ATOM accrues value from staking rewards & airdrops

Cosmos Atom tokens Image credit: Cosmos.network/intro
Bitcoin and Crypto Market Watch Thursday, August 11, 2022 - 19:31

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Currently ranked among the top 50 blockchains, Cosmos (ATOM) was created to tackle some of the hardest problems faced by proof of work (PoW) protocols like high cost, scalability, high energy expenditure etc. On top of it, every decentralized application (Dapp) has its own problem and creating chains was hard. In today’s article, we will briefly talk about the Cosmos ecosystem and what it aspires to do for the blockchain world. 

Cosmos - basics

Cosmos is an ecosystem of independent blockchains that can scale and communicate with each other. Cosmos in itself is not a blockchain. It is a blueprint for designing application-specific blockchains called Zones. The ecosystem consists of Hubs and Zones. 

The Hub on Cosmos network is the first blockchain. It acts as a router for Zones. ATOM is the utility token of Cosmos Hub. Hub doesn't support smart contracts because introducing smart contracts also introduces chances of exploitation.

Hub is designed to create an interoperable & scalable economy by allowing thousands of Zones to be connected with each other. The Hub doesn't care about what logic & state the connected Zones have, it can be anything about Gaming, content or payments, etc. All it knows is who is responsible for signing & how the validator set is mutating.

Zones

Zones are Blockchains that are connected to the Hub. Zones have their own tokens & Validator set. And as of now, there are currently 49 Zones on the Cosmos. And each Zone is powered by consensus algorithms that have fast finality like Tendermint. This means that any Blockchain with fast finality can be connected to the Hub and use IBC. Tendermint is a consensus engine but it’s also an algorithm. Cosmos is a web of computers on various operating systems (OS) in which Tendermint is an OS like Windows or Linux. 

What is Cosmos SDK?

Cosmos SDK is a development framework that helps in Blockchain creation for any use case.

It is good at modularity with which one can tweak any part of the Blockchain. Cosmos SDK comes with some predetermined modules like the IBC module, Staking, Governance fee distribution, and banking module to help with the multi-assets.

How does Cosmos take interoperability to the next level?

The connection between Blockchains is achieved by Inter-Blockchain Communication (IBC). IBC is more than just a bridge, it's a general-purpose message passing protocol. IBC leverages the instant finality of Tendermint, although it can work with any fast-finality blockchains. IBC is like TCP/IP (internet protocol). 

Conclusion

For now, ATOM accrues value from staking rewards & Airdrops. Counting only the airdrops ATOM stakers have received, that's alone worth thousands of dollars. After proposed security updates (in order to secure Proof of Stake chains) to the ecosystem, the value accruing mechanism of ATOM is expected to grow multifold. Though one major drawback observed by crypto enthusiasts is the tokenomics of ATOM which is inflationary (12% per annum).

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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