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What is Cosmos (ATOM)?
Luis Clark
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Luis Clark
What is Cosmos (ATOM)?
Cosmos, heralded as an Internet of Blockchains is an ecosystem of interconnected services and apps with the objective of use within the decentralized space. This is achieved via the Inter-Blockchain Communication Protocol (IBC), which enables users to exchange data and assets across individual decentralized blockchains.
The Cosmos Hub, which is the first blockchain of the Cosmos network, is governed and secured by the ATOM token. The goal of the token is to provide economic security for the public blockchain.
Who is the Founder?
The creation of Cosmos was through the cooperation of several teams. However, the initial funds and resources for its creation were allocated by the Interchain Foundation (ICF) and the Tendermint team. The Interchain Foundation is a non-profit organization that supports and funds open-source blockchain projects.
That said, the Cosmos network was initially developed in 2014 by Jae Kwon and Ethan Buchman at the same time that they were developing Tendermint. Tendermint is the consensus algorithm that would hold Cosmos together. Tendermint connects applications through the Application Blockchain Interface protocol.
In 2016, Buchman and Kwon also co-authored the Cosmos white paper.
Over the years, the development team has grown to include several contributing teams. The core development teams include:
- Agoric
- Akash
- Althea
- Chainapsis
- ChainSafe
- Confio
- Informal Systems
- Interchain GmbH
- Iqlusion
- IRIS Network
- PeggyJV
- Regen Network
- Sikka
- SnowFork
- Tendermint
- VitWit
- Zondax
Cosmos is supported by the Interchain Foundation.
How does Cosmos (ATOM) Work?
As already stated, the Cosmos network is an ecosystem of apps and services and it achieves this via hubs such as the Inter-Blockchain Communication protocol and the Tendermint consensus algorithm to ensure that each blockchain can communicate securely.
Now, some platforms communicate via smart contracts. In this process, tokens are locked on one of the platforms while the token’s corresponding amount is minted on the other platform. An excellent example of this is wrapped tokens.
Instead of transferring Litecoin from the Litecoin blockchain to another platform like XRP, Litecoin is locked in a blockchain that offers the service. Then the corresponding amount such as wrapped Litecoin (wLTC) is issued in pegged tokens on the other blockchain.
In contrast, the Cosmos network consists of open-source tools that enable Cosmos developers to create decentralized and sovereign blockchain apps called Zones (Cosmos smart contracts). This eliminates the reliance on a single chain.
Each of these zones connects to the other via hubs. The Cosmos Hub is the first and primary one but others are available. All zones or hubs don’t have to work with each other but every zone is connected to the Cosmos Hub which keeps tabs on every zone’s state.
All zones can operate autonomously from authenticating transactions and accounts to developing and distributing new tokens and carrying out blockchain changes. Besides facilitating zone interoperability within the network, the Cosmos Hub enables interoperability with Proof of Work blockchains like Ethereum and Bitcoin via bridges even if they don’t satisfy the requirements of the Cosmos protocol.
The Cosmos Hub is powered by ATOM which secures its interchain services. Users can lock their ATOM tokens temporarily to contribute to the Hub’s security using the staking mechanism. In exchange, users receive rewards in a share of the transaction fees collected by the blockchain and newly minted ATOM.
Key Features of Cosmos (ATOM)
Gravity DEX
Gravity DEX is the first cross-chain DeFi protocol on the Cosmos Hub. It enables users to easily swap assets from all over the interchain. Users also have access to all tokens from other connected chains that are not yet available on centralized exchanges.
The Gravity DEX protocol uses an Equivalent Swap Price Model (ESPM) to reduce arbitrage opportunities and improve price consistency.
Gravity DEX combines AMM features with an order book-based model. This gives users a better and more efficient trading experience. Batch order execution within the protocol makes trading fairer by eliminating the possibility of front-running. Traders can also get instant market pricing information by building order book trading UIs.
Unlike most DEXs where high transaction fees are a pain point for small traders, Gravity DEX uses batched transactions to reduce trading fees and make DeFi accessible to all types of traders. Trading fees within the Gravity DEX protocol are between $0.01 to $0.10.
Interchain Accounts
These are accounts in the Inter Blockchain Communication protocol-enabled world. Interchain accounts enable blockchains to securely control an account on another blockchain using IBC. Cosmos users can access the entire Interchain through one Cosmos Hub account. This eliminates the need to create an application-level IBC for every module’s features.
Interchain Accounts have certain features: the creation of a new Interchain account over IBC and the relay of transactions to the interchain account and submitting the transaction to the target blockchain.
Interchain Accounts allow one blockchain to access the application features such as swaps, tokens, stakes, and votes of other blockchains. This is similar to how smart contracts interact with each other on the EVM by leveraging IBC.
Interchain Accounts make it easy for people to start using IBC and avoid any security problems that could happen. They also help IBC grow quickly and work well for many users.
Gravity Bridge
Gravity Bridge is an Ethereum-Cosmos bridge designed for the Cosmos Hub that enables Cosmos assets to easily flow into the Ethereum ecosystem as ERC-20 tokens and also allows native ERC-20 tokens to flow into the Cosmos ecosystem.
Gravity Bridge functions similarly to all cross-chain bridges. It locks up a native token on one side of the bridge and mints a representation of that same token on the other side of the bridge. The representation of the token is used by the user and then returned to the bridge. Once they return the representation to the bridge, it is used to redeem the native token on the other chain.
Gravity Bridge is an evolution of the Althea Peggy Bridge and it is backed by ATOMs staked on the Cosmos Hub worth billions of dollars. It is built using the Cosmos SDK and instead of using a permissioned set of actors or a multi-sig, it uses the validator set to sign transactions. The protocol is focused on the provision of better security through the elimination of design complexity.
Gravity Bridge is highly centralized. This means that all funds are directly controlled by about 175 validators. Despite this, it is still very secure and censor-resistant. The advanced slashing feature ensures that validators are unable to submit or sign bridge messages that were not agreed upon by consensus.
Gravity Bridge reduces individual gas costs by about 96%. This makes the transfers within the protocol extremely fast and reliable.
Gravity Bridge has a key feature known as the Solidarity contract (Gravity.sol). This was developed by the Althea team and it is used to hold the native assets being sent across the bridge. Gravity.sol cannot be upgraded. This means that it does not contain any kind of trusted parties and cannot be tampered with by any malicious actor.
Deposits of assets from Ethereum to Gravity Bridge are censorship-resistant and permissionless. Representative tokens are minted when an event is attested by more than two-thirds of the validator set.
Withdrawal transactions are batched, and multiple SendToEth messages are placed together in an individual batch, this enables Gravity Bridge to execute many transactions in a single shared context. This process increases the efficiency of the system and reduces the cost of gas by 96 percent.
Chain Name Service (CNS)
CNS is a new Cosmos SDK module that enables Cosmos addresses to get and administer chain names on the Cosmos Network. Chain Name Service makes it easier for users to identify the chains they wish to interact with.
The registration of chain names on the Cosmos Hub by CNS also provides security to Interchain transfer as it makes it easy for every token transfer to and from the Cosmos Hub to be easily tracked.
Liquid Staking
Liquid Staking which is also known as Staking Derivatives or Programmable Staking enables Cosmos users to tokenize their staking position while also providing the users with additional liquid assets that they can use across other DeFi products and applications.
Liquid Stakings are claims against stored ATOM. Just like in traditional staking, liquid staking accrues rewards but the staking is liquid, this means that they can be transferred.
With liquid staking, users can explore other avenues to earn additional yield without losing the positions of their staked assets. Liquid Staking can be partially burnt if the underlying ATOM is slashed.
Cosmos SDK
The Cosmos Software Development Kit (SDK) is a framework that allows developers to build blockchain applications using the Tendermint consensus algorithm.
Cosmos SDK was built by the Cosmos team and it is written in the Go programming language and was used to build Gaia. Gaia is the implementation of the Cosmos Hub.
Common functionalities available in blockchains such as governance, staking, and tokens are available in the Cosmos SDK. Cosmos developers also have the option of creating more plugins to add extra features to suit their needs.
The Cosmos SDK Tutorials are an educational resource created by the Cosmos team. They offer all the important information you need to learn how to create on the Cosmos SDK. These tutorials are designed to make it easy for users to understand and build on the Cosmos SDK platform. By providing this tutorial, Cosmos hopes to empower users with the knowledge and skills to effortlessly develop on the Cosmos SDK.
Weaknesses of Cosmos
Just like most cryptocurrencies, ATOM is volatile. Since the value of the token is attached to the network, whatever affects the network can affect the price of ATOM in the crypto world.
How is Cosmos (ATOM) Created?
New ATOM tokens are created as a reward for network validators.
The first ATOM tokens were created at the launch of the Cosmos Mainnet and distributed to the founding donors, the Cosmos Foundation, core developers, and token sale participants.
Mining Cosmos (ATOM)
Cosmos is proof of stake, this means you cannot mine the token. So here’s how it works:
The Cosmos Hub is built on Tendermint, which depends on a group of validators responsible for adding new blocks to the blockchain. To become a validator, a node must be in the top hundred nodes staking ATOM. Each of these validators participates in the Tendermint consensus protocol by releasing votes containing cryptographic signatures signed by the private key of every validator.
Each validator can bond their ATOM token and have ATOM staked to them or delegated by holders of the same. At the moment, there are only 175 validators, however, this can increase with governance proposals.
Validators are chosen based on the number of ATOM tokens delegated to them. Tokens are received as transaction fees via the execution of the Tendermint consensus protocol.
Validators can also set commission percentages in the fees their delegators receive for additional remuneration.
If a validator is offline for a long time or double signs, they can receive a validator penalty. This means that the ATOM tokens they have staked, including the ones delegated to them, will be reduced. However, the severity of the penalty depends on how serious the violation is.
Which Blockchain does Cosmos (ATOM) Use?
The Cosmos (ATOM) token uses the Cosmos Hub blockchain. ATOM governs and secures the blockchain.
How to Use Cosmos (ATOM)?
ATOM is the native cryptocurrency of the Cosmos network. It is used as a voting mechanism in governance. ATOM holders can govern the Cosmos Hub by using their staked ATOM to vote on proposals. It can also be used to execute smart contracts and complete transactions.
Users can stake ATOM to earn rewards. It can be bonded to earn block rewards. ATOM is also used as a spam prevention mechanism as it is used to pay fees.
The security of the network is guaranteed through the staking of ATOM. The more token holders stake ATOM, the more secure the Cosmos Hub. This is because as more ATOMs are collateralized, the more skin there is at stake and the harder it is for the network to be attacked.
How to Buy Cosmos (ATOM)?
ATOM is available for purchase on popular exchanges like Kraken, Uphold, Binance, Kucoin, and Huobi Global. CoinMarketCap has a list of all the exchanges that support the trading of ATOM.
After picking the right exchange that best suits your need, you can proceed to open an account with the exchange. Once you have verified your new account, you will be able to fund your wallet and purchase ATOM.
How to Store Cosmos (ATOM)?
You can store ATOM in a wallet on the exchange where you bought it or you can move them to another wallet.
ATOM can be stored in both software and hardware wallets. Wallets like Cosmostation, Math Wallet, Keplr, Color Wallet, Guarda Wallet, etc. Hardware wallets like Ledger Nano S and Ledger Nano X also support the storage of ATOM.
Ensure you pick a wallet that is secure to ensure that you do not lose your wallet to hackers.
Best Place to Stake Cosmos (ATOM)?
While there are tons of options, the best place to stake Cosmos is through the Cosmos network. To do so, go to https://cosmos.network/learn/get-atom. Next, buy ATOM by clicking the browse exchange link on the page and choosing any of the top exchanges to purchase ATOM.
After purchase, you need a wallet to start staking. Go to https://cosmos.network/ecosystem/wallets and choose any of the recommended wallets. Cosmostation is a popular option among ATOM holders for staking ATOM. Next, transfer your purchased ATOM from the exchange to the wallet.
In the wallet, you will see the option for staking ATOM, you will also see a list of validators, choose your preferred one and that’s it. There’s an average APR of 9% on most wallets.
What You Need to Know about the Future of Cosmos (ATOM)
Every blockchain project with potential value offers a solution to either real-world issues or blockchain-related challenges. The Cosmos network offers a solution that unites the crypto ecosystem. This puts Cosmos in a great position for the future if more and more crypto users gravitate towards interchain transactions. And since the ATOM token is the native token of the Cosmos Hub blockchain, its price value is pegged on a viable solution. This means that there’s a huge possibility that in years to come the ATOM token will rise exponentially.
Conclusion: Should You Put Your Money in Cosmos (ATOM)?
Cosmos is a great investment opportunity if the crypto industry keeps heading toward the unification of services and applications. But if not, getting quality returns on your investment would be difficult as the ATOM token is directly tied to the Cosmos ecosystem. This means that its value is dependent on the widespread acceptance of the Cosmos network.
Risk in Investing in Cosmos (ATOM)
Cryptocurrencies are volatile assets, which means they can lose their value overnight. This implies that you can lose your entire investment in the worst-case scenario. So only invest in Cosmos (ATOM) what you’re willing to lose.
FAQ
Most frequent questions and answers
The Cosmos blockchain facilitates blockchains to transfer assets to each other via Peg-Zones and the Inter-Blockchain (IBC) while ensuring that they maintain their sovereignty.
Cosmos does not seek to be “better” than Ethereum; rather its objective is to provide complementary blockchain development frameworks which enable developers to create unique blockchains. However, this is a use case that Ethereum does offer. In general, Cosmos offers a cleaner and smoother structure, cheaper fees and better interoperability.
No, Cosmos is built on the Cosmos Hub, a Proof of Stake blockchain.
The Cosmos (ATOM) asset is the native token of the Cosmos Hub blockchain.
The Cosmos SDK has been used by developers to build several key cryptocurrency and blockchain projects such as Kava, IRISNet, Terra, JUNO, etc.
Yes, one of the standout features of the Cosmos network is its interchain security.
ATOM is the native token of the Cosmos Hub, which is the central blockchain of the Cosmos ecosystem.
ATOM is the main cryptocurrency of the Cosmos network.
You can get ATOM by signing up to a cryptocurrency exchange like Coinbase and Binance, searching for ATOM, and then purchasing it with a fiat currency or another cryptocurrency.
Heterogeneous blockchains are chains that can have one end permissioned and the other end permissionless of the same protocol to enable interoperability and secure data sharing alongside access control.
The Internet of blockchains is a network of blockchains that communicate with each other in a decentralized way.
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