Reassessment of Cosmos Ecosystem Potential: Is Liquidity Explosion Imminent?

As a well-established blockchain ecosystem, Cosmos stands out with its decentralized and open characteristics. Despite a lack of high-profile promotion and a mediocre performance on social media, it has never lacked the ability to attract quality projects as the birthplace of the application chain revolution. Although the Cosmos ecosystem has been quiet in the past, it currently appears to be one of the most promising areas for high growth in the cryptocurrency industry. Recent trends indicate that projects with strong fundamentals and sustainable development narratives will benefit in future markets, and Cosmos is well-prepared for this.

01. The Rising Cosmos Ecosystem: Reassessing Underestimated Potential

Cosmos is an open-source blockchain ecosystem aimed at achieving interoperability between different blockchains. Although there is a gap in technology and projects compared to leading systems, it has advantages in decentralization and interoperability. The SDK and IBC launched by the Cosmos team help developers solve the problem of redundant development and play an important role in promoting technological advancement in the industry.

However, the market valuation of Cosmos does not match its strength. Its ecosystem is relatively small and has not yet attracted enough developers and users. The technology and application scenarios are also quite complex, requiring more time for promotion. In the crypto market, which values data and liquidity, Cosmos's market capitalization has been long underestimated, currently at only 3.15 billion USD, ranking 23rd. Its token ATOM is also valued low due to a lack of practicality.

To improve this situation, the Cosmos 2.0 white paper was launched last year, aiming to change the dilemma of low utilization of the Cosmos Hub network and the ATOM token. Subsequently, Cosmos announced a series of advancements, such as upgrading inter-chain security to "replicated security" and passing the liquidity staking module proposal. In May of this year, the Neutron mainnet went live, utilizing the upgraded "replicated security" mechanism for the first time, and will airdrop to stakers of Cosmos Hub, sparking discussions on the value capture and ecosystem of Cosmos and ATOM.

Based on these technological improvements, the Cosmos ecosystem projects are experiencing a liquidity explosion this year. Canto's daily trading volume once exceeded that of Solana, marking a successful start for Cosmos. The TVL of Stride, Injective, and Kujira continues to rise, increasing 2-6 times compared to January. In April, the number of active developers on the Cosmos SDK briefly surpassed that of Ethereum and currently ranks second. Recently, Celestia, built on the Cosmos SDK, has also attracted attention, with the Celestia+Cosmos model being regarded as the ultimate form of application chains.

The outstanding performance of the Cosmos ecosystem projects has regained market attention. Many users have high expectations for the implementation of the Cosmos 2.0 plan, with even voices saying "Cosmos Summer is coming." Recently, during the rebound, Cosmos ecosystem-related tokens such as Celestia, Injective, and Osmosis have increased by over 20% in the past week, with INJ rising over 110% in a month. These trends indicate that Cosmos is gradually gaining market recognition, laying a foundation for future development.

02. Future Planning of Cosmos Technology: Supporting the Liquidity Explosion

When exploring the latest developments in the Cosmos ecosystem, it is essential to understand its future technological plans. Continuous innovation is crucial for maintaining ecological growth and providing unprecedented Liquidity for applications. In September 2023, the Interchain Foundation, which promotes the development of Cosmos, released the 2024 development plan, outlining the future technological roadmap.

CometBFT: The Cornerstone of Cross-Chain Scalability

CometBFT is an innovative consensus algorithm and the core of Interchain scalability. By ensuring that validators reach consensus on block generation, CometBFT keeps the ecosystem secure, decentralized, and intact. The foundation plans to expand the reach of CometBFT to empower the development of sovereign interoperable applications. It has currently been upgraded to v0.38, with plans to release v0.39 by the end of the year, featuring improvements in efficiency, a comprehensive data API, and an enhanced indexing system.

Cosmos SDK: Modularization and New Features

The Cosmos SDK is a toolkit for developing blockchain or Rollup applications, adopted by several new projects. Future development will focus on modularity and introducing new features, enabling developers to create more complex, modular applications and fostering a broader and more powerful ecosystem.

CosmJS: Improve efficiency and user experience

CosmJS helps developers integrate JavaScript clients with the CosmosSDK blockchain. The foundation plans to enhance CosmJS with a new encoder, improving efficiency, reducing code bloat, and providing a more streamlined professional development experience. This will enable developers to create more elegant, user-friendly applications, enhancing the appeal of the Cosmos ecosystem.

CosmWasm: Achieving Decentralized Permissionless Deployment

CosmWasm is a smart contract framework based on the Cosmos SDK, allowing for permissionless deployment of decentralized applications and separating product development cycles from blockchain development, thereby reducing validator upgrade costs. In the future, it will be further optimized to make it easier for developers to create and deploy various applications, increasing blockchain utilization. It focuses on IBC adoption and account-based smart contracts.

IBC Protocol: Enhanced Interoperability and Scalability

IBC enables secure, decentralized, and permissionless data transfer between blockchains. The 2024 update plan focuses on scalability and usability. By enhancing the scalability and interoperability of IBC, Cosmos will increase ecological capacity, achieving seamless interaction between blockchains, applications, and smart contracts.

03. Latest Changes in the Cosmos Ecosystem: Accelerated Development and Innovation

In recent months, the Cosmos ecosystem has once again demonstrated immense potential. As an open-source multi-branch blockchain network, Cosmos boasts advantages such as smart contracts, scalability, security, and cross-chain interoperability, and its application chain theory is continuously evolving. Here are some noteworthy changes in the Cosmos ecosystem recently:

Liquidity Staking Module: Liquidity Staking Module (LSM) was implemented on June 14, 2023, on Cosmos Hub, providing a modular solution for liquidity staking. Users can now directly liquidity stake their staked ATOM without waiting for the unbonding period.

Tokenomics Upgrade: The ATOM economic model shifts towards pursuing real returns. Neutron, which went live on May 10, is the first consumption chain to use "copy security", aiming to address the lack of practical value in ATOM 1.0, bringing new narratives and momentum.

Enhanced Interoperability: The launch of Evmos 2.0 in August further strengthens the interoperability advantages of Cosmos. Built on the IBC protocol, Evmos is expected to elevate the multi-chain ecosystem to new heights, achieving interoperability between the Ethereum and Cosmos ecosystems.

The Rise of Perpetual Contracts: dYdX v4 announces migration to Cosmos, which will bring more Liquidity and innovation to the ecosystem.

Native liquidity increase: USDT has been integrated into the Kava blockchain. In March, Noble collaborated with Circle to bring native USDC into Cosmos, which is expected to generate hundreds of millions of dollars in liquidity.

04. Overview of Popular Projects in the Cosmos Ecosystem

Initia

Initia is a modular Rollup network based on Cosmos, simplifying the process for developers to build scalable autonomous systems. It integrates L1, L2, and communication layers, enabling seamless messaging and bridging between different virtual machines, and is the first Cosmos IBC compatible MoveVM computing framework. Recently, it received investment from Binance Labs to support infrastructure development, product tool expansion, and the incubation of key application layer projects. It is currently in the testnet development phase, and once launched, it will enhance the liquidity of the Cosmos ecosystem.

Celestia

Celestia is a modular blockchain network based on Cosmos, providing pluggable consensus and data availability layers. Its data availability sampling feature allows nodes to validate only a portion of the block data, reducing hardware requirements and improving network scalability. Celestia collaborates with Tendermint and Cosmos Zones to provide data availability features and a unified level of security for the Cosmos ecosystem. The mainnet went live on October 31, and the token TIA is currently priced at 2.33 USD.

dYdXV4

dYdX is a leading L2 Dapp on Ethereum, with its V4 version scheduled to be released in December and migrate to Cosmos. This move aims to address Ethereum's scalability limitations and provide a more decentralized architecture for its rapidly growing user base. Cosmos SDK offers an ideal solution for dYdX, supporting the development of independent blockchain networks. After the migration, dYdX V4 will enhance transaction speed and eliminate centralization concerns. As a top DEX with a daily trading volume exceeding $3 billion, its migration will bring a large number of new users and Liquidity to Cosmos.

Neutron

Neutron is a smart contract infrastructure based on CosmWasm, simplifying the dApp deployment process. It combines the security and cross-chain capabilities of the Cosmos Hub, allowing DeFi applications to scale across multiple blockchains. According to the Interchain 2024 roadmap, Neutron will become the first consumer chain in Cosmos, hosting a DeFi ecosystem built around NTRN and ATOM. In May, it completed a $10 million funding round led by Binance Labs. The NTRN token was listed on Binance in October, currently priced at $0.290.