🎙 Cosmos Co-Founder Ethan Buchman on Building an Internet of Sovereign Blockchains

Ethan Buchman is the co-founder of Cosmos, an ecosystem of interoperable blockchains which includes Terra, Osmosis and Crypto.org, and has the most value locked after Ethereum. It's a complex network with many moving parts, and it has exploded with activity in the past year. Cosmos was born out of Ethan’s research into a switch from proof of work to proof of stake, and his idea to enable each project and community to be able to build and secure their own blockchain. It was Ethan’s goal to bring about a community computer revolution, stemming from the personal computer revolution.

Using the Cosmos sovereignty model gives all blockchain users an incredible amount of freedom to build their platform as they see fit. But with that comes a trade-off, as they are more susceptible to attack than a larger chain such as Ethereum. Ethan says while each community should be able to decide on its security model instead of having a single system for all, the goal for the Cosmos Hub will be to provide this single source of security if needed, and it also provides tooling for chains to launch. We also talk about the role of the Atom token and where Ethan sees Cosmos in the long term.

Podcast audio and video was edited by Daniel Flynn and Gary Leuci. Transcript was edited by Samuel Haig.

🎙Listen to the interview in this week’s podcast episode here:

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👀 Only paid subscribers have access to the full interview transcript below.

Cami Russo: Welcome, Ethan, to The Defiant podcast. It's so great to have you here!

Ethan Buchman: Thanks a lot, Camilla. Nice to be here.

CR: Ethan Buchman is the co-founder of Cosmos, the CEO of Informal Systems, and president of the Interchain Foundation. Cosmos is an ecosystem of interoperable blockchains which includes Terra, Osmosis, and Crypto.com. Just the Terra chain on its own is the chain with the second-largest amount of value locked after Ethereum.

The Cosmos Hub is the ninth proof of stake chain with the most value staked. So [Ethan is] heading this pretty substantially large and increasingly important part of the blockchain industry. I'm very excited to hear how this all works, what's planned for this year, and understand this ecosystem better — because of how it's structured, I think that not many people really get what it's all about. I’m excited to drill down into all of that.

But before, I'd love to get to know you better. Can you tell me about your background and what led you to build Cosmos?

EB: Sure, definitely a lot to talk about. As far as my background goes, growing up I was always interested in the big questions of life — why we're here, how do we get here, what are we doing here, and what should we do about any of that? And so through investigating that, [I was] studying neuroscience, religion, history, and ultimately the origin of life, I became infatuated with the problem of sustainability, and what it means to be a sustainable organism in a universe that's always trying to tear you down. We have the second law of thermodynamics: entropy is always increasing, everything moves towards disorder — if you spend any time in this ecosystem you see how rapidly a disorder emerges. So I was really fascinated by that problem and how it is that living systems emerge and maintain themselves, how we might apply that understanding to our socioeconomic systems, our society, and our civilization. Is civilization even something that can be sustainable?

So that was the problem that was occupying a lot of my thought. In school, I figured I would go on to be a professor and just dwell on these problems and in this theoretical mindset forever. And then at some point, I met Vlad Zamfir, [who is] well-known in Ethereum these days. At the time, this was before we got into cryptocurrency, and we became good friends at university. He started teaching me about the financial system and how corrupt everything is, and opened my eyes to the world beyond professordom, or beyond the ivory tower… And I found that very depressing — to realize that this desire to stay in academia and just work on these problems at a theoretical level wasn't going to be sufficient, and I was going to have to do something about it more practically and address these really fundamental problems of the corrupt structure of the financial system and at the heart of it, really, the monetary system. So together, we discovered Bitcoin, and Ethereum, and started working on these things, and really committed ourselves to building these systems, probably for the rest of our lives, in order to improve the fundamental substructure of society. At least for me, a big motivation was that it felt like the phenomenon I was studying in the biophysical world of the origin of life, was reoccurring in the digital world with the birth of blockchains — digital organisms, or something like that.

So I became really fascinated with the problem of whether they could have a role in a more sustainable social economy. That's what led me into the rabbit hole, and then I fell down it and haven't been able to get back out.

CR: That's so interesting. You came into the blockchain world from a very unusual angle — living systems, biophysics, biology, and neuroscience. I'm wondering if you can dive deeper into that connection? From the outside, it's hard to see it.

EB: So the crux of the matter, and the climax of my research and in biophysics, was this understanding that sustainable systems are systems that internally within their structure are able to have efficient and accurate representations of their environment. In some sense, they have to internally represent the patterns of energy flow that drive them, and they need to do that because they need to be able to respond to changes in their environment. They need to be able to capture energy [and] store it up internally so that they can use it [and] have access to it to respond, adapt, reproduce, and so on.

There has been a lot of work over the decades coming to this understanding of the, let's say, information-theoretic nature of sustainability and the relationship between an organism's ability to model its environment, and its ability to sustain itself in that environment. And that's intuitive, that that might be obvious, but there has actually been really formal work on it. The way I've defined or described what's happening in human socioeconomic systems is that the structures and institutions we use to organize ourselves are ways to represent aspects of the environment, or aspects of the social structure in some internal organism…, internally in the institution.

So the history of humanity is, in some sense, this evolving progressive desire to represent more of the stakeholders of society, and including the planet within the state machine of our institutions, of our civilization, and I see blockchains as ways to really formalize, extend, and facilitate this problem of representing stakeholders more effectively in the state machine.

Historically, if you look at the patterns of political economy and who was able to vote, as a very basic example… to concretely talk about this, over time, we've extended the vote to more and more people. And so in a sense, the state machine of society — the rules and institutions of society — have become more representative of a greater body of stakeholders in at least our highest level democratic electoral institutions, which are still riddled with issues. But there are many more places and aspects in society where we do a really poor job of representing stakeholders, and especially of representing the environment and the ecology of the planet as a fundamental stakeholder. So I see blockchains as a tool, as technologies, for enabling us to better represent stakeholders in the state machines of civilization. And thereby, through that, hopefully, create a more sustainable civilizational form.

CR: That's so interesting. So how do you reconcile the environmental aspect? Having blockchains be a more representative system with Proof of Work?

EB: Well I think I've played a big role over the last seven or eight years of transitioning the whole blockchain ecosystem away from Proof of Work. I wrote my master's thesis in 2016, which was on Tendermint in the context of the history of consensus science and how we can use this extensive literature and advancements like Tendermint… to make blockchains more efficient and more environmentally friendly. And obviously, the entire blockchain industry has moved to Proof of Stake since, and Ethereum is planning to move. But I still have a soft spot for Bitcoin and for its Proof of Work. I happen to believe that there is room for at least one, but probably only one, big Proof of Work chain on the planet, and I'm happy for that to be Bitcoin.

I try to explain this, I have a blog post called ‘Orange Is The New Green’, where I try to write about this. But I think it's important to ground the monetary system, or the financial system, in thermodynamic processes, and Bitcoin is a way to do this. It's a very crude way to do this, so it's not sufficient for the sustainability story, but I actually think Bitcoin has more to offer global sustainability than it does take away from it.

People often hyper-focus on certain aspects of the environmental impact, on the carbon emissions, and stuff like that. And there's a lot of nuance here, and I don't know how much time we want to spend diving into all that, but at the end of the day, the way I put it is that the world has bigger problems right now than the energy consumption of Bitcoin. And I would rather face those problems with Bitcoin at our back than without it.

CR:That's super interesting. So do you see… Bitcoin as still being an important part of… the future of the blockchain ecosystem?

EB: Yeah, I could put it like this: I'm irresponsibly long Bitcoin, Ether, and ATOM, plus a smattering of other things. But I think both Bitcoin and Ethereum will have big roles to play in the long term for the blockchain ecosystem.

Bitcoin especially is something that is offering a very particular guarantee. Not only the thermodynamic guarantees it offers in terms of Proof of Work, [and] the inability to rewrite the history, but culturally, the social contract around Bitcoin is quite different from pretty much every other blockchain in the sense that it's very conservative. A lot of people think ‘oh, that means Bitcoin is dead or it can't evolve’. I don't think that's true, Bitcoin does still evolve. We saw the Segwit upgrade, we saw the Taproot upgrade. So Bitcoin does evolve, but just evolves a lot more slowly, and it's important to have at the foundation of sustainable systems — very slow-moving processes that you can depend on, that aren't going to change under you in ways that you can't expect.

So I do think that it's important for those reasons. But it's obviously also important that we have higher-level systems that can move much faster and can adapt more rapidly to changes in the environment, and that's what the technology we've been building is really all about.

CR: Awesome. Okay, so I'll definitely want to get deeper into your view of the blockchain ecosystem and the future, and multi-chain [versus] cross-chain — all of those discussions. But let's go back to starting Cosmos. So when you were in university you met Vlad Zamfir, you went down the rabbit hole, and you learned about Bitcoin and Ethereum. So at what point did you decide that you didn't want to build Ethereum and wanted to go and do something else, and what were you trying to accomplish?

EB: So Vlad and I were working together on Ethereum in 2014, and we were very optimistic about it. I ended up getting a job with a company that year. We were both working in the Open-Source community, and then I took a job with a company that was trying to bring Ethereum to enterprises, and I was excited to have my first job honestly. I think you could say I have a bit of a practical bend. I'm an idealist, but I also like to see how things can actually materialize in practice, and I thought that working with a company to try to bring this technology to real enterprises… would be really valuable.

Two things happened late that year. One was we realized that if we were going to bring this technology to enterprises, we weren't going to be able to use Proof of Work, and we would need to upgrade the consensus mechanism and use something a bit more interesting. Proof of Stake was already being discussed in the ecosystem, so there was an early group of people starting to work on it… I’ve been maintaining forks, or playing with forks of the Go Ethereum codebase since all the way back then, so we were forking Go Ethereum and trying to change out the consensus and all this stuff. So that was one.

And then the other… Vlad's written about this in his history of Casper series, there was a night where we stayed up all night talking about the future of blockchains and consensus, and convinced really convince ourselves that Proof of Stake was the future, and that worked through all of these problems, like the ‘nothing-at-stake’ attack, and long-range nothing-at-stake attacks, and all these… and all the kinds of things that are materializing today… like interoperability… We were working through all that and convincing ourselves that this was really the future.

Vlad set out to do it through Ethereum, the Ethereum community, and Ethereum technology. and I felt that — as much as I loved the Ethereum vision — that there were more practical on the ground things that needed to happen. And that led me to finding Jae Kwon and Tendermint, and starting to work with him to adapt old byzantine fault-tolerant solutions to the consensus problem, to this modern blockchain context, and to start using it in enterprises. And to start to build an ecosystem around many blockchains rather than just trying to build one Ethereum blockchain that could handle as much throughput and computation as possible. Jae and I really had a notion that there was going to be a proliferation of many blockchains, maybe as many as cities, or as companies, or websites. People now say there's going to be billions of them. We'll see.

And so that led us down the path towards Cosmos, and thinking about how we enable a world where anyone can any community really can build their own blockchain and figure out how to secure it with the right level of security that's appropriate for them — not being forced to inherit this huge global amount of security and still have all those chains be interoperable with one another. And that was really what took shape as the Cosmos vision, and what I've now started referring to as the ‘community computer revolution’. So just like we had this personal computer revolution which gave every individual a computing device, this Cosmos approach has been to bring about this community computer revolution where we want to give every community their own computing device that will transform their relationship to technology and what they can do. So that's at least at a high level [explanation], but we can go into more detail about any of the history if you'd like?

Defining Cosmos and Tendermint

CR: So we're introducing the concept of a personal computer versus the community computer. A very basic question, what's the difference between Cosmos and Tendermint?

EB: That's a great question. So Tendermint is a piece of the stack — so you could think of Tendermint as like the operating system, and Cosmos is everything built on top of it. That's one analogy.

More concretely, Tendermint is a consensus engine. It's a general-purpose Byzantine fault-tolerant state machine replication engine. That's how we describe it in purely technical terms. It takes care of the low-level components of running a blockchain. It takes care of the consensus algorithm, the peer-to-peer networking, the mempool, and all the stuff that's below the blockchain application. It takes care of all of that low-level networking and stuff.

Tendermint is really unique because it's pretty much the only general-purpose consensus engine that has actually been implemented… that allows you to build applications on top of Tendermint in any programming language — so you can build an app in any language you'd like, and Tendermint will allow you to take that app and transform it from an application that runs on one computer to an application that runs on many physical computers, and stays in consensus on all of that. So it's a general-purpose technology for running fault-tolerant applications.

Cosmos is an extension of all of this. It is the idea that there are going to be many Tendermint blockchains out there because once we built Tendermint we made it really easy for people to build and run their own blockchains. So therefore there are going to be many Tendermint blockchains, and so we need some concept or some project to represent this wider set of Tendermint blockchains. And more specifically, each Tendermint blockchain — [which] you could think of as like a single logical computer — we need a way for them to connect to each other, and that's the interoperability piece that is core to Cosmos.

So Tendermint was this first building block that was to enable arbitrary consensus systems, and any application to inherit Byzantine fault-tolerant consensus. Cosmos is this umbrella project to enable there to be many Tendermint blockchains and for them to connect to each other. So, to make an analogy to the internet and history of computing, you could say that Tendermint is like the emergence of Linux or the emergence of the personal computer. And Cosmos is about the internet and connecting all of those things together, and there being many computers, and many operating systems that then are able to connect to each other and talk to each other.

CR: Okay. So is Cosmos like a technical program that apps need to run? Or is it more of like a concept of ‘okay, Cosmos is like the group of all these Tendermint chains together’? Or is it like an actual program running somewhere?

EB: It's more like the latter. I'm guilty of maybe propagating some confusion because Cosmos means too many things I think.

The way it was described in the white paper is that Cosmos is a network of blockchains. So whereas you can use Tendermint to build a single blockchain, Cosmos is how you would build many blockchains, or connect those blockchains to each other. But really, the way I've described it is a philosophy of blockchain design — it's an approach to blockchains that includes a technology stack, which you could call the Cosmos stack.

So there's the Cosmos philosophy, which is how we go about building blockchains in the first place. There's the Cosmos technology stack, which are all the pieces we've developed that make it easy for you to actually build a blockchain. So there's Tendermint at the bottom of that, there's the Cosmos SDK, which allows you to actually build the cryptocurrency application. IBC is part of that technology stack, that’s the Inter Blockchain Communication Protocol. And then there is a third thing that Cosmos means, which is the Cosmos Hub — which is one particular blockchain within the wider Cosmos network. So there's a bit of a movement now to call maybe the Cosmos Hub ‘Cosmos’, and call the network of blockchains The Interchain, but that's marketing stuff that's being worked out. But it is important to differentiate those three meanings, let’s say, of Cosmos the philosophy, the technology stack, and the Cosmos Hub blockchain, because they are all different, even though they work really well together…

CR:Okay. So this is all very different from the way that we're used to thinking about blockchains, so it's great to break it down and clear up the meaning of these concepts.

Okay, to summarize, Tendermint is the operating system that helps run all the low-level stuff that makes the blockchain work. And then there's the Cosmos SDK, which is like the toolkit that helps developers build applications on top of this lower-level Tendermint stack right? And then on top of that, there's IBC, which connects all of these chains that are using Tendermint and Cosmos SDK, right?

EB: That's right. Except I would say, just as a caveat, IBC is technically not limited to the Cosmos SDK or to Tendermint so there are other ways to build on top of Tendermint. You don't have to use the Cosmos SDK and you can still use IBC if you do that. For instance, there is a blockchain that launched recently called Nomic, and they're built on Tendermint but they do not use the Cosmos SDK. So the Cosmos SDK is written in Go and is one way to build blockchains on Tendermint. Nomic built their application in Rust on top of Tendermint using their own system, but they're still using IBC and they'll be connecting to other blockchains. And there are others that are also building on top of Tendermint without using the Cosmos SDK. So you can use IBC independently of everything else.

CR: Okay, but you still need to be using Tendermint to be connected in the IBC Network, right?

EB: No, IBC is even more general than that. So that's where we started because we're very practically-oriented, and I think there's a lot of misunderstanding of what IBC really is and how it works. IBC is really about being a general-purpose interoperability protocol for different blockchains. And as long as your blockchain can fit within what we call the IBC-client interface, then you can use IBC. For instance, there is work right now to develop an IBC integration for Polkadot, and Polkadot is obviously not using Tendermint. There's work to implement IBC on Ethereum, Celo, and with other blockchains as well.

So the main IBC implementation uses Tendermint, but IBC is actually a multi-layer protocol specification, and at the bottom-most layer it allows you to plug and play different kinds of consensus algorithms. So long as you can build what we call a client, or a light client, for that consensus, and even if you can't build a client there are ways around it. So you could fit like a multi-sig into IBC, so you could have an IBC connection that's just controlled by a multi-sig or even a single-sig. I can make an application and connect that over IBC to another blockchain, and that blockchain doesn't have to know that I'm just one person. It's like in the internet of blockchains, nobody knows if you're a fridge. So IBC is very general-purpose and extremely powerful, and we're only just starting to actually unveil that power and have people realize what is possible with it.

CR: Okay, so somebody could create an IBC-compatible Ethereum client, and that would be able to connect to this network of chains. And so once chains are connected with IBC, what exactly can they do? What's the benefit of joining?

Inter Blockchain Communication

EB: So there is, let’s say, three layers in the IBC protocol stack. So the bottom layer is the client, which is where you determine what chain you're connecting to. The middle layer, we call transport authentication and ordering — that's just taking care of the low-level concerns of establishing a connection between two blockchains. And then there's the IBC application layer, where you can start to build actual applications that allow you to do cross-chain things.

So the simplest application is token transfer, and that's the one that's live today. That allows you to transfer a token from one chain to another. And really, what's happening in token transfer is you're locking up the coin on one side of the IBC connection and you're minting a voucher on the other side, and then that voucher can flow around, and when you send it back, the voucher gets burnt and the coin gets unlocked — it's standard bridge design, but it's all been standardized. So that's token transfer.

But you can build other protocols on top of other application-level protocols on top of IBC, and we have two: one that's launching very soon, and another that should be launching this year. The first one is called ‘inter-chain accounts’, and this basically lets you control one blockchain from an account on another blockchain. So, for instance, with an account on the Cosmos Hub, I can send transactions on some other IBC-connected blockchain without having to transfer over to that blockchain first. So this opens up all kinds of really interesting possibilities for people to build.

For instance, let's say liquid staking is one example. So you'll be able to build a blockchain that uses inter-chain accounts, and you can send ATOMs from the Cosmos Hub to that blockchain, and then, using inter-chain accounts, that chain can stake those ATOMs back onto the Cosmos Hub to a validator. But then it can do whatever it wants with a tokenized version of those staked ATOMs locally. So it really allows for a huge amount of flexibility in inter-chain communication and applications that I don't think people have quite grasped how powerful that's going to be. so there's a lot of amazing potential there.

And then the other big application that we're building right now over IBC is what we call ‘inter-chain security’, which is effectively a shared security model not too dissimilar from what Polkadot offers. That will allow the validator set on one blockchain to secure another blockchain by basically passing validator set updates over IBC.

So IBC’s a general-purpose protocol that you can build arbitrary application-level protocols on top of. That's a few of the ones we have now, but you can imagine other things down the road — other kinds of distributed systems, algorithms, or whatever. I think people are just starting to understand the level of flexibility of IBC and starting to look at what other kinds of protocols that could be built. For instance, I think the holy grail of protocols on top of IBC is to implement Tendermint itself on top of IBC, where that would basically allow you to have entire blockchains acting as validators for some other blockchains running Tendermint over IBC. So that's like a meta mind-exploding idea that might take us a couple of years to get to, but that's ultimately one of the holy grails I think.

CR: Okay. Simplifying the concept, what this allows you to do is that any blockchain connected to IBC, users on those blockchains will be able to use their tokens or cryptocurrencies in more flexible ways. Like maybe they can have an account on one chain, but use those tokens to stake them or swap them on another chain. Is this pretty seamless? Or is it like using Layer 2s where you sometimes need to wait for weeks to deposit, withdraw, and so on?

EB: No, it's completely seamless. I mean, we are so spoiled in the Cosmos ecosystem, it's a little bit ridiculous. The difference of experience between using IBC and Kepler — which is the main wallet — versus doing anything on Layer 2s or other bridges is just unbelievable.

The best way to experience this is to get some ATOMs, and then send them over to Osmosis — which is a decentralized exchange built using the Cosmos stack, but it is its own blockchain. So that's where a lot of the IBC activity is today, because everyone's sending coins over there to put them into liquidity provider pools, AMMs, and do trading, and so on. And it's completely seamless and has a really beautiful user experience. It's almost hard to believe how nice it is.

Application-specific blockchains

CR: Nice, very cool. So this is what's a bit confusing to me still — so you have applications that are their own blockchains, right? So Osmosis is a DEX, but it's also a blockchain?.

EB: Yeah, it's its own blockchain.

CR: So how does it work? What are the validators of Osmosis, where does its security come from?

EB: Yeah, so [Osmosis] has its own token, the OSMO token, and it has its own validator set who stake OSMO. OSMO has a price on the market, and that's what secures the chain ultimately. They actually rolled out a new feature which is pretty cool called Superfluid Staking — which allows you to actually stake your LP tokens. So If you're an LP on Osmosis, you have tokens locked up in the AMM, you can actually stake those and contribute to the security of the chain like that. So people are already starting to explore different ways to expand the functionality of staking and add more security to their chains.

But that's right, I mean it's like five years ago when we were talking about Cosmos, the internet of blockchains, there's going to be all these application-specific chains, they're going to bring their own security — everyone was like ‘no, that's not going to work, security is too expensive, you can't have every chain provide its own security’. But lo and behold, that's what's happening. There's a new business now which is called a Proof of Stake validator, and these are companies that specialize in operating independent Proof of Stake blockchains, and they acquire tokens one way or another, and they stake those tokens on that chain and thereby secure the operations of that chain. And it means they have to keep up with it, they have to follow governance proposals. They have to vote on stuff. They have to upgrade when it's time to upgrade, and so on. So yeah, each Cosmos chain has its own validator set.

And there's a lot of overlap. Of course, there are a lot of validators that are on… many of the chains. For instance, our company runs a validator, Cephalopod Equipment, and we're on six or seven different chains or so. You have to acquire the tokens and stake them and there's always the question about the token price, and therefore the security of the chain. But that's part of the model, for a community to have sovereignty over its application and its infrastructure requires this model, and it seems to be working.

CR: Okay. And taking Osmosis as an example, how much is staked there? How much value in OSMO tokens is securing that chain?

EB: I don't know offhand, probably a few hundred million or something.

CR: Does that mean that somebody can go with a few hundred million and attack Osmosis?

EB: Yeah, if someone had a few hundred million dollars worth of Osmosis and they staked that all themselves, and let's say if they're able to control two-thirds of the validator set, they can basically do whatever they want. So if they were able to control two-thirds of the validator set, they could steal everyone's money and do whatever.

And there are attacks over IBC that only require one-third of the validator set. So yeah, that's real, but acquiring that stake requires acquiring that many OSMO, so you'd have to go and buy them. This is true on every Proof of Stake chain, that’s not unique to Cosmos chains, there's just more of us. But it's been true on the Cosmos Hub, it'll be true on Ethereum, or on Polkadot, or any other chain where if you control a significant fraction of the supply and you're able to buy up all those tokens, then you'll control the chain.

But I think the other piece of this that people take somewhat for granted is that there is accountability — there are reputations that are at stake as well as money. And there is the historical nature of actually acquiring a stake, it's hard to acquire a massive stake without everyone noticing. And either the price gets driven up quite significantly as that happens, and so then you have to question why is someone spending all this money just to destroy it, and it's possible for the community to organize socially to recover.

There's an interesting thing happening right now around Juno, which is another Cosmos-based blockchain where they airdropped their token to ATOM holders — it is one of the fun values of holding ATOMs, everyone is airdropping tokens to you these days. And they set a limit, they called it the ‘whale-cap’ of how many Juno each address could receive, and it was discovered that there was an entity that had split up its tokens across many addresses. The limit was supposed to be like 50,000 JUNO, and this guy — it's a known entity in Japan, ended up with like 2.5M JUNO. And so the community is trying to figure out what to do about it because they have too much of the token, and they could influence governance or take over the network. I mean, I don't know what the total supply of JUNO is, I think it's much more than that, so I don't know if that's a real concern yet. But the community is trying to figure out what to do about that, and that's the shape of sovereignty — you need to solve these problems for yourself and secure yourself, and deal with these risks.

Blockchains as reorganizing the societal mode of production

CR: It's super interesting. I definitely see the advantage of each community/company/application/organization — whatever is using this infrastructure — to have sovereignty over how they want to shape their chain. And maybe they want to have specific monetary policy, or governance, or just make up their own architecture. But at the same time, having just a main chain providing security means that individual applications are just harder to attack, right? Because I'm just imagining a future where, say, most of the global economy is running on Cosmos — then you have like the biggest bank in the U.S. is on a Cosmos chain. Then some enemy of the U.S., or just like a big competitor of the bank [could spend] hundreds of millions or billions to crush somebody. It could be a bigger liability to be relying on your own security.

EB: Yeah, I mean, this is a deep political [and] economic conundrum. And I don't think there is a singular solution to this. The solution to this is good politics, citizenship, and governance, and it's not something you solve by just having a single global blockchain that solves all of the world's security problems — I think that's a utopian dream. As much as I respect the teams that are trying to build that, I don't believe we're building purely economic systems. There's no economic determinism here. Well, if only you acquire enough value in the token then you can completely usurp it.

I mean, first of all, I don't think Proof of Stake is the be-all-end-all of the story here. I think it's a stepping stone and there's a trajectory from Proof of Work, to Proof of Stake, maybe to things like Proof of Bandwidth, to what I ultimately call ‘Proof of Care’ or ‘Proof of Plant’ — which are ways to structure society around the behaviors that the community deems are valuable. And that's ultimately a political governance project.

People need to constitute their communities and the rules around them, and blockchains, right now, are experiments in doing this. We're experimenting, we’re experimenting, Proof of Stake as a stepping stone, but it's riddled with issues. There's all these oligopolies, and if we just took the current model and just applied it to the real world, we'd have all these problems, just like you're saying. The banks would still run the world, and then what have we achieved?

So personally, for me, it's not about building global, public, anonymous, fully secure blockchains to rule the world. It's about empowering each community to define their own rules for how they're going to be governed. And they can create capital controls or limits on who can enter, and they can have more advanced rules on who's allowed in the validator set and how that gets decided… And the other reality here is there is such a thing as the legal system, and I know crypto-anarchists and so on like to pretend that the legal system can all go away, or all we need from it is to enforce some vague notion of property rights — I don't believe that at all.

I think that legal systems are very real institutions that are very important institutions. They're going to need to evolve, and we're going to have to interface with them properly, and I don't think it's wrong to think about the reality of the legal system as you're designing systems because they exist. If we're always antithetical to the legal system and saying ‘no, we don't need that’ or ‘we're against that’, then we're not going to have a productive discourse with regulators, with the existing institutions of society. We have to build on what's already there, we can't just burn it all down and pretend we can start from scratch by building some global, fully secure blockchain system. So I think there's lessons in history from this too.

I mean, the utopian market fundamentalism idea that emerged in the nineteenth century did this as well, was like ‘oh, we don't need any of these institutions’ or ‘they're all wrong and we can obliterate all these local pockets of information and structure’, and dismissed the structuring aspects that the previous feudalist system was providing. Not to romanticize or justify the feudal order, but it was providing functions that the market system that replaced it neglected, and with that has potentially threatened our sustainability as a species. And there's been massive growth over the last, let’s say, 200 years, but there's also been growth in systemic risk.

So I think we're designing blockchains, as well, these are fundamentally political-economic systems, and we can't just be trying to build a global self-regulating, perfectly secure, final blockchain. It's really about enabling communities to take more control over their own lives and have more sovereignty and empower them to do what's right for them and still be able to interoperate with everyone else. And that's really the crux of the Cosmos vision, it's not to provide a one-size-fits-all solution. It's to continuously negotiate with the political-economic reality and provide tools that can help bring about a more sustainable future. Hopefully, that wasn't too abstract, that's the vision anyway.

CR: Okay, got it, that makes a lot of sense. It’s like maybe having this like one-size-fits-all [approach], it does provide a lot of security, but at the same time, it is maybe idealistic to think that this one solution will be the right one for every single use-case, political situation, and economic framework that comes down the line. So your view when you're doing things is ‘okay, let's give different communities the tools to build their own chains, rule sets, and frameworks, and maybe they'll be able to come up with solutions to the problems they face’.

EB: Exactly, but I would also say, just to round out the point, we did go sovereignty first. But that doesn't mean we're not also exploring ways to do things like shared security, and to merge sovereign chains, and so on. For instance, this inter-chain security feature that we're working on for the Cosmos Hub. We are positioning the Cosmos Hub to be a service provider for the rest of this ecosystem, it's not the one-chain-to-rule-them-all. But it is finding a particular niche within the emerging inter-chain, and one of the features we are developing and should be live this year

is inter-chain security where new chains can launch that do leverage the security of the Cosmos Hub. So we just took the approach of building bottom-up and starting with sovereignty first, putting that at the forefront, not prioritizing a particular token over our values, and really focusing on what is the most valuable thing to build at any time.

And first, it was Tendermint, and then the Cosmos SDK, and then IBC, and now we feel it's actually the time where the most valuable thing we could build is the Cosmos Hub, and a Cosmos Hub that services all these other chains and provides these other options that there's obviously demand for, like inter-chain security, so that chains can launch using the security of the Cosmos Hub. So it's not that we won't have that functionality, that Eth2 or Polkadot are providing. It's just that we took a different way to get there and wanted to lay more solid foundations that we could build on top of because now we can build things like inter-chain security on top of IBC so we already have a standard communications protocol. It's general-purpose enough that we can build a sharding solution on top of it right. So that was more of a bottom-up approach, I would say, than top-down.

The evolution of Cosmos Hub

CR: Interesting. And then if you can explain what Cosmos Hub is? As I understand it, it's one chain within the Cosmos ecosystem, right?

EB: Yeah, so it was really the first, technically another chain beat us by a month — the Iris network, which is our sister chain in China, we worked together early on in the project. But the Cosmos Hub launched in early 2019. It was the first to really put all the pieces together and demonstrate all this technology we've been working on. Tendermint, the Cosmos SDK, the staking system within the Cosmos SDK, and the governance system within it is quite advanced and put all that together. So for a while, it was really just like a prototype in the sense of ‘here's what you can do with all of these pieces, now go build your own chain’.

And in the last year, there's been a proliferation of Cosmos SDK or Tendermint-based chains that are using IBC. You can look at mapofzones.com, this amazing visualization of all the Cosmos blockchains and IBC, and all the traffic between them. It's like witnessing the birth of a new internet.

But the Cosmos Hub itself didn't really have its own development team historically because the developers were all focused on the core pieces — on building Tendermint, on building the SKD, on building IBC, etc., and it's only within the last year that we've properly put together a team around the Cosmos Hub. Initially, the vision for the Cosmos Hub was ‘well, let's prove that this all works and that we can actually deliver IBC, and… enable this sovereign interoperable reality with this proliferation of application chains’. And there's been a renewed impulse to set a new vision for the Cosmos Hub, Cosmos Hub 2.0 — now that we've proven that all this technology works and everyone's using it, what role can the Cosmos Hub play within that emerging inter-chain ecosystem, and this emerging internet of blockchains?

So we've only really finally put a team together to really focus on the Cosmos Hub in the last year and we outline three key functions that the Cosmos hub aims to play, and features that we're building on. These are the three pillars of the Cosmos Hub, you could say, and they are public goods, inter-chain services, and money.

So on the public goods front, we're building tools and functionality on the Cosmos Hub to make it really easy to launch organizations, raise funds to develop projects, and use it as like a shelling point for funding the public goods within the Cosmos ecosystem — core pieces [like] Tendermint, the SDK, IBC, IBC relayers, CosmWasm, things like that. There's all this technology that people are building that's very general-purpose, and so the Cosmos Hub is positioning itself as a way to raise funds across all the different chains to fund these common goods that everyone is benefiting from. So that's the public goods piece.

The inter-chain services piece, which is what we're focusing quite a bit on now, is providing services to this emerging inter-chain, all of these blockchains are coming online. Each one is focused on some application-specific reality, whether it's a DEX, or a lending platform, or a smart contract platform — whatever it might be. The Cosmos hub is focusing on what cross-chain functionality can [it] provide to make it easier and improve the UX for all of these other blockchains coming online and starting to connect to each other. So it will never be required to use the Cosmos Hub to access IBC and connect into the internet of blockchains, because that's not our values. We're permissionless, or sovereignty maximalist, but we want the Cosmos Hub to be able to provide services over and above what people already get out of the software that makes it easier for them to use IBC. So for instance, inter-chain routing is a big one, or chain naming registry — things that you need in this emerging inter-chain. The Cosmos hub is a commonplace for them, and actually maintaining the IBC infrastructure requires off-chain processes called IBC relayers that actually take care of relaying packets back and forth. They're very expensive to operate, so having all of these chains connecting point-to-point with each other is very expensive to maintain versus if they were all to just connect to the Cosmos Hub — it could be a lot cheaper and easier, and we could provide higher quality service and things like that. But they'd still always be able to fall over, so it wouldn't be like a central point of failure, it would just be a faster and more efficient way to do things. And then, of course, there's inter-chain security, which is another inter-chain service that will allow new chains to launch using the security of the Cosmos Hub. So these are all features under inter-chain services.

And then there's the monetary function, ATOM has this because the Cosmos Hub is somewhat like Bitcoin is a little bit more of a conservative chain — it's not trying to evolve too rapidly or adopt the most advanced experimental features right away. It's a little bit more conservative and stable, a place that we want institutional firms and larger, more conservative firms to be able to park assets and serve as a safe starting point to explore the rest of the more experimental ecosystem. And with that conservative ethos comes this monetary function that allows you to trust ATOMs as a little bit more stable potentially, that could be used as collateral in the rest of the ecosystem, and stuff like that. So there's that monetary function.

And even further within that, and this is the stuff that I'm really excited about, we'll probably be looking at using inter-chain security for this, to actually start building applications that connect with the real world, and that start to take care of monetary functions within the real world. In particular, enabling things like credit clearing, and mutual credit to emerge in more communities with more real-world businesses. Not necessarily having to know that they're using Cosmos or that there's anything really happening blockchain-wise behind the scenes, but to bring more services to them that allow them to reduce their liquidity costs and requirements, and help make small businesses more viable and sustainable. But that's a whole other topic to get into.

So in other words, Cosmos Hub 2.0’s vision story is coming together. Billy, who is the lead for the Cosmos Hub right now, he does these Twitter spaces I think every week, and Cryptocito has been hosting the show on the Cosmos hub. So there's lots of information out there you can start to tune in and hear about, but there isn't like a second white paper yet. But maybe it's time for that.

CR: Okay, so the vision going forward for a Cosmos Hub is for it to provide all the tooling and infrastructure needed for different chains to launch and use, just like the Cosmos ecosystem, in the best way?

EB: Yeah, that's right. So really, it's the chain that's trying to service all the other chains. While every chain is out trying to be the best at whatever it does, the Hub is trying to make it easier for all of them to be the best at what they do right, so it's in service of everyone else.

The role of ATOM within the Cosmos ecosystem

CR: What's the role of ATOM? Can you break down ATOM’s tokenomics?

EB: So ATOM is the staking token for the Cosmos Hub, so obviously it has a role in securing that main conservative chain that's providing all of these services. ATOM is also able to be used as a fee token throughout the Cosmos ecosystem. I think that other chains are starting to look at allowing people to pay fees in ATOM, and ATOM is being positioned as prime collateral within the ecosystem. Cosmos has really good integrations with ATOM, exchanges, and other service providers, and it's been around for a long time, so there's more trust in it, I guess. With this Cosmos Hub 2.0 vision, it will unlock all kinds of new features and demand for ATOM, and things you can do with it. For instance, liquid staking is coming, which will allow you to stake ATOMs but still use them, and they'll still be transferable and will open up more doors.

So it's a staking token. Like other staking tokens, it's used for fees on the Cosmos Hub. It can be used for fees on other chains, and building the monetary ecosystem around it will continue with Cosmos Hub 2.0. I know that there's a lot of talk about the tokenomics of ATOM and it's very inflationary — all that is up for change. I mean, the current parameters are just what was there at the beginning to bootstrap the thing, but I can certainly see a world where the tokenomics are radically changed where something like EIP-1559 is introduced so ATOMs start being burned as fees, or where the supply becomes capped at some point, or more goes into the community pool. Like I said, the constitution of a Cosmos Hub team is still a new thing, so it's still just starting to grow and… to focus. So it's amazing what we've been able to achieve, even without that team, just through diverse folks working on the core products, and now the core public goods. And now that this Cosmos Hub focus team is coming together, still in a decentralized fashion — Cosmos is known for being more entities than anyone can keep track of, but… a number of them are really focusing on building up the Cosmos Hub and use cases for ATOM, and the tokenomics of ATOM are all flowing out of that. So I expect we'll see a lot of updates and changes to the tokenomics over the next two years to really stabilize things and make it a really secure place to custody assets and launch into the rest of the ecosystem from.

CR: This is super interesting. A quick aside, this team working on Cosmos Hub, is that Informal systems?

EB: It's a bunch of companies. But yeah, Informal Systems is one, Interchain is one, the Peggy JV team, the Strange Love team — there's a bunch of companies working on it. So Cosmos is a pretty diverse group of organizations, and quite decentralized.

CR: And how would this decision to change tokenomics be made? What's governance like?

EB: So on-chain governance has been a key part of the Cosmos stack pretty much from the beginning. When we first shipped, there was an on-chain governance protocol. It's relatively simple, you just put up a proposal, there's a deposit required and the deposit can be crowdfunded, but once the threshold is hit, then the proposal becomes active, and then validators and delegators can vote.

So validators can vote, and they vote with the weight of all the stake delegated to them, but then individual delegates… can override the vote of their validator and vote independently. Then there's four voting options: yes, no, no with a veto, and abstain. And a quorum of stake is required for the vote to be valid — I think right now 40% of the stake has to actually show up and vote, and then if more than 50% of that votes ‘yes’, it passes, and if more than a third votes ‘no with veto’ then it fails. So that's built-in there, it's a little bit subtle, but it's basically because of the way the consensus works. If you control more than a third of the voting power, you can always stop votes from going through, you can censor transactions, and so on. So we recognize that directly in the governance system to say ‘okay, if you're really against something… they would have to coordinate and collude and all that. We made it explicit for them to be able to vote ‘no with veto’. And then there's abstain if you want to abstain.

So governance has been pretty active on the Hub and on other chains. I mean, Juno had like 95% turnout or something, it was pretty nuts. It was really crazy to see how many people are out voting, so that's pretty exciting. And yeah, so for any big tokenomic change, it would require passing a governance proposal. There are things that are just parameters, so you can make a proposal that will just change a parameter or a few parameters, and then if governance approves it, then the parameter changes — and that's happened a bunch of times. But any larger change requires a vote to actually do an upgrade, and then developers would work on the software, they'd make a proposal to upgrade to it, and then if that vote passed, then there would be an upgrade at some point in the future.

CR: Very cool. Um, so in launching and developing all these different pieces for the Cosmos ecosystem, it seems like it's been a pretty complex system, very technical, and a lot of new infrastructure. So what are some of the lessons from shipping all this stuff? Things you wish you could have done differently, and the challenges going forward as well?

EB: There have been some unique organizational challenges in Cosmos, and that's part of what led to there being so many organizations now and us being so so decentralized. One thing I would love to have done sooner is institute a workers' cooperative model for us to work together under.

So Informal Systems, which is the company I'm running now, is a workers cooperative, which means every employee gets a membership after nine months. Nine months is the gestation period for a human. So after nine months, they become a full member of the cooperative, and then that entitles them to a vote on any major decisions. So I would have loved to have that model right from the beginning, and maybe we would all still be one big workers cooperative organization. But possibly in the future, we'll reconstitute something like that. I'm a huge fan of cooperatives and I think it's tragic that there aren't more of them, especially workers’ cooperatives, and especially in the blockchain space. I think that's something I'd really like to see changed and different.

Maybe on the technology front, we were I think we were really naive about how complex the system was. There's this joke that we were like two months away from launch for like sixteen months, and finally we got to the point where we were only six weeks away from launch and that's how we knew it was really going to be launch time. So we probably could have done a better job of specing things out ahead of time, and really understanding the scope and complexity of the system, and planned better for that. But those are all the classic challenges technology software startups have.

CR: Great. And then going forward, what are some of the big milestones that the Cosmos ecosystem is working towards this year? I know you mentioned shared security with Cosmos Hub, what are some of the other big ones?

EB: So that's a really big one because that'll really open up the door to new kinds of applications coming to Cosmos, and using the Cosmos Hub, therefore the ATOMs are securing more and more value. I think the other is inter-chain accounts, which should launch on the Cosmos Hub very shortly with the next upgrade. But we'll need other chains to upgrade to actually use it.

We've hit these incredible milestones with IBC, I think we're doing something like 13M IBC transfers a month in total across all the IBC chains, which is just nuts. You can see this all on mapofzones.com — I encourage people to go to that site because it's really something amazing to witness and to actually start using it. So actually seeing more uses of IBC, more kinds of applications using IBC, I think, will be really big milestones.

Getting inter-chain accounts to work and getting people to actually start building applications that are inter-chain account-native will open up all kinds of amazing possibilities. For instance, we were just talking about governance. You'll be able to have one chain vote to do something on another blockchain. So governance on one chain will actually be able to control an account on another blockchain using inter-chain accounts, [and] will just open so many possibilities for cooperation across blockchains. So actually seeing those things start to happen, I think, will be really exciting. And seeing chains start to start to use inter-chain security, those are the two huge milestones for us.

Leveraging blockchain to resolve structural economic crises

CR: Very cool. And then starting to wrap up, Cosmos… way out… in the future — which, I don't know, in the blockchain and crypto world, maybe it's like two years from now, or say five years from now — where does Cosmos fit? Thinking about what you mentioned before, Cosmos in relation to Ethereum, to Bitcoin, to all the other Layer 1 chains, do you see Cosmos as competing with Ethereum and taking over market share from it? Or complementing it? How does the landscape look?

EB: Yeah I think it's largely complementary. I mean, Ethereum is this world computer vision, and is trying to build some very specific global censorship-resistant, compute protocol, and I think there are going to be limits to its scalability, and stuff that the team is already experiencing with the years of research and struggle to get Eth2 out.

With Cosmos, or at least what I'm most interested in, I am trying to deeply study the structure of the monetary system, the banking system, and the payment system, and how corrupt and broken it is., and how essential it is to the problems of sustainability, resilience, and to some extent staving off certain kinds of civil war. So it's really important to me that we address those core infrastructural problems, and that we do it right, which means attending to the actual political economics of the situation.

And so I express my philosophy as monetary localism. I believe that money should be a much more locally-governed phenomenon and that communities — whether it's cities or other kinds of local jurisdictions — should have more sovereignty over their monetary system and their ability to engage with it. So those are the kinds of things that I'm hoping to be working on over the next five years. Whether that means cities issuing their own local currencies per se, or it just means alternatives to bank loans, and payment systems for small businesses to be able to manage shocks and clear payments with each other more readily, I think is really important because the banking system is really ill and there are all kinds of indications that… we've never really recovered from [the]... 2008… monetary crisis, the extent of which I don't think has been well understood.

There hasn't really been a recovery in any sense, and we're still suffering from this deep, deflationary monetary structure. And that sounds crazy because consumer prices are up and all this stuff, but are those for other reasons? I think what's happening, especially over the last fifteen years, there's been like a complete collapse of small businesses and small business lending. And it’s been that everything is focused on the biggest and, let's say, most secure companies that are able to get loans at very low interest rates, and so on, and this has all been at the expense of the heart and soul of the of the economy — which are smaller businesses and smaller entities being able to operate.

So I'm really hoping that over the next five years… with the Cosmos technology… we’re able to… make an impact for real-world networks of trade and small businesses that makes them more resilient, better able to tolerate shocks, and able to clear more economic activity with less, let's say, exchange media, and less dependence on bank loans, and things like that.

So I wouldn't say I'm quite trying to destroy all the banks, or something like that. I mean, I'm hoping there's a way we can all work together. But they're not performing the function they're supposed to perform, and the economic system is really Ill because of it. So that's really important to me to address.

CR: Very cool. Okay, so obviously you said you are a sovereignty-maximalist, so I guess developers and founders will build whatever within the Cosmos ecosystem, but your hope is that it main impact will be in the financial system — like providing an alternative to traditional finance, and to what the function that banks have been, hopefully with blockchain technology there. There can be just a better way of doing things, and financing smaller communities and smaller businesses — is that your hope?

EB: I mean, I wouldn't frame it as just the financial system. One way to think about finance and payments is that it's just the inverse of the supply chain, or the reverse of the supply chain. And so for me, really it's about the sustainability of the species, and I think that means smaller scale supply chains, more localism, and more self-sufficiency in communities. And so it's really about supporting that social and ecological regeneration.

I think that's really important to do, because if we don't do it, it's really hard to make progress on other things [like] addressing these core monetary [and] systemic issues. So it's not even so much about finance as it is about the monetary structure as a way to address that. And that's one application, but there are others.

Obviously, we need to clean up the planet, and rejuvenate and regenerate all kinds of ecologies. And there are applications of Cosmos to that, which I think are really exciting. So there's the Regen Network that is doing that, there's IXO, which is doing these social impact bonds. There are a bunch of Cosmos-based projects that are trying to actually clean up this mess we’ve made over the last, let's say, 200 years or so. So those are things I'm really excited about as well and would love to see more.

And of course, all the DeFi degen stuff is a lot of fun, and we're learning a lot. There's a lot of experimentation happening, and almost rediscovering from first principles governance, politics, and all these interesting things — maybe that will train off a bunch of people to become politicians and to help restructure our actual organization or actual institutions.

So I don't know, but I'm hoping that these technologies actually start to have real-world impact and help communities become more sustainable, self-sufficient, and so forth.

CR: Very cool. And then one final question, Ethan, how are you defiant?

EB: In many ways. I guess I reject almost all standard classifications. I don't like being put in boxes, so you can't label me other than the terms I came up with because I don't want you to have the wrong connotations.

I defy the standard understandings of capitalism and what we're trying to do, and standard organizational structures, and I'm constantly — maybe to a fault — putting my values first. This company we built, Informal Systems, is structured as a workers’ cooperative, and we defied traditional organizational structures to really make something different. Our goal in the long term with that company is to transform what we feel are three really Ill but really important institutions of society: software — how we build and deploy it, money — how we issue and distribute it, and organizations —how we own and govern them. So we are defying all the current ways we do things in those institutions, and hopefully remaking them for the better.

CR: Awesome, I love that answer. One random question, I was asking on Twitter what people wanted to know — Matt Huang from Paradigm said something about chickens, what’s that about?

EB: Yeah I used to have chickens. For a while, I lived in a small town outside Toronto. I had a house there and we had chickens. We had like 25 chickens in the backyard and so every morning I'd go out and play with my chickens. Chickens are an absolute delight to have.

So the chickens are gone because we've moved out of that house, they're largely in our tummies. At one point we made chicken soup and stuff out of them, but we had eggs galore for a while. We had so many eggs we didn't even know what to do with them. So if you can have chickens, I highly recommend them. I Hope to have chickens again soon.

But yeah, I've been threatening to quit computer science and become a farmer for like my whole career, so that threat still stands. So yeah, don't piss me off too much or I'm out of here.

CR: That would be a grade loss to the industry. That's actually also a dream of mine, to have a farm with lots of animals. I'm a huge animal lover, I've always wanted to have like a donkey, and like deer, foxes, and bunnies. I don't know, just like a big farm.

EB: I don't know foxes and bunnies go well together. But otherwise, that sounds fun.

CR: That's true. But they're both cute on their own, maybe bunnies inside the house, and foxes outside. Okay, so a farmer and a rapper, those are two side-hobbies of Ethan Buchman that I didn't expect going into this research. I won't put you on the spot and have you rap, but I'll definitely ask all listeners to go and check out Ethan’s rapping skills — very undervalued, or I guess it should be better known because they're actually generally really good.

EB: Really appreciate that! I'm still planning on making a proposal to the Cosmos Hub for some fun so I can produce an album. I've got some more tracks I need to write, there's a few good ones in there already.

CR: Go for it, amazing. All right, Ethan, well this has been a pleasure. Thank you so much for joining me!

EB: Thanks a lot for having me. It was a lot of fun, take care.