Cosmos Blockchain Project Faces 'Existential' Challenge with Terra's Fall and Ethereum's Rise
Cosmos, a once-pioneering blockchain ecosystem renowned for its groundbreaking concept of interconnected blockchains called "appchains" and its innovative proof-of-stake consensus mechanism, is now facing an uphill battle for survival.
The blockchain ecosystem faces existential challenges in the wake of Terra's collapse and the meteoric rise of Ethereum.
One of the biggest blows to Cosmos came with the disastrous collapse of Terra, once one of the largest Cosmos-based blockchains.
Terra's decentralized stablecoin, UST, suffered a catastrophic price drop from $1 to below a penny in just a few days, triggering a liquidity crisis in Cosmos's decentralized finance (DeFi) ecosystem.
Cosmos's main decentralized exchange chain, Osmosis, saw its liquidity plummet from $1.7 billion to a mere $116 million, impacting developer interest and confidence in the ecosystem.
The fallout from Terra's demise has been far-reaching, affecting other Cosmos-based DeFi projects and leading to a decline in innovation and developer activity.
The liquidity hole left by Terra's collapse has proven difficult to fill, hindering Cosmos's ability to compete with other blockchain ecosystems, especially Ethereum.
In contrast to Cosmos's struggles, Ethereum's ascent as the dominant blockchain platform has been remarkable.
Ethereum's introduction of smart contracts completely changed the blockchain space, empowering developers to build a wide array of decentralized applications (dApps), including decentralized exchanges (DEXs) and non-fungible token (NFT) platforms.
Although Ethereum faced challenges related to scalability and high transaction fees, its community rallied to find solutions.
The introduction of layer 2 scaling solutions, such as rollups, has
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