The last crypto bullish cycle allowed incredibly innovative projects to be pushed to the forefront of the industry. We saw groundbreaking technologies come to light. That boosted the adoption of decentralized finance and blockchain technology in general.
Two major narratives in the past couple of years have been interoperability and scalability. Cosmos and Algorand have put significant efforts into these blockchain features. With this, they hope to create future-proof ecosystems.
In this article, we take a look at Cosmos vs Algorand and analyze their technologies to assess their similarities and differences. This should allow us to form a good idea on which one between ATOM and ALGO could be the better investment in the long term.
What Do They Have In Common?
Cosmos and Algorand are both highly scalable smart contract blockchains. This smart contract capability allows them to provide developers with a platform to deploy various dApps.
Consequently, both of these projects act as a channel for the growing Web3 industry. This allows users to participate in DeFi, NFT marketplaces, blockchain games, and much more. Both blockchains have a decent amount of apps covering these niches quite successfully.
Their high scalability provides users with cost-effective transactions. So unlike Ethereum, where gas can skyrocket at times of high usage, transaction fees remain low at all times on Cosmos and Algorand.
They achieve this scalability by deploying groundbreaking consensus protocols and blockchain architectures.
What Are the Differences?
With that being said, Cosmos and Algorand have very different approaches to how they handle their blockchain architecture. Below, we take a look at their differences regarding these fundamentals.
Cosmos uses the Terndermit consensus mechanism. It ensures that transactions are always recorded in the same order on different validators. This mechanism is Byzantine-Fault Tolerant (BFT). It allows 1/3 of the pool of validators to record failures while ensuring transaction execution. This consensus requires a round of communication between the validators. It works in three steps:
- Proposing a validator, where a validator is chosen using a round-robin to confirm transactions.
- Pre-voting, where nodes cast a vote until 2/3 of the votes have been committed.
- Pre-committing, until 2/3 of blocks are committed.
Once that round of communication is over, the block is committed to the chain and added to the decentralized ledger.
Algorand uses pure proof of stake (PPoS), which also works on the BFT model. It uses a verifiable random function to select the leaders that will participate in the creation and validation of blocks. These leaders need to have a stake in the network in ALGO tokens.
The ATOM cryptocurrency is used for staking and paying gas on the Cosmos blockchain. The issuance of new tokens relies on the staking proportion in the system. The ATOM token has a maximum inflation rate between 7% and 20% on a yearly basis following this model. Currently, there are 346,608,690 ATOM in circulation.
The ALGO cryptocurrency has a maximum supply of 10,000,000,000, with 7.7B already in circulation. The major portion of the supply is supposed to be released by 2030.
Cosmos is not just a single blockchain but a platform to build an ecosystem of blockchains that easily interoperate with each other. It implements the Inter-Blockchain Communication Protocol (IBC). The protocol allows different blockchains to communicate with each other and exchange assets. As such, it attempts to provide full interoperability in its ecosystem, without the need for bridges. This also means that these separate blockchains provide linear scalability to the Cosmos ecosystem.
Algorand is a Layer1 protocol that counts on its high scalability and throughput to become competitive in the industry. It has managed to draw in hundreds of applications that benefit from its high-profile technology.
ATOM vs ALGO: Which Crypto to Choose?
Cosmos has struggled in the past year due to the huge impact of the collapse of the Terra/Luna ecosystem. A lot of the liquidity disappeared overnight, putting many projects building on IBC out of business.
Algorand, on the other hand, hasn’t really proven that it can compete with highly scalable chains like Avalanche, Solana, or Polygon. In this regard, Cosmos has more aces up its sleeve, thanks to the interoperability technology of its ecosystem. This makes ATOM a clear winner over ALGO. So maybe instead of the next Bitcoin to Ethereum exchange, you can consider purchasing some ATOM.