Cosmos, not to be confused with outer space stuff, is an open-source blockchain platform. Atom (ATOM) is the main cryptocurrency existing on the Cosmos platform. Cosmos is a recent entry into the crypto space but is showing a lot of potentials. Traders and analysts are considering it to be a competitor to Avalanche (AVAX). Moreover, traders are predicting that Cosmos can do an AVAX-like surge to the $100 price point shortly. Cosmos is seeing a bullish trend recently. It increased by more than 330% from its June low of $7.82 to this week’s swing high of almost $32. A 330% increase in such a short period is amazing, but, what is the reason behind this surge?
The scarcity of circulating tokens might be a factor in attracting buyers to the market. According to statistics retrieved from the Messari database, roughly 64% of the current ATOM supply has been staked. Cosmos investors have pledged over 180 million ATOM tokens to become validators on the Cosmos Hub. It is a proof-of-stake blockchain that is one of the network’s many hubs. Users earn a share of the network’s transaction fees and block rewards in exchange.
If you are a veteran crypto investor, you will be familiar with the term staking. But for new investors, it raises some questions. Most importantly, what is Staking? It is a broad term that refers to the process of committing your crypto-assets to a cryptocurrency system in exchange for incentives. Staking allows users to contribute to the network’s security by locking up tokens. As a result, users get native tokens for safeguarding the network.
Not only that, it gets even better. You can earn a passive income from staking. What could be better than that? The greater the number of crypto-assets you commit, the greater the benefits. Because the incentives are dispersed on-chain, the process of earning them is automatic. It’s only a matter of staking them. That’s it, you stake them and they earn for you, while you sleep.
What are Cosmos and ATOM?
The Interchain Foundation (ICF) is behind the development of Cosmos. ICF is a Swiss non-profit that funds open-source blockchain projects. Cosmos seeks to build a network of crypto networks linked together by open-source tools for facilitating transactions across them. Its founding team referred to it as an “Internet of blockchains.” Each new independent blockchain within Cosmos links itself to the Cosmos Hub. These new independent blockchains are Zones. The Cosmos Hub keeps track of each zone’s state and vice versa.
The Cosmos network has three layers:
1. Application – Processes transactions and changes the network’s status.
2. Networking: Allows transactions and blockchains to exchange information.
3. Consensus: Assists nodes in reaching an agreement on the system’s current state.
Cosmos is made possible by the following tools:
Cosmos relies on the following open-source tools to connect all the layers and allow developers to construct blockchain applications:
Tendermint enables developers to create blockchains without having to construct them from the start.
2. Cosmos Hub and Zones
It operates as a bridge between all the autonomous blockchains generated inside the Cosmos network, known as zones. Each zone of Cosmos is capable of performing its primary activities on its own. The Cosmos Hub is in charge of allowing connectivity across all the network’s zones by keeping track of their statuses.
3. Inter-Blockchain Communication Protocol
Simply put, these are the nerves that connect Zones to the Cosmos Hub. It allows data to move freely and securely between each connecting zone.
4. Cosmos SDK
SDK stands for Software Development Kit. Thus, it is a tool that allows developers to build blockchains using Tendermint. The SDK reduces complexity by providing the most common functionality of blockchains, like staking, governance, and tokens. Developers may write plugins to provide any extra functionality they choose.
What makes Cosmos different?
Cosmos is attempting to overcome a lack of interoperability across blockchains. The primary problem is the isolation of blockchain-based economies from one another. Hence, making them incapable of moving assets between themselves. The Cosmos platform’s IBC protocol seeks to address this. This technology also serves as a message system for blockchains, like that of TCP/IP solutions.
Cosmos is also targeting blockchain usability and sovereignty as weaknesses. Popular platforms act as sandbox solutions. It pushes developers to optimise their apps for the majority of use cases rather than focusing on a specific problem. The Cosmos SDK seeks to provide a developer-friendly and flexible solution for blockchain development. Meanwhile, keeping the architectural compromises to a minimal.
Even after the establishment of apps, they must occasionally limit their sovereignty since they share a similar foundation. Cosmos’ IBC protocol allows the blockchains with different applications and validators to continue transferring assets and data among themselves. Additionally, this also includes transfers between private and public blockchains.
On the whole, this emphasis on interoperability and customisability distinguishes Cosmos from other initiatives.
Also read: What is Stablecoin and What Makes It Better?