Cosmo or Layer 3, can only choose one or the other?

Kyle Liu, Investment Manager, Bing Ventures

The competition between Cosmos and Layer 3 is focused on balancing flexibility and performance. Cosmos achieves a high degree of flexibility and interoperability through the Hub-and-Zone model, while Layer 3 focuses on improving scalability. However, flexibility may sacrifice some performance, and an over-performance focus may limit the flexibility and malleability of the ecosystem. Our research will try to explore a better balance between the two.

Selection of Decentralization Applications

Cosmos’ strength lies in its cross-chain interaction. Cosmos provides a scalable architecture that allows developers to build and deploy custom Blockchain applications while enabling interoperability with other Blockchains. This provides more flexibility for solutions for specific needs and helps build a multi-chain ecosystem.

In contrast, the competitiveness of Layer 3 (based on Ethereum) lies in its mature ecosystem and wide range of application scenarios. As the earliest smart contract platform, Ethereum already has a large number of developers and users, and there are rich development tools available. This makes it easier to build DApps on Ethereum to gain user adoption and ecological traffic.

However, the success of a DApp does not depend solely on the underlying technology, but also on factors such as user acceptance, security, and real-world application viability. From the perspective of application layer ecological construction and DApp development, the two technical routes of Cosmos and Layer3 have their own advantages and competitiveness. They are not one or the other, but depend on specific needs and goals.

Source: cosmos.network

Greater risk and innovation

From a future perspective, both Cosmos and Layer3, as key explorations in the field of Blockchain technology, will play an important role in future development. However, they have some differences in the customizability, application scalability, and security assumptions of the solution, which will affect the choice of application developers.

First, Cosmos, as a solution focused on ecosystem interoperability, will facilitate the connection of different Blockchain networks and the flow of assets. This will open up more possibilities for cross-industry collaboration and innovation, and drive the development of the Blockchain industry as a whole. However, Cosmos has relatively little functional customization and may be limited in the depth of expansion in specific areas.

In contrast, Layer 3 stands out for its highly customizable solutions and custom scalability. This allows developers to create execution environments and applications based on specific needs, providing greater flexibility and innovation for application development in specific industries or fields. However, the applicability of Layer 3 may be limited, especially in terms of cross-chain interaction.

We’ve also noticed that the highly customizable nature of Layer 3 can lead developers to be distracted and pursue personalized solutions, limiting the unified collaboration of the ecosystem. If each developer pursues their own unique solution, it can lead to ecosystem fragmentation and drop interoperability between different applications, and even high-frequency inter-chain interactions can increase network congestion and security risks, meaning that frequent inter-chain interactions can make the entire system complex and vulnerable to malicious behavior.

The path ahead depends on the first principles of app developers, i.e., which solution they rely on more for greater innovation. Before making the best conclusions, it is necessary to consider a number of factors such as industry needs, technological developments, and market trends. In this ever-evolving field, application developers need to make informed choices based on their needs and goals to drive innovation and application of Blockchain technology.

Source: LUOZHU

Future Competitive Landscape

Cosmos and Ethereum are both leaders in the Blockchain space, but they compete differently and have different goals. Cosmos’ goal is to build a multi-chain ecosystem that enables cross-chain interaction through the IBC protocol, allowing different Blockchains to communicate and exchange value with each other. Ethereum, on the other hand, is primarily focused on building a distributed application platform to support more Smart Contract and dApp development.

Both are geared towards different application scenarios. Cosmos is more suitable for use cases that require cross-chain interoperativity, while Ethereum is more suitable for use cases that support Smart Contract. Although both Cosmos Appchain and Ethereum Layer 3 are currently competitive in their respective ecosystems, the author believes that a more unified integration solution may emerge in the future. This solution may be based on further development of Cross Chain Technology and interoperability, capable of integrating multiple Blockchain networks to provide more efficient and flexible application development and interactive experiences.

Since the nature of Blockchain is distributed and open, there may be more Cross-Chain Interaction, cross-ecosystem applications and asset flows in the future to achieve better interconnection and user experience. In our view, the following are the core areas where the two communities will compete in the future:

1. Future Cross-Chain Interaction: While both Cosmos and Layer 3 are committed to solving the scalability problem of Blockchain, more robust and flexible Cross-Chain Interaction solutions may emerge in the future. These solutions will be able to seamlessly connect multiple Blockchain networks and enable the free flow of assets and data, thereby breaking down the barriers of the current ecosystem and facilitating broader application innovation and user experience.
2. Blockchain governance challenges: Both Cosmos and Layer 3 projects face the challenge of how to govern effectively. As these projects grow and are adopted, issues such as decision-making power, consensus mechanisms, and community governance will become more important and complex. Innovative governance models and mechanisms may be needed in the future to ensure the sustainable development of projects and synergies of ecosystems.
3. Balance between privacy and transparency: Blockchain technology has outstanding advantages in providing transparency, but the protection of personal privacy remains an ongoing challenge. In the future, Cosmos and Layer 3 may face increasing demands for privacy protection and Anonymity, while maintaining sufficient transparency to meet regulatory and compliance requirements. How to find a balance between privacy and transparency will be a key question.
4. Long-term storage and sustainability: As Blockchain data continues to grow, long-term storage and sustainability become an important topic. Cosmos and Layer 3 projects may need to explore more efficient data storage and management solutions to ensure data security, accessibility, and sustainability. This may involve the application of technologies such as distributed storage.

Source: KYLE SAMANI

Summary and outlook

Cosmos excels at solving public chain scaling and interoperability issues. Its unique multi-chain interconnection provides the ability to seamlessly connect data transmission and value exchange between different Blockchain networks. This ability to integrate the ecosystem helps promote cross-chain interaction and data exchange, thereby providing more room for innovation for application developers. Its open ecosystem and multi-chain interconnection make it possible to reap rewards in areas such as Decentralized Finance, identity verification, gaming, and the Internet of Things. The potential return on investing in a Cosmos project is closely related to the level of development and adoption of the ecosystem as a whole.

• In terms of elasticity and scalability, due to Cosmos’ modular architecture and scale-out capabilities, DApps can add or remove different modules as needed to meet the specific needs of the application. This flexibility allows DApps to better adapt to changes in the market and user needs.
• In terms of time and technical difficulty, it is true that the development of Layer 3 and even Sharding needs to solve many technical details and takes time to study and implement. The challenges of designing Layer 3 mechanisms, provers, data availability, and sequencer decentralization need to be carefully thought out and solved. In addition, designing an easy-to-use Layer 3 SDK is also an important consideration.
• In terms of autonomy and Autonomy, Cosmos provides a higher degree of autonomy and Autonomy, and DApp teams can formulate their own Consensus Algorithm and governance mechanisms according to their own needs and rules. In contrast, Layer 3 based on Rollup may need to rely on the underlying Layer 1 Consensus Algorithm and governance rules, limiting the autonomy of the DApp team.

Source: Trustless Labs

In contrast, as a solution that focuses on customizability and application-specific development, Layer3 provides customization capabilities and purpose-specific application scalability, enabling developers to carry out deeper innovation and application development in specific fields. This protocol customization capability brings great potential for innovation in the development of specific industries and use cases. In particular, the Rollup technology preserves the availability of transaction data on-chain, while ensuring the security of transactions through mechanisms such as ZK Rollups or Optimistic Rollups. Further evolution and improvement of these technologies may lead to higher performance and stronger data availability, providing a better user experience and functionality for DApps. Cosmos, on the other hand, may face data consistency challenges in the process of cross-chain interaction.

The author believes that the development of Cosmos and Layer 3 will further promote the evolution of the cross-chain interaction governance model. Traditionally, each blockchain network has been relatively independent, and Cross Chain Technology enables seamless connectivity and asset flow between different Blockchains. However, cross-chain interaction governance faces the challenge of how to coordinate and manage multiple application chains and DApps, involving consensus mechanisms, decision-making, and resource allocation. Future research will explore innovative Cross-Chain Interaction governance models to facilitate the development and collaboration of Cross-Chain Interaction ecosystems.

In general, the author firmly believes that the future belongs to the era of “multi-chain interconnection” rather than “multi-chain co-layer”. If you are a long-term investor looking to invest in a more ecologically scalable developer system, Cosmos Appchain is a more practical option. While Layer 3 has its own advantages, its ecosystem also faces serious challenges, such as congestion, high fees, and scalability. In contrast, Cosmos’ native architecture design is more flexible and scalable, so it has more potential for future growth.