The Rise of Polkadot and Cosmos: The Interoperability Leaders

7 min readNov 5, 2022

Founded in 2008, Bitcoin was the first protocol that separated money from the control of governments and central banks. Now there was no need for middlemen like banks to process, validate transactions, and maintain the ledger. Following the success of Bitcoin in decentralizing money, Ethereum was founded by two visionary tech enthusiasts, Vitalik Buterin and Gavin Wood.

The idea was simple: if we can decentralize money, then we can decentralize everything from finance to land registry. This vision gave rise to the first programmable blockchain, Ethereum, which aims to be the world computer that will power the internet of the future. Ethereum supported smart contracts, which gave rise to decentralized finance and non-fungible tokens. But as the network’s users grew, Ethereum started facing scalability issues.

This gave rise to many other programmable chains like Solana, Fantom, and BSC that offered higher scalability at the cost of decentralization. Well, competition is always good for the industry as it encourages innovation. The existence of multiple blockchains is good, but all the blockchains today are like isolated islands, which are great in themselves but can’t communicate with other chains.

Blockchains are great databases, but they are dumb at communicating with each other and lack interoperability. To transfer assets across chains, we have to use bridges, which come with inherent custodian risks. According to Cointelegraph, more than $2.5 billion worth of assets have been lost in bridge hacks and exploits. To solve this serious problem and enable interoperability among different blockchains without using centralized bridges, developers around the world are building robust solutions.

Out of all the solutions, the two projects that have emerged as the industry leaders are Polkadot and Cosmos. Using their unique modular approaches, they allow blockchains to seamlessly interoperate with each other. In this article, we will learn about Polkadot and Cosmos point by point.

Architecture

Polkadot Network uses a “relay chain–parachain” model. The relay chain is the heart of the network, and its intended role is to secure and enable interoperability among the blockchains connected to it (known as “parachains”). Parachains are application-specific chains built using a substrate framework that communicate with the relay chain and other parachains in a trustless manner using the XCM (cross-consensus messaging) protocol.

Cosmos uses a “hub and zone” model. There can be multiple hubs with their own set of interconnected chains called “Zones.” Zones are independent application-specific (similar to parachain) chains that use the IBC protocol to communicate with each other seamlessly.

Security

Polkadot offers shared security. This means all the connected parachains leverage the multibillion-dollar security of the Polkadot Relay Chain, regardless of their market cap. A parachain with a $1 million market cap is as secure as the relay chain with a $7 billion market cap. Outsourcing security allows the blockchains to be highly scalable and decentralized, thus solving the blockchain trilemma.

The interconnected blockchains, called Zones in Cosmos, have to bootstrap their own validator set and are responsible for their own security. However, Cosmos is dedicatedly working on implementing shared security with its Interchain Security Protocol. But till then, Cosmos network security is only as strong as the weakest link.

Validator Selection

Polkadot uses nominated proof of stake, where the dot holders (or nominators) nominate the validators by backing them with their dot tokens to participate in the consensus and get rewarded. Out of 1000 validators, the top 297 are selected into the active set every 24 hours.

Cosmos uses a delegated proof of stake consensus mechanism. Validators backed by a higher amount of ATOM tokens have higher chances of being selected to verify transactions, produce blocks, and earn rewards.

Decentralization

Polkadot Relay chain currently has 297 validators, all of whom run their full node and are backed by 21,570 nominators. All the validators in the active set receive equal rewards, irrespective of their stakes. This encourages the dot holders to nominate the validator with lower stakes to maximize their rewards. As a result, the validators are equally staked and have nearly equal voting power. This makes the network highly decentralized, and it requires 82 validators to acquire one-third of network power. Thus, the Nakamoto coefficient of Polkadot is 82.

The Cosmos chain supports a maximum of 175 validators currently. Token holders delegate their tokens to the validators, and the validators get to produce blocks and earn rewards proportional to their stakes. To acquire one-third of the network power, it requires only seven validators. Thus, the Nakamoto coefficient of Cosmos is 7.

Trustless Communication

Polkadot is a shared-state machine system where all the parachains share state with the entire system. The state transition proofs of all parachains are finally verified by the relay chain validators. Thus, the shared state feature enables “trustless” communication among all the chains.

On the other hand, Cosmos chains don’t share state with the entire system. Consequently, the asset and message transfer is not trustless by nature and involves some trust assumptions.

Onboarding barrier

In Polkadot, projects have to win a parachain auction to obtain a parachain slot and leverage the security. However, there is another category called “parathreads,” which are technically the same as parachains but will only pay on a per-block basis. Learn more about parathreads.

There is no entry barrier in the case of Cosmos chains. The only requirement is that chains have to arrange for their own validator set and therefore the network’s security.

Limit on connected chains

The Polkadot relay chain has a capacity of 100 parachain slots. So does this mean only 100 blockchains could connect to Polkadot? The answer is no.

There are slots reserved for nested relay chains, which will have their own network of interconnected blockchains. And at least 10 parachain slots will be reserved for parathreads. A single parachain slot will be shared by 50 parathreads. Thus, there is practically no limit to the number of connected chains.

On Cosmos, there is no limit on the chains that can be connected to the Cosmos Hub. Likewise, there is no limit on the number of zones or hubs.

Project lifetime

Parachain slot could be leased for a maximum of 96 weeks. When a project loses its parachain slot, it will automatically downgrade to the parathread model, where it will still continue to benefit from the interoperability and security of Polkadot. However, it would now have to pay on a per-block basis, which might cause lower block production temporarily until it gathers funds to win the parachain slot again.

Cosmos, on the other hand, does not involve any similar scenario. The chains could continue to interoperate with other Cosmos chains indefinitely.

Consensus Algorithm

Polkadot uses a hybrid BABE and GRANDPA consensus algorithm. BABE (or Blind Assessment for Blockchain Extensions) is responsible for fresh block production. This uses a lottery system and randomly selects validators to produce blocks using the verifiable randomness function. GRANDPA (or Ghost-based Recursive Ancestor Deriving Prefix Agreement) is the finality gadget that uses a fork rule to avoid forking and to provide provable finality to the blocks or finalize a valid chain. Learn more about Polkadot’s consensus mechanism.

The Ignite (or Tendermint) consensus algorithm is a Byzantine fault-tolerant proof-of-stake (PoS) infrastructure that powers the Cosmos Hub and connected zones. Ignite helps in the functioning of several of the Cosmos’ most important components. These include the interoperability-focused Inter-Blockchain Communication (IBC) protocol and the Cosmos Software Development Kit (SDK).

Developer activity

This is an essential metric for finding out the amount of development happening on the network. Having a higher level of development activity is positive for the project’s growth and reputation as well.

Polkadot and Cosmos both have significantly higher developer activity compared to other projects. According to a report by Messari, the weekly commits in Polkadot and Cosmos are in 2nd and 3rd position respectively, with Polkadot having almost three times the dev activity of Cosmos. Undoubtedly, Polkadot is a developer powerhouse.

Conclusion

I hope the point-by-point comparison helped you understand Polkadot and Cosmos. Interoperability is going to be the next big thing in crypto, and developer activity gives a clear understanding of which projects will dominate the sector.

Considering the current state of interoperability projects, Polkadot’s shared security, trustless communication, and forkless upgrades make it stand out from its competitors. Additionally, there are some projects like Composable Finance that are trying to establish communication between Polkadot and Cosmos. This would create a massive network effect and push us one step closer to the success of web3.