Have Cosmos and Polkadot Been Replaced? The Future of ATOM and DOT
Cosmos and Polkadot were once the most-hyped blockchain interoperability solutions, worth hundreds of billions of dollars each and promising to be the backbone of an interconnected ecosystem of chains. However, this vision never came to life as intended, and they have now fallen to the wayside in exchange for appchains and rollups on different ecosystems. Let’s explore Cosmos and Polkadot’s visions, their new competition, and if there’s any hope for revival.
Though different in technical implementation, Cosmos and Polkadot were created to bring interoperability to sovereign blockchains. They created separate standards, consensus protocols, and communication layers that chains could build upon and offered the ability to plug into a wider ecosystem of similar chains. Cosmos’ ATOM was meant to act as the hub between different Cosmos SDK chains, providing a way to bridge tokens in exchange for a fee paid in ATOM. Similarly, Polkadot’s main chain was meant to power connections between various Parachains, which paid in DOT for one of one hundred available spots.
Though this vision garnered lots of hype from investors because of its potential to revolutionize the way we use blockchains, the reality is that neither solution ever achieved mainstream adoption. A primary obstacle was the requirement for chains to support the Cosmos and Polkadot-specific architectures, which made it difficult for existing layers like Ethereum to join the collectives seamlessly. Cosmos’ SDK, which allows developers to spin up their own chain easily, was adopted by many solutions like Binance’s BSC, Terra, Osmosis, Celestia, and others, but many chains opted not to join their InterBlockchain Communication (IBC) protocol. Those that did typically used other bridging solutions, mitigating the need for ATOM. While Polkadot did have new chains buy slots in their ecosystem, they never gained any real traction, and many projects, like Manta, have pivoted to other ecosystems.
Another issue with these solutions was that they require blockchains to bootstrap a validator network from scratch. Developers would need to create a blockchain and generate economic security through a robust network of validators staking millions of dollars of the chain’s native token.
Ethereum took the ideas of interoperability and brought them to the rollup — a layer 2 with its own execution environment but relies on Ethereum for security and validation. Through this approach, they could take the concept of appchains and remove the need for validator networks, instead allowing each chain to build on Etheruem’s extremely decentralized and massive network of validators staking tens of billions of dollars of ETH.
Other protocols have followed suit, with protocols like Dymension making RollApps — Cosmos SDK-based chains that derive security from DYM stakers and are interoperable with one another. RollApps are similar to L2s but use Dymension as the settlement layer instead of Ethereum. Saga is another similar project taking this idea and implementing it primarily for gaming and AI-based chains. It must be noted that neither of these solutions has seen many app chains go live, but both promise this will change soon. Though this may be true, Polkadot and Cosmos promised the same thing. Creating a compelling infrastructure layer is a challenging task, and it follows a power law distribution where the top ecosystems take the vast majority of the market share.
AltLayer is creating a similar ecosystem where L2s can deploy using various infrastructure, data availability, and virtual machine tooling to create a fully customized L2 experience. This provides great flexibility to rollups and paves the way for interoperability through Ethereum as a settlement layer or Polygon’s AggLayer. For most use cases, these solutions are better in almost every way over Cosmos.
ATOM’s primary use case today is as a token to hold for potential airdrops. Each time a chain releases using the Cosmos SDK — recently Dymension and Celestia — they typically airdrop to ATOM holders but fail to integrate ATOM into their ecosystem meaningfully. DOT has an even less strong value proposition, with no massive projects recently choosing it as their protocol of choice. Instead, the appchain vision investment appears to have shifted to the ecosystems that took the best of both approaches and improved upon their shortcomings. The main scenario where it would make more sense for a blockchain to build with Cosmos is if they want their own validator network, like Celestia. Even then, the value this adds to ATOM itself is questionable at best. Though Cosmos’ vision is strong, the ATOM tokenomics are not the same.
Though Cosmos and Polkadot paved the way for cross-chain interoperability, their shortcomings, primarily around standardized architectures, questionable tokenomics, and required sovereignty with validator networks, made practical implementation quite difficult. Numerous other projects took their ideas and improved them with new technologies and concepts, and are now the more likely options for mass adoption. That being said, it is very possible that new solutions like Dymension and Saga follow the same path as Cosmos and Polkadot — lots of promises but little results. Ethereum appears to be the only time-tested ecosystem with continual building and existing network effects powering a network of interconnected, independent chains relying on the ETH validator network for security.
By Lincoln Murr
