What is Cosmos Atom 2.0?

Introduction

Cosmos is popular as the blockchain that facilitates communication between network nodes without relying on centralized infrastructure. It is an open-source project that connects blockchains, establishing a fast, usable, scalable, and interoperable system. With the launch of Cosmos 2.0 in September 2022, the platform’s vision of becoming the “Internet of Blockchains” is quickly coming to fruition.

Cosmos 2.0 is an evolution that serves as a Layer 0 blockchain that establishes connections within the Cosmos ecosystem. Being an upgrade to the initial Cosmos infrastructure, it brings key changes like Liquidity Staking and Interchain Security. Additionally, Cosmos 2.0 improves the token economics of the Cosmos Hub, facilitating platform-specific economic activities.

In this article, we will give a comprehensive overview of the Cosmos ecosystem, specifically focusing on Cosmos Atom 2.0. We will also explore the various exciting new features in the Cosmos ecosystem, including its specifications, performance, availability, and uniqueness.

Understanding Cosmos Blockchain

Cosmos is the blockchain framework that aims to solve pertinent problems since the inception of blockchain. For instance, interoperability has always challenged blockchain developers because blockchain networks were not made to intercommunicate. Interoperability can be viewed as sending data from an Android to an iPhone operating system. Likewise, in blockchain, heterogeneous systems must communicate to foster technological adoption. However, before Cosmos, blockchain systems had a hard time intercommunicating and Cosmos brought the needed change.

Commonly called the Internet of Blockchains, Cosmos is a network of many blockchains that can interoperate and swap tokens between one another. Through a software development kit, blockchains in the Cosmos ecosystem are open-source. This offers developers flexibility and minimizes the complexity of the system.

Because the Cosmos network offers autonomous solutions for developers, application-specific blockchains can interoperate without creating smart contracts. The unique configuration of the Cosmos ecosystem, comprising hubs and zones, ensures that blockchains built on Cosmos can be independent and interoperable.

Cosmos Hubs and Zones

Source: Cryptonews

The developers of Cosmos realized that the blockchain landscape contained lots of hubs without spokes. In essence, there were several blockchains with exciting use cases that were not able to communicate effectively with one another. This birthed the innovation of the hubs and spoke model, a central hub that facilitates data transfer across various chains.

Cosmos Hub is integral to the Cosmos ecosystem as it serves as the primary hub where the zones or decentralized blockchain applications are linked. It is the first blockchain hosted on the Cosmos network and helps to maintain the record of each zone’s state. It also links all zones and allows for their seamless communication and interaction. Each zone has the capability of autonomous function and can authenticate transactions, create and distribute tokens, and make blockchain changes.

Inter Blockchain Communication (IBC)

IBC protocol facilitates data transfer, communication, and interoperability between independent blockchains. Unlike traditional blockchain systems, which cannot seamlessly interoperate, IBC bridges the connectivity gap by allowing chains to exchange data in a standardized way.

IBC protocols are effective because they allow for modularity. This ensures that even blockchains outside the Cosmos ecosystem can integrate IBC to interact with any IBC-enabled blockchain. This allows for an interconnected network of chains that seamlessly interact.

The light chain verification mechanism makes IBC efficient because chains use light clients to authenticate cryptographic proofs associated with the transactions on the other chain. IBC can also transfer tokens and data among hubs and zones. This model allows for a secure exchange of information. It also gives an assurance layer that ensures that a security breach on a chain doesn’t affect other chains connected to it.

Tendermint Byzantine Fault Tolerance (BFT)

The team at Cosmos has provided a software development kit, also called Cosmos SDK, that allows developers to build fast, cheap, and simple zones. These SDK tools use the Tendermint Byzantine Fault Tolerance (BFT) consensus mechanism to secure the network, allowing developers to create blockchains without coding them from scratch.

The BFT functions by validating transactions and executing blocks on the blockchain. Using a proof-of-stake governance mechanism, it integrates all the distributed networks on Cosmos. For optimal functionality, network participants can stake ATOM and earn rewards. The top ATOM stakers then become validators, powering the blockchain and voting on changes. This model incentivizes participation and prompts stakeholders to perform honestly.

The Problems Cosmos Solve

In the earlier days of Web 3.0, blockchains were not built to interact effectively with other chains. Unlike the Web 2.0 internet, where most communications happen between centralized servers, blockchain servers are decentralized and built to be independent. However, this feature greatly reduced the use case of blockchain systems because there was a need for interaction among different chains. Cosmos emerged to solve these problems, aiming to become the internet of blockchains that allows communication among different chains in a decentralized manner. Through Cosmos hubs and zones, the Cosmos team is building a full suite of services that solve pertinent problems in Web 3.0. The problems are outlined below:

Scalability

Unlike the proof-of-work consensus protocol, which is slow, expensive, and harmful to the environment, Cosmos systems are optimized for scalability. By utilizing the tools at its disposal, such as Tendermint BFT, Cosmos SDK, and IBC, Cosmos guarantees the functioning of a scalable system. Because it allows for interoperability between different blockchains, Cosmos can integrate various platforms for at-scale functionality.

Sovereignty

Another problem that Cosmos aims to solve in blockchain systems is sovereignty and usability. Many platforms, including Ethereum Virtual Machine function as sandbox solutions, making developers cater to many potential use cases rather than focusing on a specific problem. With the launch of Cosmos SDK, Cosmos offers user-friendly and customizable solutions for blockchain development. The Cosmos SDK also allows developers to build sovereign applications that interconnect with other chains without high transaction costs.

Interoperability

The lack of interoperability between blockchain systems is another problem Cosmos attempts to solve. Blockchain-based systems are customarily siloed, isolated from each other, and incapable of exchanging data or assets among one another. Through the IBC protocol, the Cosmos platform aims to resolve this issue seamlessly. The technology functions as a messaging protocol or internet for blockchains, resembling TCP/IP solutions.

Cosmos Atom 2.0

Source: Coingape

The co-founders and core contributors of Cosmos released an updated whitepaper on September 26, 2022, outlining Cosmos’ fresh vision and a new economic model of ATOM. Cosmos Atom 2.0 is an evolution of the Cosmos Hub, functioning as the Layer 0 blockchain that connects all the participants in the Cosmos ecosystem.

Interchain Security and Liquidity Staking are the key changes in Cosmos Atom 2.0, which greatly enhance the security and scalability of the Cosmos ecosystem. With Interchain Security, larger chains can secure smaller chains, providing overall consolidation in the security capabilities of the Cosmos ecosystem. Furthermore, Liquid Staking unlocks capital efficiency and liquidity, allowing network participants to use their staked assets across different Cosmos chains.

In addition to these features, Cosmos Atom 2.0 introduces changes to the token economics of the Cosmos ecosystem. According to the updated whitepaper, there is a fixed target issuance of 300,000 ATOM per month. This aims to fund the community pool and support hub-specific functionalities sustainably. The changes to ATOM’s token economics support its long-term stability and attractiveness as a collateral asset within the Cosmos ecosystem.

How Does Cosmos Atom 2.0 Work?

The Cosmos Atom 2.0 is an improvement to the previous Cosmos platform where on-chain infrastructures and blockchains are interconnected. In a bid to enhance the security and scalability of the platform, the new upgrade offers key changes like Interchain Security and Liquid Staking.

Interchain Security

Interchain Security empowers independent projects to build on the Cosmos Hub with Liquid Staking being the interchain reserve asset (Source: Cosmos Atom 2.0 Whitepaper)

Since interoperability is a core goal of Cosmos, the Atom 2.0 update focuses squarely on ensuring secure and scalable connections across different chains. Interchain Security facilitates the establishment of a security mechanism for all interchain native applications and infrastructures within the Cosmos network. In addition to bolstering cross-chain security, Interchain Security can also help in resource allocation and better utilization of staked assets.

Provider chains, typically larger and more established, ensure the security of smaller chains, known as consumer chains. Through Interchain Security, smaller chains can leverage the enhanced security of larger chains, like Cosmos Hub, to protect against attacks. For a better understanding of Interchain Security, let’s explore its key elements:

1) Provider chains: The established and reliable chain that provides security for consumer chains. An example is the Cosmos Hub.

2) Consumer chains: The smaller chain that benefits security from the provider chain.

3) Slashing: A mechanism that penalizes unscrupulous behavior by validators on the provider chain. These bad actors are penalized, ensuring the security of the smaller consumer chains,

4) Staked assets: Staked assets are provided by validators serving as collateral for securing the consumer chains on the network.

5) Gas fees: Transaction fees paid by consumer chains to enjoy the security services of a provider chain.

Liquid Staking

Liquid staking aims to revolutionize the utilization of staked collaterals on the Cosmos ecosystem by allowing users to convert their staked assets into liquid tokens which can be freely traded across various Cosmos chains. This favorable update brings capital efficiency and enhanced liquidity to the Cosmos economy, empowering participants to maximize the earnings from their staked assets.

The advent of liquid staking brings a wide range of possibilities to ATOM holders. They can now use their staked assets as collaterals in yield farming, lending, and borrowing activities while earning rewards. This empowers all network participants and brings inclusivity to the financial activities of the growing ecosystem. Liquid Staking also upholds Cosmos’ vision of creating an interconnected blockchain ecosystem by allowing for a seamless flow of assets across different chains, allowing participants to explore new opportunities.

Cosmos Atom 2.0: Token Economics

Source: Coincodecap

The release of Atom 2.0 has also brought significant changes to the token economics of Cosmos. These changes aim to ensure the long-term sustainability of the Cosmos network and improve the attractiveness of ATOM as a collateral asset within the ecosystem. The key changes to Cosmos tokenomics include the implementation of fixed target issuance, a fee-burning mechanism, and ongoing value accrual.

To ensure the financial sustainability of the Cosmos ecosystem, the platform aims to implement the fixed target issuance of 300,000 ATOM per month. This issuance, which seeks to fund the community pool and support hub-specific functions, will be administered in phases to ensure a smooth transition. Initially, issuance will be set at 10 million per month, gradually reducing subsequently. This gradual decrease will help maintain the value of ATOM while shielding against sudden disruptions to the network.

New ATOM issuance from the time of activation

Cumulative ATOM issuance from the time of activation (Source: Cosmos Atom 2.0 Whitepaper)

Atom 2.0 also introduces a fee-burning mechanism where a portion of transaction gas fees generated from the transactions on the Cosmos network will be permanently removed from circulation. This will essentially reduce the supply of ATOM tokens and create a deflationary effect where the tokens become scarce and accrue value over time. By this mechanism, the platform incentivizes long-term holding of ATOM tokens while making a positive feedback loop for the ecosystem.

Is ATOM a Good Investment?

ATOM has seen significant gains since its inception because of its massive utility and superior technology. Although each zone on Cosmos can issue and use its cryptocurrency, ATOM is the primary token utilized in the Cosmos ecosystem. It is integral in maintaining interoperability across the network, and the token can be sent, exchanged, held, spent, or staked.

With many zones and hubs relying on the platform’s security and transparency, ATOM becomes more valuable, especially as adoption surges. The new Cosmos Atom 2.0 update, which offers improved technology, monetary policy, and value proposition, will activate more adoption within the blockchain community.

It is noteworthy that there is no cap on ATOM’s circulation supply, and Cosmos adjusts the circulating volume of tokens based on the number of ATOM tokens being staked. Because ATOM is already listed on popular exchanges, including Gate.io, it is easy to own the token and be a part of the Cosmos community.

Like any investment, ATOM carries inherent risks like the volatility of the cryptocurrency market and changes in the regulatory landscape. Investors should always do their research and assess their risk tolerance before investing in any cryptocurrency asset. Moreover, investing in ATOM, or any other cryptocurrency, does not guarantee automatic profit and could result in financial losses. So, investors are advised only to inject an amount they can afford to lose in the assets.

How to Own ATOM?

ATOM can be purchased from centralized and decentralized cryptocurrency exchanges. For instance, Gate.io offers ATOM/USDT and ATOM/BTC trading pair options. To own the token, create a Gate.io account and complete the registration process. After that, fund your spot trading account and go through the steps to buy ATOM.

Conclusion

Cosmos Atom 2.0 ushers in significant improvements to the Cosmos platform, improving its functionalities and positioning it as a leader in the blockchain industry. It also relays the team’s commitment to evolution, sustainability, and continuous improvement. The introduction of Interchain Security and Liquid Staking enhances the security, scalability, and value accrual of the Cosmos ecosystem, providing participants with a consolidated and efficient platform.

Looking ahead, Cosmos will continue to thrive as a platform for interchain-native infrastructure and applications, where the seamless transfer of assets and data between different chains remains a priority. This will enable developers to build interconnected solutions, enabling interoperability and inclusivity within the Cosmos ecosystem. With a robust tеchnical foundation, a commitmеnt to dеcеntralization, and a clear roadmap for futurе dеvеlopmеnt, Cosmos is setting new standards in the blockchain industry.