What is Cosmos coin (ATOM) and why is it called blockchain 3.0?

- 7 minute read

Mike Hesp
Content Creator
Mike Hesp

The blockchain is still relatively young. Nevertheless, developers and organisations are constantly looking for the next phase for the blockchain. Also, the IFC (Interchain Foundation) has its own version. The result? The cryptocurrency Cosmos. Cosmos is called blockchain 3.0 because the network is faster and more scalable than the older blockchains.

Table of Contents

  1. What is Cosmos?
  2. Cosmos coin price
  3. How does the Cosmos network work?
  4. Tokenomics of ATOM
  5. Cosmos coin vs Ethereum 1.0
  6. Cosmos roadmap
  7. Conclusion

What is Cosmos?

Cosmos is a Proof-of-Stake cryptocurrency and was conceived by the ICF (Interchain foundation) in 2014. In 2016, Cosmos was officially introduced by its owners Jae Kwon and Ethan Buchman. In 2017, Cosmos coin named ATOM was officially launched using an ICO (Initial Coin Offering). An ICO is a fundraising activity that raises funds from investors who want to co-invest in the project. In return, the investors receive ATOM coins.

Cosmos is a blockchain of its own. The organization even calls Cosmos blockchain 3.0. They see problems with the large and well-known blockchains such as Bitcoin and Ethereum and claim that Cosmos is a better version. The Cosmos blockchain, according to its developers, solves several problems that other blockchains face such as, scalability, sovereignty, usability, and interoperability. In particular, the limitations of Bitcoin and its scale problems were reasons for the Cosmos developers to create a better alternative.

In the early years of Bitcoin and Ethereum, their transaction speed was sufficient, but especially in the last few years, the market has grown enormously, leading to more transactions. Because the older blockchains suffer from scalability problems, the transaction speed is low, what’s making it more expensive to carry out transactions.

As mentioned earlier, Cosmos calls itself a blockchain 3.0 and not without reason. The blockchain makes it possible to run multiple or different blockchains via Cosmos. The handy thing about this is that blockchains can be linked more easily. This means that Cosmos is a decentralised network where individual blockchains can be linked together. This concerns blockchains that are built on Cosmos, but also blockchains that are not built on the Cosmos blockchain, such as Ethereum and Bitcoin.

Cosmos coin price

How does the Cosmos network work?

The Cosmos blockchain uses the Proof-of-Stake (PoS) algorithm, which means that blocks are traced and transactions are carried out by means of strike. The network remains functional through the staking of 'ATOM' tokens. ATOM is the coin that is linked to Cosmos coin and enables the execution of transactions.

Cosmos is a Dual-Layer blockchain, which means that the blockchain consists of two layers. The first layer wraps the network in a generic engine. In other words, the network appears to function without any attention being paid to it, allowing developers to focus on developing applications on the blockchain instead of ensuring that the network continues to work.

The second layer of Cosmos is used to build applications on. This is comparable to Ethereum, where applications in the form of smart contracts can also be built on the second layer. This is where Cosmos immediately makes its difference, because on the Ethereum blockchain, only Dapps can be added to the blockchain. Dapps are applications built on the Ethereum blockchain. On the Cosmos blockchain, it is possible to add applications that do not use the network, making the network a lot more user-friendly.

Tendermint BFT

The first layer is also called the Tendermint BFT. BFT stands for Byzantine Fault-Tolerance and is, in other words, the consensus algorithm of Cosmos that ensures that blocks are validated and transactions executed. BFT also ensures that the network is protected against malicious parties who try to abuse the network.

Cosmos SDK

The second layer of Cosmos is the application layer called Cosmos SDK. The application layer makes it possible to add individual applications, in this case other blockchains, to the Cosmos network. The Cosmos SDK (Software Development Kit) can translate several popular programming languages such as Java and C++ so that the Cosmos network can understand it.

IBC connection

Part of the second layer is the Inter Blockchain Communications protocol (IBC). IBC consists of a hub with zones connected to it, making it possible for other blockchains to send tokens to each other.

Tokenomics of ATOM

ATOM coin is the token that is linked to Cosmos. The network therefore needs ATOM to keep functioning. This is done by using the Proof-of-Stake (PoS) algorithm. The network keeps functioning because owners of ATOM coins delegate their tokens to the network. In other words, they make their ATOM coins available to the network for a longer period, thus acting as a validator. A validator checks the blocks and enables transactions to be carried out.

In 2017, through the Interchain Foundation, the distribution of coins was done in five different phases. The five phases are:

  • The seed contributors (specifically investments from acquaintances, friends, and family) received 5% of the initial stock equivalent to 11,809,947.91 ATOM coins. This was a $300,000 investment and has a value of $363 million at the time of writing.
  • The early investors received 7.1% of the initial stock which equals 16,856,718.97 ATOM coins. This was an investment of $1,329,472.3 and is worth $480 million at the time of writing.
  • The public contributors received 67.9% of the initial stock, equal to160,293,050 ATOMs, in exchange for $16,029,305.06 collected in BTC or ETH.
  • The ICF has received 10% of the coins to continue developing Cosmos, which has been distributed to 984 wallets. In total, this amounts to 236,198,958.12 ATOM coins.
  • The makers of Tendermint BFT received 10% of the initial stock which is 23,619,895.81 ATOM coins, for developing the open-source IP used by the Cosmos network.
  • The investors who participated in the ICO received 67.9% of the initial stock which equals 160,293,050 ATOM coins. This represented an investment of $16,029,305.06 and has a value of $4.5 billion at the time of writing.

At the time of writing ATOM has a value of $28.55 per ATOM coin. This is 36.39% less than the all-time high measured on 20 September last year. At that time the coin had a value of $44.70 per ATOM coin.

Cosmos coin vs Ethereum 1.0

Zoals al eerder aangegeven is Cosmos ontstaan om problemen waar onder andere Ethereum mee te maken krijgt op te lossen. Er zijn een aantal belangrijke verschillen tussen deze twee blockchains:

Ethereum 1.0 Network Cosmos Network
Smart contracts (Dapps) built on the Ethereum network. Applications built on different blockchains.
15 transactions per second. 10.000 transactions per second.
Debugging in applications must be approved by Ethereum's operating system. The fact that applications can be built on the network on their own blockchain creates sovereignty.
Token transfer to other applications built on the Ethereum network. Send tokens to applications on other blockchains.
Transaction fees at times over $100 per transaction. $0.01 per transaction.

Cosmos roadmap

The developers behind Cosmos keep coming up with new upgrades. A living roadmap called ' The Cosmos Hub Roadmap 2.0' has been published since 2018 and is still being worked on today. For example, four more upgrades are expected by the year 2022.

v7-Theta Upgrade (expected Q1 2022)

  • Gaia v7.0.x
  • Cosmos SDK v0.45
  • Gravity DEX: Liquidity v1.4.5
  • IBC 3.0.0

v8-Rho Upgrade (expected Q2 2022)

  • Gaia v8.0.x
  • Cosmos SDK v0.46
  • Tendermint v0.35
  • IBC 3.1.0
  • Interchain Account Message
  • Liquid Staking
  • Wasmd
  • Budget Module
  • Global Fee Module

v9-Lambda Upgrade (expected Q3 2022)

  • Gaia v9.0.x
  • Interchain Security v1 - Required Participation of Provider Chain Validators
  • Chain Name Service

v10-Epsilon (expected Q4 2022)

  • Gaia v10.0.x
  • Interchain Security v2 - Opt-In Participation of Provider Chain Validators
  • Cosmos SDK v0.47
  • IBC Queries

Conclusion

The Cosmos network aims to solve problems that older blockchain such as Ethereum and Bitcoin run into. Sovereignty, scalability and usability are elements in which Cosmos wants to excel. By using tendermint BFT, Cosmos SDK and IBC connection, the network can handle 10,000 transactions per second. In addition, other blockchains can use the network and the transaction costs are only $0.01 per transaction. These functionalities, among others, have ensured that there is a great deal of confidence in the project and the value per ATOM has reached $44.70. Cosmos has released a roadmap that runs until early 2023 and is expected to do four upgrades in 2022. What impact the upgrades will have is hard to say, but that the project continues to develop is a positive observation.