Why the Death of CosmWasm is a Blow to Blockchain Progress

Smart contract platforms integrate programs that automatically perform predetermined actions upon meeting certain conditions. The automation and security they provide are on a higher level than traditional systems, which explains their central role in DeFi and dApp development. In fact, it wouldn’t be an exaggeration to claim that they are key to blockchain progress.

Atom Accelerator DAO recently wrote that CosmWasm, a powerful smart contract platform and the only one in Cosmos, was being defunded. CosmWasm enables developers to write and launch smart contracts on Cosmos SDK-based blockchains. It’s highly appreciated by developers, but apparently not businesses, at least at this time. The defunding is a fact, although CosmWasm is probably the most widely used platform after Solidity. Its open licensing model has allowed for its proliferation, benefiting a vast community.

Raising funds for CosmWasm is critical

CosmWasm is designed for interoperability and modularity, extending blockchain functionality by making it possible to create dApps and other blockchain solutions with dynamic logic. The unique properties of the Solidity programming language and EVM make unit testing in Solidity challenging, but testing in CosmWasm is easy and accessible. There is no way of migrating a project to another blockchain or composing across chains in Ethereum. CosmWasm provides this capacity by building upon the Cosmos SDK and IBC.

CosmWasm is deployed on multiple interlinked blockchains, which reduces the strain on any single one, ensures low fees, and improves overall scalability. This benefits users as well as developers, enabling more efficient and cost-effective smart contract execution.

CosmWasm uses Rust, a safe and modern programming language suitable for smart contract development. Rust is also used outside of cryptocurrencies. Ethereum and Solana, the two largest smart contract platforms, leverage it as well.

Atom Accelerator DAO cites an analysis of 15 blockchains over the past year, which reveals shocking statistics that completely justify incredulity at CosmWasm’s defunding. 5.2 million accounts interacted with 15,700 deployed CosmWasm contracts in that time frame, and those contracts generated $5.7 million in fees. What’s more, building apps on CosmWasm is much more straightforward than a full-on Cosmos SDK app chain. Thanks to its modular design and seamless integration with Cosmos SDK, the smart contract platform has helped position the Cosmos ecosystem as a leader in decentralized, multichain applications.

Positions of the funder and the developer 

The Interchain Foundation (ICF), which has been funding CosmWasm through Confio, a platform developing CosmWasm since 2020, underwent organizational restructuring. As a result, it has drastically reduced Confio’s funding for 2025. As Atom Accelerator DAO points out, this is a massive blow to the infrastructure powering an entire ecosystem and facilitating cross-chain interoperability. Specifically, ICF funding to Confio for 2025 is 28% of the funding for 2024. Assuming the same cost levels, this would cover just over three months of service. Confio will continue security and upgrades for the platform until mid-2025, intending to stretch this budget to half a year somehow.

The funding issue is not recent. Confio announced they were pausing operations due to a lack of funding back in February 2023. The organization wrote that its team of developers and blockchain experts had not received funding for their work since October 2022. They reached out to most CosmWasm-enabled chains and several major projects but failed to obtain funding for general ecosystem utilities. They were advised to monetize CosmWasm, but found no way to charge fees for the source code or core library licenses “while remaining relevant.” At the time, they hoped to generate revenue through consulting work to build utilities on top of the CosmWasm stack. Still, defunding is a fact.

Aligned with the conviction that CosmWasm is a critical resource for the interchain and that its development must go on, Atom Accelerator DAO has proposed to contribute $250,000 to a funding effort. Neutron’s initial commitment of the same amount kickstarted the initiative. While half a million dollars is definitely a good start, the funding isn’t enough for the year as CosmWasm consists of modules, tools, libraries, and documentation across almost two dozen repositories.

Implications of CosmWasm’s silent collapse and how to prevent it

The developments draw attention to a glaring issue in blockchain – entities want to benefit from the ease of use and security of decentralized protocols and smart contracts but not invest in them. It’s impossible to overstate the benefits of smart contract applications. They increase efficiency, reduce counterparty risk, lower costs, and enhance transparency. CosmWasm addresses many security issues in Solidity, such as reentrancy attacks, a common DeFi exploit. It also provides more streamlined contract migration instead of adopting a proxy pattern and does away with multiple language elements, which were often misused, such as tx.origin for security.

Confio writes that CosmWasm’s needs have been increasing in parallel to the number of users and the ecosystem, concluding that the platform has grown too large and they “can no longer afford to subsidize it.” The solution is in the hands of individuals and organizations with a vested interest in the growth and success of blockchain technology. Venture capitalists stand to gain returns on investment as smart contract platforms form the backbone of DeFi. Tech companies and blockchain startups use smart contracts for their products and build complementary technologies, like Layer 2 solutions or dApps. Finally, financial institutions use smart contracts to automate financial transactions, reduce costs, and increase transparency. The blockchain world can only hope they will step in at this critical time.