Cosmos aims to combine the utility of open-source software, decentralized networks, and time-stamped blockchain data storage to accelerate the scaling, adoption, and use-case experimentation of blockchains. To bypass the hindrances such as limited performance and ad hoc governance that inherently exist in PoW chains, Cosmos was envisioned as a decentralized network of independent, scalable, and interoperable PoS blockchains. The ideal solution, according to Cosmos, was a tool for interacting with multiple parallel blockchains such that the unique value proposed by a chain can be expanded to any other chain.

The idea of a Proof-of-Stake blockchain with Byzantine Fault-Tolerant (BFT) consensus mechanism originates from the year 2014 when the future Tendermint Inc. co-founder Jae Kwon explored the possibilities in his research. With the participation of Ethan Buchman, the other Tendermint Inc. co-founder, this idea was further developed in 2015, and Cosmos was introduced in 2016. Tendermint Inc. and Interchain Foundation (ICF) have been responsible for the development and adoption of the technologies underlying the Cosmos network, Tendermint Core (a BFT consensus mechanism) and the Cosmos SDK (a modular framework for building new blockchains).

ICF ran a successful initial coin offering for ATOM in 2017 and used the collected funds to boost the development of Cosmos SDK, IBC, and Peggy. The first blockchain of the network, Cosmos Hub, launched on mainnet in 2019, and since then, many well-known projects have sprouted in the network such as Terra, THORChain, and Crypto.com.

ATOM is the native token of Cosmos Hub, the PoS blockchain that constitutes one of many hubs on the Cosmos network. Since the PoS consensus mechanism requires validators to own ATOM to participate in the validation process, the main purpose of ATOM is the security and sustainability of the Cosmos Hub network. ATOM owners can stake their tokens to ensure network security, and in return, get a portion of the network transaction fees and block rewards distributed for validation. The token is also necessary for taking part in Cosmos Hub governance. ATOM owners can delegate their tokens or actively take part in governance by holding ATOM in their wallets.

Cosmos is designed to operate as a network of zones and hubs. Zones are application-specific blockchains with sovereign security and governance models while hubs are intermediary blockchains that observe the state of connected zones and facilitate asset transfer between them. Cosmos is not a blockchain but a toolbox to design new blockchains. However, Cosmos Hub is the first PoS blockchain that works as a hub between zones and contains a multi-asset ledger, and lets other subsequent zones interact with each other through the inter-blockchain communication protocol, IBC. Their interaction is powered by Tendermint Core, a secure consensus protocol that provides fast finality and is easily adaptable with Proof-of-Stake (PoS) blockchain. Interacting with the IBC protocol requires chains to have a consensus mechanism that offers fast finality, meaning that Cosmos cannot use IBC for asset transfers between proof-of-work blockchains like Ethereum and Bitcoin. In order to bypass this shortcoming, Cosmos introduces account-based blockchains called peg zones (Peggy) and offers fast finality through implementing finality thresholds to blockchains with probabilistic finality.

Cosmos is designed to operate as a network of zones and hubs. Zones are application-specific blockchains with sovereign security and governance models while hubs are intermediary blockchains that observe the state of connected zones and facilitate asset transfer between them. Cosmos is not a blockchain but a toolbox to design new blockchains. However, Cosmos Hub is the first PoS blockchain that works as a hub between zones and contains a multi-asset ledger, and lets other subsequent zones interact with each other through the inter-blockchain communication protocol, IBC. Their interaction is powered by Tendermint Core, a secure consensus protocol that provides fast finality and is easily adaptable with Proof-of-Stake (PoS) blockchain. Interacting with the IBC protocol requires chains to have a consensus mechanism that offers fast finality, meaning that Cosmos cannot use IBC for asset transfers between proof-of-work blockchains like Ethereum and Bitcoin. In order to bypass this shortcoming, Cosmos introduces account-based blockchains called peg zones (Peggy) and offers fast finality through implementing finality thresholds to blockchains with probabilistic finality.

While Tendermint constitutes the networking and consensus layer of the application-specific blockchains built within the Cosmos network, Cosmos SDK offers a framework to construct the application layer by building deterministic state machines through SDK modules. Since the consensus mechanism and application layer are separate informational domains in Cosmos blockchains, the changes in the state-machines (e.g. transactions on the blockchain) are communicated to the Tendermint consensus engine through the Application Blockchain Interface (ABCI). Another implication of this separateness is that the blockchains on the network are not limited by strict rules when choosing a consensus mechanism. They do not require to use of Tendermint’s vanilla version and can make adjustments on the consensus mechanism to render it suitable for application-specific purposes.

All the zones in the Cosmos network have distinct governance styles tailored for the value proposition of the blockchain. The Cosmos Hub, on the other hand, employs a hybrid governance model where it uses an off-chain governance platform for discussions and uses on-chain voting for decision-making and execution. Any user can submit proposals on protocol upgrades, modifications to network parameters, bounty allocations, and other governance policies and participate in discussions on the Cosmos governance forum. Since community governance plays an essential role in the development and stability of the network, Cosmos Hub obliges each validator to vote on every proposal. Those who do not vote, get penalized by the protocol and their validator status gets deactivated for a predetermined period of time. The Cosmos Hub also benefits from an additional aiding agent named Governance Working Group which aims to equip Cosmos governance with structural tools, improve governance functionality, and conduct educational efforts to further the awareness and the adoption of Cosmos governance.