means you can transfer it to DEXs without permission and thus provide liquidity in pools. That’s the general idea of liquid staking – it’s a great feature that is available across multiple blockchains at the same time.
The version that comes to the Cosmos hub is more standard, that’s where you stake the assets and you get a token that you can use interchain. The version proposed by Osmosis is called Superfluid Staking, which is the ability to provide liquidity in a DEX while simultaneously issuing liquidity provider tokens (LPs) that you can use to wager on the blockchain. Whether you use LP first or first, you always get the representation you can use on IBC, which means a lot of flexibility and freedom.
However, it adds a huge additional risk as this is now like a derivative of the second level of your original token. So if something breaks along the way, you could run into trouble. But for those of you with a great risk appetite, liquid staking offers more than what you can get with traditional returns.
CT: In theory, is this technology applicable to all types of pools? For example, can I get a loan token to secure the deposit into a staking pool for returns when I loan my cryptos?
PZ: Exactly, you are on the right track. And there can be many levels, and each level adds additional risk to your portfolio. So the point is to find out how much risk you want to take. Much of it [liquid staking] happened in Ethereum due to the power of the ERC-20 tokens, but it was only developed in the Cosmos ecosystem. And of course there is an additional level of complexity in Cosmos due to the different security levels. So part of the proposed benefit of liquid staking is the ability to share security between multiple chains at the same time. This is kind of a looser version of Ethereum where everything is secured by the token.
CT: Another recent development being discussed at Cosmoverse is ABCI ++ and how it can help improve cross-chain functionality and oracles. Would you mind elaborating on that?
So the Tendermint Core protocol hasn’t been updated with new features for a long time. And ABCI ++ is a very big new feature. It increases the features that Tendermint Core can support. So right now, at the end of every single block, there is a function that all Cosmos blockchains use to run their business logic. At the end of each individual block, which at Cosmos typically lasts six to seven seconds, some activity can happen. But the Tendermint Core Consensus creates a consensus on new blocks, but it is not a one-step process; In fact, it is a five-step process of block consensus building.
In fact, there has been a built-in block explorer in the past that hasn’t been updated much but actually shows every step of the Tendermint block consensus. ABCI ++ is that it enables a developer to take advantage of any of these five steps. You can imagine it. Instead of just allowing one event for each completed block, it now allows five events and you can now choose which step to allow consensus to take on that role. And that offers a lot of potential for more efficient calculations.
The new [v0.35] # TendermintCore release:
• Prioritized mempool
• Peer-to-Peer Network Makeover
• StateSync improvements
• Go API internalization and stability
… and discover more great features https://t.co/zXP4t6EBiF pic.twitter.com/zQtV6paZgm
– Tendermint (@tendermintHQ) November 5, 2021
CT: Is Tendermint taking any steps to introduce Cosmos into the Metaverse?
PZ: Yeah, so I think the metaverse is pretty undefined right now. Everyone builds things as Web 3.0. Of course, Facebook can claim they are building the metaverse, but it will only be Facebook’s wall garden metaverse. There will be Google’s wall garden Metaverse and Apple’s version of it. I would assume that Steam and Epic Games have their own version. But the version that most of us want today is open and without permission.
CT: What are some of the highlights of the upcoming hackathon?
PZ: So it’s the biggest Cosmos hackathon. And I think Cosmos is the second largest crypto ecosystem in the world at over $ 170 billion [of assets] built on the Kosmos infrastructure. It is a very important event for the whole world. Zoom out a bit and see what happened last year, which was on a much smaller scale. Back then, this proof-of-concept DEX project called Osmosis won the biggest award. And today, Osmosis is a live blockchain with over $ 700 million in TVL [total value locked]. Maybe it’s a coincidence, but I hope to see projects of this caliber this year. This time around we have a lot more prize categories – I think there are seven, each with prizes worth over $ 200,000. With this wide range of prices, we make sure people solve a wide variety of problems. There is so much undeveloped infrastructure and there is no point in giving just one prize.
Growth of TVL on the Osmose DEX. | Source: DeFi Lama
CT: Would you like to share further comments or visions about Tendermint and the Cosmos blockchain?
PZ: Yes, I believe Cosmos is the only ecosystem that seeks to democratize access to finance, more than any other ecosystem. Because in Cosmos you don’t have to buy a token to participate in the ecosystem. If you rely on Cosmos, you don’t have to buy anything. You don’t have to pay for gas, which I think is something very valuable in economies where you can’t really afford expensive transactions and when you don’t really have the capital to deal with these hybrid ecosystems like Polkadot. really experimenting or avalanche or polkadot or ethereum and appealing to people with the times. Young people with time but without capital no longer have Web 1.0, and Cosmos will win Web 3.0. And that’s really Tendermint’s core job of bringing in newcomers, making it as easy as possible to build things, and we welcome everyone.