Guide to Cosmos Hub

Introduction to Cosmos

Cosmos is a decentralized network of independent parallel blockchains built with the Cosmos Software Development Kit (SDK). The focus of Cosmos is to streamline the building of custom blockchains by providing robust tooling via the Cosmos SDK and the Tendermint consensus engine. A key feature of the Cosmos SDK is its native interoperability protocol. By prioritizing ease of building and interoperability, the Cosmos ecosystem has observed massive growth over the past few years. 

In 2019, the Cosmos Hub became the first blockchain built with the Cosmos SDK to launch and acted as the steward for the Cosmos ecosystem. By breaking down the barriers between blockchain economies, allowing each blockchain to remain sovereign while trustlessly communicating with each other, the Cosmos ecosystem becomes a so-called internet of blockchains.

There are three core pieces of Cosmos technology, all of which are pioneered by the Cosmos Hub:

• Tendermint consensus engine

• Cosmos SDK

• Interblockchain Communication Protocol (IBC)

The Cosmos design philosophy focuses on modularity, and features are built in “modules” – one way to think about modules would be akin to blockchain lego pieces that can be tied together to create unique interactions. 

A Cosmos blockchain is built of two layers: the consensus and application layers. The application layer is built with the Cosmos SDK, which can plug into compatible consensus engines, such as Tendermint. The IBC module is within the Cosmos SDK, enabling blockchains to create connections for information transfer. These pieces together allow for unique blockchain applications to be built with granular control over lower level architecture as needed. 

The Cosmos Hub plays an important role in bringing new features of the Cosmos SDK to market such as the launch of IBC in 2021 with the Cosmos Hub’s stargate upgrade.

To learn more about the Cosmos ecosystem, check out our article on application-specific blockchains and the Cosmos ecosystem.

Tendermint

At the bottom of the tech stack sits the consensus layer, which determines how nodes come to agreement on the actions occurring in a blockchain. Tendermint has been in development since 2014 and is one of the first Proof-of-Stake (PoS) consensus algorithms to be used in production. The Tendermint consensus engine is a package of consensus-related processes including the Tendermint Core consensus algorithm.

Tendermint Core is a Byzantine Fault Tolerant (BFT) system allowing it to achieve consensus even when up to one-third of participating nodes go offline or act maliciously. Another powerful aspect is that it provides instant finality. In contrast to probabilistic finality observed in blockchains such as Ethereum, once a transaction is included in a block on a Cosmos chain and added to the chain, it is considered finalized and cannot be changed.

Tendermint Core supports applications written in any programming language and also supports either proof of stake or proof of authority protocols, allowing for diverse blockchains to be built within Cosmos using Tendermint as their consensus layer.

For more information on the Cosmos tech stack see our article here.

Cosmos SDK

The Cosmos SDK framework allows developers to create customized blockchains using a series of modules. There are many modules pre-packaged in the Cosmos SDK but development teams are also able to customize provided modules to fit their use cases in the best way, and even create their own modules. Blockchains built with the Cosmos SDK are often referred to as application-specific blockchains or appchains. By enabling developers to build blockchains with adjustable off-the-shelf solutions, and the ability to create their own business logic, more unique and granular protocol designs can be developed. With this modular design, new features can be introduced more easily, and adjusted while limiting dependencies on other pieces of the blockchain. 

Application-specific blockchains ensure a higher level of sovereignty for the application’s stakeholders, as the stakeholders of the application and those of the blockchain are the same. This streamlines the path toward application development as the app developers do not need to convince the stakeholders of the underlying chain to proceed. 

Interblockchain Communication Protocol

The IBC Protocol allows for communication between blockchains with compatible consensus standards (e.g. Tendermint-based chains) without needing special permissions to do so.

IBC formalizes the light client mechanism, allowing the blockchains to act as light clients on each others’ networks, read each others’ states, and interoperate without the need to function as full nodes or to store each others’ full states. 

IBC is not just a token bridge, it allows for arbitrary data to be transferred. Features can even be built into IBC, such as interchain accounts and interchain security. By implementing IBC, blockchains gain access not only to typical bridging actions between each other, but also these more powerful tools for creating secure, composable applications within the Cosmos ecosystem.

If you are curious about how IBC works in more detail check out our article here.

How to participate in the Cosmos Hub

As Cosmos Hub is a PoS network, token holders participate in securing the blockchain by staking the network’s native token, ATOM. There are two main groups that can engage in ATOM staking – delegators and validators. Validators actively participate in network consensus by operating validator nodes, while delegators stake their ATOM to validators they trust. By delegating to a validator, the user is allowing the validator to use their delegated stake to participate in consensus. A validator must garner enough stake (self-bonded + delegated) to become active and earn rewards for participating in consensus. The validator ‘active set’ is composed of the top validators ranked by stake, the number of which is determined by on-chain governance.

While operating a validator requires a level of technical competency, there is no deep technical knowledge needed to delegate. Any token holder can stake by delegating their ATOM to a validator and earn rewards in return. For more information on how to stake ATOM, you can check out our delegation guide.

Delegated ATOM is locked and requires unbonding to become liquid again. Once a delegator initiates an unbonding, the tokens are locked throughout the unbonding period (21 days) and do not receive any staking rewards. If delegated to a validator outside of the active set, unbonding is immediate.

Risks of participation in the Cosmos Hub

In order to keep validators operating within the bounds of the protocol, a mechanism called slashing is used to disincentivize bad behavior. A slashing incident will burn a portion of the validator’s stake depending on the severity. When a validator is offline longer than a specified amount of time, a portion of their stake is burned every block. A validator that double-signs is severely slashed and permanently removed from the active set. This is why, as a delegator, it is important to choose your validator carefully. 

• Downtime is penalized on the Cosmos Hub if a validator does not participate in consensus for more than 9,500 blocks in a row (approx. 16 hours). The validator is slashed for 0.01% of its total stake, considered jailed, and removed from the active set for 10 minutes. Following this, the validator can submit an un-jail transaction to rejoin the active set.

• Double-signing has much more potential for network harm and, thus, is penalized significantly more. Double-signing burns 5% of a validator’s total stake and becomes tombstoned, making it ineligible to be an active validator ever again. Any delegations to the tombstoned validator are automatically unbonded after the slashing incident.

Governance on the Cosmos Hub

ATOM stakers also have the ability to participate in on-chain protocol governance. There are many ways in which ATOM stakers can participate in governance, from discussing topics in the Cosmos Hub governance forum to submitting a proposal on-chain. Governance is especially important for the Cosmos Hub as it allows for the community to decide on protocol upgrades, parameter changes, community pool spends, decision signaling, and more. 

Typically, a governance proposal is expected to be discussed on the governance forum before being put on-chain. Once on-chain, the proposal enters the deposit period. If the deposit is not filled before two weeks, the deposit is burned and the proposal is never voted on. By requiring a deposit for collateral towards the proposal, it discourages spam proposals. During the voting period, stakers are able to vote Yes, No, NoWithVeto, or Abstain. They can change their vote at any time during the voting period. Delegated stake assumes the validators vote but can be overridden by the delegator voting. 

For a proposal to be valid, there must be enough voting power participating to meet the quorum of 40% total staked ATOM. Voting Yes or No indicates approval or disapproval of the proposal, respectively, while voting Abstain indicates that the user wants to contribute to the quorum but not the direction of the vote. NoWithVeto is typically reserved for spam or malicious proposals and requires only 33.4% of voting power to veto the vote which burns the deposit. For a proposal to be accepted, the following criteria must be met:

• Quorum must be met,

• Majority vote must be in favor, and

• NoWithVeto vote must be less than 33.4% of the participating voting power.

Depending on the proposal type a change may occur immediately, at a specific block height, or it may not change anything about the protocol level directly.

Why run Cosmos Hub nodes with Coinbase Cloud?

Participate with confidence based on Coinbase Cloud's expertise and experience with the Cosmos Hub and broader Cosmos ecosystem. We have been active Cosmos Hub validator operators since the early Game of Stakes testnet before its mainnet launch. Coinbase Cloud participates in Cosmos Hub governance by voting on-chain and empowering customers to vote on-chain. Coinbase Cloud is committed to supporting Cosmos and the vision of the internet of blockchains.

• Participate with industry-leading security, including offline-generated validator signing keys, and HSM-supported secure backups

• Protect your validator node from DDoS attacks with our unique node architecture and Equinix-metal infrastructure

• Manage governance and participation with insights and guidance from our protocol specialists

• Leverage our deep experience as a validator within the broader Cosmos ecosystem

• Coinbase Cloud is trusted by the highest tiers of financial institutions for quality, reliability, and security.

If you’re an ATOM holder, you can start staking now by delegating to Coinbase Cloud’s Cosmos Hub validator. Contact our sales team for more information.