Both Polkadot and Cosmos are amazing projects that draw attention with their similar and unique features. They both empower developers to build on top of their platforms, but the greater goal of both is to introduce a new degree of interoperability to the blockchain ecosystem. Their profound focus is on providing an interface for multiple state machines to interact with one another.
Table of Contents
- Supply and key price drivers
- Blockchain Interoperability; The main slant
- Market Cap
- Mining process and Rewards
- All time high values
- Pros and Cons
- Investor Inclination
In this article, we’ll take a look at the differences between Polkadot and Cosmos. Polkadot is a next generation open-source blockchain protocol aiming to join different specialized blockchains into a single, coalesced network. This protocol will allow users to control a completely decentralized web. Polkadot supports both public, open, permissionless blockchains and private, permissioned blockchains for data transmission.
Polkadot builds on the promise of prior blockchain networks’ revolutions while also providing a slew of basic benefits as part of a larger vision for a web that gives citizens back power over internet monopolies.
Cosmos is a decentralized network of individualistic parallel blockchains intended for a decentralized future that addresses both scalability and interoperability challenges. Cosmos focuses on customizable and interoperable blockchains, each driven by BFT consensus algorithms such as the Tendermint consensus.
Rather than emphasizing on its own network, its vision is to develop an infrastructure of networks that can transmit data and tokens programmatically, without the need for a central hub.
Founded in 2016, Polkadot is the creation of Robert Habermeier, Peter Czaban and Dr. Gavin Wood, one among Ethereum’s co-founders and the creator of the Solidity smart contract language. Polkadot is a flagship project of the Web3 Foundation, a Swiss non-profit organisation dedicated to enabling a completely operational and user-friendly decentralised internet.
Polkadot will make it easier than ever as it’s built to connect private and consortium chains, public and permissionless networks, oracles, and future technologies that are yet to be created.
Polkadot is a genuine multi-chain application environment that supports cross-chain registries and computation. Polkadots vision is to build applications that get permissioned data from a private blockchain and use it on a public blockchain.
Cosmos was launched in 2014 by Jae Kwon and Ethan Buchman. Cosmos is a proof of stake (POS) platform that addresses the fundamental challenges of proof of work (POW) cryptocurrency networks as Cosmos solves several of the most difficult blockchain concerns, such as scalability, usability, and interoperability and lack of flexibility.
The Proof-of-Stake consensus protocol that underpins the Cosmos Hub and the Cosmos SDK is known as Tendermint BFT. Binance Chain, a product of one of the largest exchanges after Coinbase, Binance, was built on Tendermint BFT and Cosmos SDK.
Cosmos’ purpose was to make it straightforward for developers to build blockchains and to tear down barriers between them by allowing them to transact amongst each other. The ultimate vision is to create an Internet of Blockchains, a distributed network of blockchains that really can connect with one another.
Supply and key price drivers
The current circulating supply of Polkadot is 987,579,315 DOT whereas it has no max supply but had an initial max supply of 10 million in August 2020. The total supply of the DOT token 1,103,303,471.
The current circulating supply of Cosmos is 220,041,845 ATOM. It should be mentioned that the number of new ATOM that may be produced is now unrestricted. Cosmos, on the other hand, changes the quantity of tokens generated dependent on the number of ATOM staked. The total supply of the ATOM token is 277,826,447.
One of the main reasons why the price of these two cryptos increases is because of their project and released roadmap.
Blockchain Interoperability; The main slant
Polkadot quotes that “Polkadot enables cross-blockchain transfers of any type of data or asset, not just tokens. Connecting to Polkadot gives you the ability to interoperate with a wide variety of blockchains in the Polkadot network.” Cosmos quotes that “Cosmos is an ecosystem of blockchains that can scale and interoperate with each other. Before Cosmos, blockchains were siloed and unable to communicate with each other. They were hard to build and could only handle a small amount of transactions per second. Cosmos solves these problems with a new technical vision.” Let’s have a look at this in detail.
In Distributed ledgers, interoperability refers to the ability to see and access data across many distributed systems. The capacity of numerous blockchains to interact with one other without the use of middlemen should help to create truly decentralised systems. Interoperability is one of the main aspects that both of them work on. Polkadot and Cosmos work largely on introducing interoperability to Blockchain. Connecting all of the blockchains together would be one of the quickest methods to expand the bitcoin network effect.
Although two blockchains might be close together and may have some basic interoperability (for example; BTC on Ethereum, Matic on Ethereum or AVAX on Ethereum), we cannot say that they are completely connected. This is a disadvantage on blockchain, if there were more connections between blockchains, they could become more useful.
For instance, how would it be if a payment could be triggered on the Avalanche blockchain by running a smart contract from the Ethereum blockchain. What if it was also possible to exchange value between two varying blockchains such as 1 BTC for 1 ETH. There is a compelling use case for an interoperability network such as the one offered by Cosmos and Polkadot in the long run. If any project has successfully achieved this on the whole, they would very soon become one of the greatest.
The governance aspect of these crypto is also a very important one. One of the main purposes that the DOT token serves is governance over the network along with bonding and staking. According to Polkadot “Polkadot has a sophisticated governance system where all stakeholders have a voice. Upgrades to the network are coordinated on-chain and enacted autonomously, ensuring that Polkadot’s development reflects the values of the community and avoids stagnation.”
Similar to Polkadot, Cosmos also has a governance token called ATOM. According to Cosmos “The Cosmos network is not only a Proof of Stake blockchain network but also one that utilizes on-chain governance. Staking ATOM gives rights to participate in the open governance process, which governs the evolution of the network.”
Consensus is an approach for reaching a shared state accord. All nodes in the network must agree and reach consensus in order for the blockchain’s state to continue to grow and progress.
Cosmos is powered by Byzantine Fault-Tolerance (BFT) consensus algorithms like the Tendermint consensus. It is, in fact, a round-robin protocol that provides instant finality. Tendermint BFT is a system that combines a blockchain’s networking and consensus layers into a modular foundation, allowing developers to focus on application development rather than on the complicated underlying protocol.
There are two consensus protocols that Polkadot uses, GRANDPA (GHOST-based Recursive ANcestor Deriving Prefix Agreement) and BABE (Blind Assignment for Blockchain Extension). When Polkadot’s wiki was written down, it said that – BABE and GRANDPA, together are called “Fast Forward”. BABE (Blind Assignment for Blockchain Extension) uses VRF (Verifiable Random Function) to set openings to validators and an alternative plan that may be used in an emergency; round-robin pattern to guarantee that each slot has an author. GRANDPA (GHOST-based Recursive Ancestor Deriving Prefix Agreement) rather than single blocks, votes on chains.
Scalability is a major component of blockchains as well as one that solves the blockchain trilema. It refers to the ability of the blockchain to proliferate the TPS (transactions per second) in a blockchain network and uplift the optimization of the blockchain.
Polkadot is powerful enough in terms of scalability. Polkadot was designed in a way where scalability is enhanced literally “by keeping data on the edges of the system.” That’s because messages don’t move through the Relay Chain.
Polkadot scales through the use of parachains. Parachains are the name given to the parallelized chains that participate in the Polkadot network. They are specialized blockchains that connect to Polkadot. These have specialized characteristics for their uses and also the ability to control their own governance.
Polkadot believes that by using Parachains they will be able to scale up to 1 million Transactions Per Second (TPS) which would even enable Polkadot to handle most of the blockchain transactions in the world. Though it should be noted that these claims are theoretical; they have not been proven under real-world conditions yet.
Cosmos is anchored by two types of scalability. They are Vertical Scalability and Horizontal Scalability. Vertical Scalability basically just means to encompass the methods for scaling the blockchain itself. On the other hand, Horizontal Scalability is fairly complex. It surpasses the limits of Vertical Scalability. In Vertical Scalability, at one point, the transaction throughput of a single chain inevitably hits a wall it cannot surpass. To go past, the solution is indeed to move to multi-chain architectures.
Cosmos expands “Modular, secure, and fully customizable – Cosmos SDK makes it easy to build complex blockchains on top of Tendermint”. What it is, is that, using Cosmos, you can also create your own blockchains within the Cosmos ecosystem in a very easy way by just using plug and play tools. This can be done by using the Cosmos SDK. These pre-built modules are a huge advantage since they speed up the blockchain development process while also making it interoperable and scalable. Another advantage is that due to its experience, SDK provides code that is tested and secure so that the chance of being a vulnerability is much lower than others. Developers can quickly launch a new network by utilizing all these new features. They can also connect their blockchain via IBC to the Cosmos Network.
Now, let’s have a quick glance at the highlights of the market caps for these two cryptos at the time of writing:
Polkadot’s market cap peaked this year when it touched over $45,000,000,000 with each coin valued at $49.69 on May 15th. That month, the DOT token became the ninth largest coin in terms of market cap.
On May 7th, nearly two weeks before the meltdown, Cosmos’ market cap brushed past at $6.3B, with each coin worth $32.14. That month, the Atom token climbed four spots to become the 31st most valuable cryptocurrency in terms of market capitalization, up from its previous week’s position.
Mining process and Rewards
Polkadot operates under the NPoS (Nominated Proof-of-Stake) consensus model. DOT holders can become nominators and nominate up to 16 validators. If the validator that you chose gets selected, then your DOT holdings will be locked (staked) for 28 days. Then, when your holdings are unlocked, you can receive a reward from the validator that you nominated. The validator can even take 100% commission and give you no reward, leading to quite a problem. Also, only 128 nominators can earn rewards. If there are more than that, the 128 nominators with the most DOT locked only earn rewards, leaving nothing for the rest.
The reward that the validator earns is 100 times the fraction of the total stake in a validation pool. For example, in a validator pool, Validator 1 stakes 100 DOT, Validator 2 stakes 200 DOT and Validator 3 stakes 300 DOT, then the reward earnt by Validator 3 is (300 (tokens that he/she staked) / 600 (total stake)) * 100, which is equal to 50 DOT.
Cosmos, similar to Polkadot, works on the Proof of Stake consensus algorithm. Rather than solving complex computational puzzles, to gain validation power in PoS, the individual must lock some of their own coins through staking.
The delegator’s mining capacity is equal to how much of the coins he has staked, e.g. if a miner has 10% of the coins, then he will be able to mine 10% of the transaction. In case of the validator;s misbehavior, the coins that he has staked will be penalized, ensuring better security in Cosmos.
This algorithm is far greener than the traditional PoW (Proof of Work) algorithm and prevents validator misbehaviour. Cosmos reduces the energy consumption and introduces a new era in the blockchain network.
If we stake coins in Cosmos, we receive an 8.918% reward and the miner gets roughly 10% commission.
All time high values
Let’s have a look at the all time high values per year of Polkadot first:
- 2020 High – $9.292
- 2021 High (till now) – $49.6
Now, let’s take a look at the all time high values per year of Cosmos:
- 2020 High – $8.52
- 2021 High (till now) – $ 32.1
Pros and Cons
- Flexible and easily adaptable blockchain network
- Enables blockchain interoperability
- Multiple launching projects
- Faces interminable rivalry with other blockchains providing similar features
- A restricted number of 1000 validators is only permitted
- Every project is competiting for developers in a crowded space
- Provides a customizable platform
- Designed to be quick and scalable
- Trusted by large projects
- Staked ATOM must be locked for at least 3 weeks
- Danger of losing coins locked in staking in case of validator’s activities
- High competition from competitors
Investors are finding the DOT cryptocurrency so intriguing that institutions are beginning to develop DOT investment solutions.
Coinfund is one of the firms that has invested in Polkadot. This company has also made significant investments in a number of other DeFi projects.
“We’re seeing talent migrate onto Polkadot that was going to build on Ethereum. I believe it will be one of the winners in the next five years, and it will then continue for perhaps 100 years.” Keld van Schreven, managing director at investment firm KR1, recently said.
Osprey Polkadot Trust also arrives as institutional interest in Altcoins grows swiftly. According to Bloomberg data seen by CoinDesk, Goldman Sachs, ICAP, JPMorgan, and UBS have purchased the first ETP that provides customers with exposure to Polkadot’s DOT cryptocurrency.
To end with, let’s have a look at what Denko Mancheski has to say:
“Yes. Definitely. I believe Polkadot is in a prime position to take over the altcoin space currently occupied by Ethereum,” says Denko Mancheski, CEO & Co-Founder of Reef Finance.
Take a look at what some of the world’s most well-known investors have to say about Cosmos:
Chief executive of KR1 George McDonaugh said he believes Cosmos “is going to yield healthy cash flows to the business going forward to support operations and keep our cash balance strong”.
Andre Cronj, a popular coder also best known for creating Yearn Finance, described the Cosmos project as “Fantastic”. The team of Cosmos also dubbed the project as “Internet of Blockchain”.
Back on April 18, FXStreet said a “decisive close” above $22.62 would forecast a rally that would push ATOM to $41.66.
Both these cryptos are destined to be great.
Disclaimer: Digital Wallets News does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.