Cosmos (ATOM)
June 14, 2022

Cosmos (ATOM)

Cosmos is a proof-of-stake network founded in 2014 by Jae Kwon and Ethan Buchman. The network is built up out of several different parts.

Cosmos (ATOM) - Connecting a galaxy of blockchains 

A universe full of opportunities is what crypto can bring, according to some. In this article, we discuss Cosmos and its native token, ATOM! What is Cosmos, how is it different, and what does it do? Let’s dive right in by answering the first one of these questions!

What is Cosmos

Within the crypto industry, we often move from talking about “Layer 1” blockchains like Bitcoin to Layer 2 solutions. These solutions are built on top of Layer 1 chains to help scale up transactions. But we can also go the other way to Layer 0 chains.

Layer 0 blockchains are networks that mainly try to solve the interoperability problem that blockchains face. While Bitcoin, for example, is especially good at safeguarding value and sending it over the internet peer-to-peer, another blockchain like Ethereum cannot directly communicate with it. Therefore, Cosmos aims to offer a platform for an internet of blockchains.

Cosmos is a proof-of-stake network founded in 2014 by Jae Kwon and Ethan Buchman. The network is built up out of several different parts. Firstly, there is the Cosmos Hub, the main chain of the network. But just as important are the Cosmos Zones. These are blockchains that are connected to the Cosmos Hub but are specialized in their own specific use-case.

To give you a clearer idea of how this works, we will give a simple example of how the Cosmos network does what it does best; being interoperable!

How does Cosmos work

To understand how Cosmos works, we need to understand the different gears. So let’s begin with the Cosmos Hub. Imagine the wheel of a bicycle with its spokes and central axle. The Cosmos Hub would be the central axle where all information that comes through the spokes is being handled. 

Through the Inter-Blockchain Communication Protocol (IBCP), the Hub keeps an eye on all the different Cosmos Zones. This information is stored on the Cosmos Hub, and thus it forms the central hub of everything within the Cosmos ecosystem. It is also the point through which communication between the different Zones flows.

Now, what are these Cosmos Zones we are talking about? In the bicycle wheel example we gave just now, the Zones would be the different spokes of the wheel. They are blockchains on their own that were built with the Cosmos SDK (software development kit). Blockchain networks built with the Cosmos SDK can communicate with the central hub and also communicate with other Cosmos-supported blockchains.

The beauty of this system is that these individual blockchains can specialize in their own use case. These Zones can then also act as intermediaries for other Zones to connect. However, each Zone has the authority to refuse other Zones if they rather not connect with them.

This system allows decentralized applications (dApps) on different blockchains to communicate with each other. Aside from the scaling aspect, making blockchain technology interoperable may cause the industry to innovate more and grow faster.

The utility of ATOM

One cannot make the cosmos without atoms, of course. ATOM is the native cryptocurrency of the Cosmos ecosystem, which serves several utilities. First and foremost, users pay transaction fees with ATOM. Secondly, holders can stake the crypto, making it possible to participate in the governance process. In other words, the more ATOM one stakes, the bigger the voting power for proposals becomes.

Staking allows holders to also participate in the consensus process. By staking ATOM through a validator, stakers receive rewards and help keep the network safe by validating transactions.

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