Steem power-down series - Cosmos (ATOM)

in #blockchainlast year (edited)

I used some of the STEEM from my power-down to buy a small amount of ATOM, the native currency on the Cosmos hub, which is part of the Cosmos network. Welcome to my third steem power-down post. Gotta love them free internet moneys!

What is ‘Cosmos’?

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I find the Cosmos ecosystem pretty challenging to get my head around. There are a lot of terminologies to understand in the Cosmos world including - Cosmos network, IBC, Tendermint, BFT, Cosmos Hub and ATOMs. Before writing this post I had to go back and watch some videos and read some articles for me to be able to explain why I think Cosmos is a sound investment alongside crypto mainstays like Bitcoin and Ethereum.

Truthfully, previously I just had a ‘gut’ feeling that ATOM was a worthy investment based on what a lot of clever people in the crypto space had to say about it. In particular, one podcast that grabbed my attention was Wyre‘s episode featuring Matt Luongo and James Prestwich, creators of tBTC, discussing projects outside Bitcoin and Ethereum that they were interested in. In Matt’s words, “Cosmos wants Bitcoin to be money and Cosmos is just the glue.” It’s not a cryptocurrency to compete with Bitcoin, nor is it a smart contract platform to compete with Ethereum, it’s an interoperability platform to coexist alongside both.

The Cosmos network comprises the IBC (Inter-Blockchain Communication) and protocols and SDKs that help developers to connect all the parts together. IBC and the other tools available to developers enable blockchains in the network to operate and connect with one another. They connect through Zones (‘heterogenous’ blockchains) and Hubs (specifically designed to connect blockchains).

What are ‘ATOM’s?

Whilst most people understand ATOM to be the native currency for the Cosmos network (or just Cosmos), this is not entirely true because it is only the native currency for Cosmos Hub, the first Hub launched on the Cosmos network.

I have followed with some interest the debate around the value proposition for the ATOM. It is not a traditional store of value like Bitcoin. There are currently not many use-cases for it. The main use-cases are:

  • speculation
  • staking
  • ’signalling’ (ie governance proposals and/or voting)

Currently most of the issued ATOMs issued are held by folks who are staking them to earn more ATOMs. This helps to secure the Cosmos Hub network. Since ATOMs are an inflationary token, not staking them results in holders being diluted. Transaction fees are also paid in ATOMs and these fees are divided among stakeholders. As the Hub is still in its infancy, the transaction volume on the network is still very low. The other thing is (which is discussed in more detail in the YouTube video I have included below) that the Cosmos Hub is the most trusted blockchain on IBC so it is expected to secure the exchange of value and data across many blockchains. As Zaki Manian explains in the video, “credibility will be a scarce resource” and the Cosmos Hub has credibility on IBC. He also makes the point that folks who believe in ATOMs as an investment rely on this credibility to protect their wealth. As long as demand for the Cosmos Hub outperforms supply, the value of ATOM tokens should continue to rise.

Learn more

Here are some of the excellent resources I used to help me compile this post: