Cosmos (ATOM): What Is It & How It Revolutionizes the Crypto Industry?

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Interoperability has been a struggle for most blockchains to exchange usable data and for cross-chain communication. Since the blockchain is undeniable rigid, developers are left with two choices — either fork the code to build their own chains or uses middleware systems to bridge the gaps. Since Cosmos focuses on customizability, that is precisely how Cosmos’ Inter-Blockchain Communication protocol thrives. While the tools provided help facilitate the building of decentralized applications on the Cosmos network.

Shortly after its launch, Cosmos has successfully climbed the ladders in the crypto market as one of the most promising investments in 2021. But what has Cosmos brought that makes it stood out from the rest? Also, could it be a sign for Cosmos to overtake some of the crypto titans that promise a similar projection?

What Is the Cosmos Network?

Cosmos is dubbed the “internet of blockchains” that aims to create a network to bridge the gaps for cross-chain to exchange data without central supervision and streamline transactions. The Cosmos Hub serves as a central network to connect the different chains into a dedicated zone to interact with one another. The native token (ATOM) is used to sustain the ecosystem by rewarding validators and staking.

In 2014, computer scientist Jae Kwon developed Tendermint, an open-source blockchain launching software. The Cosmos network was then launched through the Interchain Foundation (ICF) support with the core of the Tendermint consensus algorithm. A few years later, in 2017, ICF held an ICO of ATOM tokens and has successfully raised over $17 million. The fundings collected from Tendermint Inc through Series A fundings further support the development of Cosmos. Subsequently, co-founder Ethan Buchman and Jae Kwon authored and released a white paper about Cosmos in 2019, and Cosmos was officially launched on the mainnet in March of the same year.

To maintain the interoperability between all zones within the Cosmos network, the Cosmos Hub uses Proof-of-Stake (PoS) mechanism. This communication of disparate blockchains known as the Inter-Blockchain Communication (IBC) protocol helps expand the interoperability non-limited to blockchains that are Temdermint-based. For example, any proof-of-stake cryptocurrencies like Cardano (ADA) can connect to the IBC.

Another of Cosmos’s goals is to make it easier for users to create and launch decentralized applications (DApps) in the network by solving sovereignty issues in other networks (e.g., Ethereum).

How Does Cosmos Coin Work?

There are three important layers that make up the Cosmos networks:

  • Application layer: This top layer of blockchain software defines the state and state-transition function.
  • Hubs and networking: Cross-chain communications happen here in which each blockchain interacts with one another to facilitate the transactions.
  • Consensus: To facilitate an agreement of the network.

When all of these layers are combined, developers can easily build applications. But it’s only achievable with the outsourcing tools like the Tendermint Byzantine Fault Tolerance (BFT) engine. And that’s what makes the Tendermint algorithm the backbone of the Cosmos network. BFT is a Proof-of-Stake governance mechanism that keeps the distributed network working in sync with Cosmos Hub.

Using the Tendermint BFT algorithm, the network reaches a consensus between all the blockchains in the Cosmos network connected through the IBC protocol. The separate blockchains communicate with the Tendermint core using the Application Blockchain Interface (ABCI), allowing developers to build DApps in the respective networks using different programming languages. Because of this capability, users aren’t required to develop a DApp from scratch. Instead, they use existing codes to replicate the DApps. 

ABCI is mainly a bridge between the Tendermint core and the Cosmos software development kit (SDK). The Cosmos SDK allows developers to build projects on the Cosmos network. These systems interoperate and are connected to the Cosmos Hub, which is the main component of the Cosmos network.

Visual representation of the Cosmos network. Source: Medium

But if Cosmos itself is a PoS network, how does it connect with PoW networks such as Ethereum’s? To achieve this, Cosmos uses peg zones. A peg zone is another bridge-like system that provides a solution to PoW networks that do not have fast finality. Since Ethereum has smart contracts, it’s easy to create a finality threshold, communicate the contracts in the pegging zone, and link them to the Tendermint Core using ABCI. But Bitcoin doesn’t have smart contracts, so it’s much more complicated to connect Bitcoin with Cosmos than to connect Ethereum.

The Cosmos SDK provides simple tools for developers without sovereignty issues found in Ethereum. To illustrate, if developers want to create a DApp in Ethereum, they have to abide by certain rules and regulations set by the Ethereum network. That is not the case with Cosmos.

What Are ATOMs?

The native token ATOM is used to run services on the Cosmos network. ATOM tokens are not mined in the same way as on PoW networks. The computational power of the nodes doesn’t determine their mining rewards. Instead, nodes are rewarded based on the number of ATOM tokens they’ve staked. The more you stake, the more you are rewarded.

Staking tokens requires that you lock your ATOM tokens for a certain period so that the network can use your locked tokens for securing itself. After the staking period is finished, you get your ATOM tokens back, plus additional tokens as an incentive to keep staking even more. If a node is caught being dishonest, that node can be penalized, resulting in the loss of ATOM tokens.

Another highlight for ATOM is its use to power the participation of validator nodes. For example, to become a validator of the Cosmos network, a participant needs to be at least in the top 100 to stake ATOM. Should the participant be in the top 100, they will earn the right to vote for the changes in the network. At the same time, the voting power is highly dependent on the amount of ATOM that is being staked.

As of July 15, 2021, out of the 260 million total circulating supply, there are 218,135,070 ATOMs in circulation. With an average price of $10.20, the market capitalization of Cosmos is around $2.5 billion. This market cap puts Cosmos at number 36 in the crypto market rankings. Imagine you’ve bought the asset since the launch (or earliest known price); the estimated investment return is around 79.08% based on the current market price of $11.57.

Cosmos’s Past Projects

Over the last few years, Cosmos has expanded its ecosystem with more new partners and projects that can potentially drive its price higher. To illustrate, the Binance Chain works on the Cosmos network. Akash is working on providing a marketplace for developers there, and E-Money, a European network, is also working on the Cosmos network. IRISnet was built with Cosmos SDK and has plans to focus on the business field of blockchain interoperability. Even Loom, a project that began on Ethereum, has now shifted to the Cosmos network because of the Tendermint BFT algorithm’s many features.

These projects and many others have made Cosmos a rather favorable network for developers and investors. To add anonymous credentials to the Cosmos network, the team collaborated with Nym in 2020. A few months later, Cosmos released the IBC protocol to the public with the launch of Stargate.

ATOM Price Analysis

The ATOM token was launched in March 2019 at a starting price of $7.50. The price dipped to $3.45 within a few days, as buyers who had purchased ATOMs in the ICO took advantage of the new price and sold their tokens. The price increased to $7 in June but bounced to a consolidation price of $2 in September of that year. ATOM ended the year at a price of around $4.20.

Cosmos Price Chart
Price chart by CoinMarketCap – July 15, 2021.

In the first quarter of 2020, the price went as low as $1.60. Investors bought the dip and increased the price of ATOM to $8.50 by August, marking a new high. By December, however, the price of ATOM averaged $5.

Since the beginning of the year, ATOM has seen significant growth, making up to almost 7x growth to its all-time high of $32.14 on May 7, 2021. Despite the launch of IBC and the stargate upgrade that contributed to a price pump in February, the following Bitcoin bullish trend helped ATOM’s price soared to a new height in May 2021. This marked a 448% price increase in around four months. The price of ATOM has dropped back amidst the crypto bearish trend. ATOM is currently trading at $11.57 on July 15, 2021.

Cosmos (ATOM) Price Predictions

While there is no concrete evidence to prove that ATOM’s price may surge based on the projections, the scalability issues Cosmos aims to resolve are still undeniable. Looking at the current state, here are some of the predictions:

Owning ATOM

Cosmos originally introduced itself as a revolutionary cryptocurrency network, making quite a name for itself immediately after its release. Because of this, ATOM tokens were widely accepted by many big cryptocurrency exchanges. ATOM is available in major cryptocurrency exchanges.

To safely store your asset, always opt to save it in a cryptocurrency wallet. Leaving them in your crypto exchange is vulnerable to hacks. There are plenty of choices you can make for a cryptocurrency wallet, whether it’s a hardware or software wallet. Alternatively, you can also opt for a paper wallet.

  • The best hardware wallets for Cosmos are Ledger Nano X and Ledger Nano S.
  • The best mobile wallets for Cosmos are Cosmostation and Wetez.
  • The best web wallets for Cosmos are Cosmostation and Lunie.

What is the Future of Cosmos Coins?

Heralded as the “internet of blockchains,” Cosmos is now working on integrating DeFi into its network with the creation of Gravity DEX, an automated market maker (AMM) that can increase the liquidity of the Cosmos network. A key characteristic of this AMM is that it may feature a hybrid version of both liquidity pools and traditional order book models. The Cosmos developers believe that this might be the main reason why Gravity DEX could be one of the most efficient automated market makers (AMMs) in the crypto market.

Visual representations of an order book, liquidity pool, and hybrid model for Gravity DEX. Source: Gravity DEX Light Paper

An innovation such as this one, which enables AMMs and connecting different blockchains, could make Cosmos one of the best networks in the crypto market. The addition of the IBC feature has already had a positive impact on Cosmos and is likely to continue doing so in the coming years.

Another feature that Cosmos plans to add in the coming months is Gravity Bridge. This feature plans to add a peg zone directly connected to the Cosmos Hub so that tokens of different blockchains (i.e., Ethereum) can be used directly to secure the Cosmos network and be staked by users. 

Because of all these features and a limited supply that makes its price deflationary and the upcoming updates in the Cosmos network that may increase demand, the price of ATOM may increase in the future.

The Bottom Line

To sum up, the Cosmos ecosystem is proud to be one of the most sustainable networks in the crypto market. Not only does it solve scalability issues and provide sovereignty for developers with the Cosmos SDK, but it also connects different blockchains by providing a medium for co-working. Undoubtedly, the technology used can boost network expansion, and community support helps foster an even better cosmos ecosystem. Still, the future of Cosmos is unpredictable.

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

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