Polkadot (DOT) vs. Cosmos (ATOM) | Who's Better? | Notum

Intro

It's always interesting and fruitful to compare two and more things to find out more about each individually exploring details and nuances.  

DOT and ATOM are quite famous but why and what for? How are they differ and similar? That’s what we’re going to find out here.

What Is Polkadot (DOT)?

Polkadot was introduced as Ethereum's improved version launched in 2020 by Ethereum (ETH) co-founder Gavin Wood. Polkadot is guided by the Web3 Foundation (W3F) and developed by Parity Technologies.

Polkadot works on deeper levels than a blockchain like Ethereum. Think of it as providing a foundation on which other crypto projects can build. It positions itself as a Layer 0 blockchain, while Ethereum's other blockchains, like Solana (SOL) and Cardano (ADA), are called Layer 1 blockchains.  

Wood believed that crypto needed a new system allowing adequate interactions between different blockchains. The main issue was with Ethereum's ability to grow and scale, so Wood decided to solve this problem by creating a new blockchain-based on a proof-of-stake (PoS) validation system.

Proof-of-stake validation was proposed to oppose such blockchains as Bitcoin (BTC) or Litecoin (LTC). In proof of work (PoW), blockchain miners do cryptographic puzzles to add the following block to the chain and get mining rewards. Proof of stake allows validators to use tokens staked as collateral to define the next block in the chain.

How Does Polkadot Work?

Once Polkadot was called a “heterogeneous multi chain system”. Why?

The Polkadot network allows for the creation of three types of blockchains. 

• The Relay Chain – That’s the main Polkadot blockchain, as this network is where transactions are finalized. To achieve a greater speed, the relay chain separates the addition of new transactions from the act of validating those transactions. This allows Polkadot to make over 1,000 transactions per second.
• Parachains – These are custom blockchains that use computing resources of the relay chain’s to confirm that transactions are correct. 
• Bridges – Polkadot network interacts with other blockchains thanks to bridges. 

A layer 0 blockchain is a foundational layer beneath layer 1 blockchains. Polkadot gives a built-in infrastructure which allows programmers to build their own blockchains with cross-chain interoperability.

Layer 1 blockchains empower developers to roll out decentralized applications (DApps), non-fungible tokens (NFTs) and more.

The pain point is that it’s rather problematic for programmers to build a Layer 1 blockchain. They have to build the base layer before they can even start stimulating people to run their Layer 1 program on a computer.

Some say Polkadot already has the base layer built. This helps programmers to have a better focus on optimizing their own projects.

Polkadot looks like the “internet of blockchains.” because it allows any public or private blockchain to communicate with each other.

DOT Token

DOT, Polkadot’s native token, aims to bring proof-of-stake validation, cross-chain interactions, and base-layer programming together. 

DOT can be staked or used as collateral by validators to approve the next block in Polkadot’s blockchain. By doing this, DOT functions as Polkadot’s proof-of-stake (PoS) mechanism.

A separate blockchain built on Polkadot is considered to be a parallel chain or para chain within the system. Of course, when your world is with data, security is what you’re seeking. Polkadot provides this security with an underlying chain called the relay chain.

The Polkadot’s relay chain is the main chain and is supposed to differentiate it from Cosmos (ATOM). Perréard, the Polkadot’s head of strategy, mentioned that “the relay chain ensures security.” He claims the parachains can “leverage off the architecture and foundation of Polkadot.” So, since that, security is not an issue.

The DOT token is also used for governance and bonding. All DOT holders can vote on network governance, including upgrades and network fees.

Why Could Polkadot Be Interesting?

It would be another scalability struggling platform but it has some features to take into consideration. Here they are:

1. Heterogeneity
2. Scalability
3. Interoperability
4. Shared security
5. On-chain governance
6. Forkless upgrades
7. Extra key security

What Is Cosmos (ATOM)?

Cosmos is dubbed the “internet of blockchains” that aims to create a network to bridge the gaps for cross-chain to exchange data without central supervision and streamline transactions. The Cosmos Hub serves as a central network to connect the different chains into a dedicated zone to interact with one another. The ATOM token acts as the governance token of Cosmos Hub. 

In 2014, computer scientist Jae Kwon developed Tendermint, an open-source blockchain launching software. The Cosmos network was then launched through the Interchain Foundation (ICF) support with the core of the Tendermint consensus algorithm. Three years later, ICF held an ICO of ATOM tokens and successfully raised over $17 million. The fundings collected from Tendermint Inc through Series A fundings further support the development of Cosmos. Subsequently, co-founder Ethan Buchman and Jae Kwon authored and released a white paper on Cosmos in 2019, and officially launched Cosmos on the mainnet in March of the same year.

To maintain the interoperability between all zones within the Cosmos network, the Cosmos Hub uses Proof-of-Stake (PoS) mechanism. This communication of disparate blockchains known as the Inter-Blockchain Communication (IBC) protocol helps expand the interoperability non-limited to blockchains that are Temdermint-based. For example, any PoS cryptocurrencies like Cardano (ADA) can connect to the IBC.

Another of Cosmos’s goals is to make it easier for users to create and launch DApps in the network by solving sovereignty issues in other networks (e.g. Ethereum).

How Does Cosmos Work?

If talking about Cosmos, it’s important to mention that there are three main layers:

• Application layer: it’s a top layer of blockchain software defining the state and state-transition function;
• Hubs and networking: the place for cross-chain communications between blockchains to facilitate the transactions;
• Consensus: to process an agreement of the network.

Once all of the layers are combined, developers can easily build applications. But it’s only achievable with outsourcing tools like the Tendermint Byzantine Fault Tolerance (BFT) engine, which is the Cosmos network’s backbone. BFT is a Proof-of-Stake governance mechanism that keeps the distributed network working with Cosmos Hub simultaneously.

The network reaches a consensus between all the blockchains in the Cosmos network connected through the IBC protocol thanks to using the Tendermint BFT algorithm. The separate blockchains communicate with the Ignite CLI (formerly Tendermint Core) using the Application Blockchain Interface (ABCI), allowing developers to build DApps in the respective networks using different programming languages. Because of this capability, users aren’t required to develop a DApp from scratch. Instead, they use existing codes to replicate the DApps. 

ABCI is mainly a bridge between the Ignite CLI and the Cosmos software development kit (SDK). The Cosmos SDK allows developers to build projects on the Cosmos network. These systems interoperate and are connected to the Cosmos Hub, which is the main component of the Cosmos network.

ATOM Token

ATOM is the native utility and governance token of Cosmos Hub. ATOMs holders can stake, validate blocks, vote on improvement proposals and pay for transaction fees. ATOMs are generated as rewards for network validators.

The current circulating supply for ATOM is 286,370,297, and there is no supply limit. This is because freshly minted ATOM tokens function as a reward for stakers. As such, the inflation rate adjusts depending on the number of coins staked and the number of stakers. For all intents and purposes, ATOM is an inflationary coin.

Why Could Cosmos Be Interesting?

Atom (ATOM) is the Cosmos platform’s cryptocurrency which provides communication, scaling, and interoperation between independent chains. As the Cosmos aims to combine multiple blockchains within a single platform and eliminate several key issues plaguing this technology from the outset:

1. Scalability
2. Interoperability
3. Usability
4. Sovereignty

The whole network is organized as a modular solution built for use with application-specific blockchains of multiple types. These chains can be developed more easily, having the opportunity to transfer value from one to another without affecting their mutual sovereignty.

On top of this, the Cosmos markets have a great variety of modular and adaptable tools to help developers who want to start working on the decentralization of the internet and the related financial infrastructure.

DOT vs. ATOM

Both the Cosmos and Polkadot protocols focus on creating interoperable networks of blockchains to enable scaling on the decentralized Web3. The Polkadot exchanges messages between parachains, and the Cosmos Hub transfers messages between zones.

Polkadot and Cosmos are considered to be Layer 0 networks by providing interoperability. Layer 0 networks enable Layer 1 blockchains, such as Ethereum and Bitcoin, to run on the same network, while Layer 2 protocols offer enhancements such as faster processing speeds and scalability. 

Those are similarities. Now it’s time to delve into differences.

Firstly, Polkadot offers united security across the whole network. Each Polkadot para chain is supported by the same pooled security as the Polkadot Relay Chain. Those blockchains connected to the Cosmos Hub do not have such security.

Secondly, Polkadot uses a so-called sharding model for its parachains; that’s why changes in one para chain affect all the others. Cosmos has a hub model where multiple hubs are connected to chains in zones. 

Thirdly, the Polkadot network transfers tokens and data between blockchains. The Cosmos is focused on transferring assets among blockchains.

Wrap Up

Interoperability is still an issue, and it’s necessary for maximizing the benefits and uniqueness of all blockchains. Considering all we’ve mentioned above, Polkadot and Cosmos might play a huge role in the future. It may not be a winner take all situation, but we can already see progress and adoption of these interoperability protocols by protocols.