Often called the internet of blockchains, Cosmos is a decentralized network designed to connect different blockchains to exchange data and value. Blockchain networks like Bitcoin and Ethereum, and many others, are designed to work in isolation. Cosmos helps blockchain networks overcome this.

Cosmos creates a system of interconnected roads that other networks can connect with. At the heart of this ecosystem is the Cosmos Hub, the primary blockchain of the network.

A creation of founders Jae Kwon and Ethan Buchman, its native utility ATOM token was launched through an initial coin offering (ICO) in 2017. An ICO is an event where blockchain projects sell the native token prior to development and launch to raise funds.

The Cosmos network went live in 2019.

Cosmos key points

• Cosmos allows different blockchains to communicate and swap assets, solving the problem of isolated “siloed” networks.
• Its Cosmos software development kit (SDK) is a tool that allows developers to launch a new blockchain in a fraction of the time than creating one from scratch.
• ATOM’s supply grows over time because new tokens are regularly created. Token creation depends on how much ATOM people are staking compared to how much is circulating in the market.

History of Cosmos (ATOM)

The co-founders of Cosmos, Jae Kwon and Ethan Buchman, initially built Tendermint. This is a proof-of-stake (PoS) protocol that helps different computers (and therefore blockchains) reach consensus with a wide range of tolerance.

The Tendermint protocol was launched in 2014, and the Cosmos project was announced in 2016 through its Cosmos whitepaper. The paper addressed one of the biggest issues faced by blockchain networks: fragmentation and isolation.

Instead of building another blockchain that would attempt to be the king of all, the developers approached the issue by deciding to make a single network that all others can connect to, even if they are incompatible.

Today, there are several blockchains that connect with it, with all kinds of decentralized finance (DeFi) activities happening. Cosmos even has its own DeFi dedicated Osmosis blockchain, allowing crypto holders on connected chains to trade, stake, and even provide liquidity.

The Cosmos SDK has helped launch some of the biggest networks, including Binance’s BNB Chain and the ill-fated Terra Luna, which collapsed in 2022 due to poor financial modelling.

Cosmos Staking

Unlike Bitcoin and (at the time) Ethereum, Cosmos uses a different mechanism to secure transactions on its network. Instead of using proof-of-work (PoW) that requires computing power to mathematically mine a block, Cosmos employs proof-of-stake (PoS). A block is a computer file that contains a set of crypto transactions.

Instead of network maintainers using large computer servers that take up a lot of energy, Cosmos maintainers (known as validators) stake their ATOM tokens. Think of it like putting up a security deposit. By locking tokens, validators help to vouch for the transactions on the network. In exchange, the network rewards validators with more ATOM tokens.

While validators maintain the network, ordinary users can also partake in the rewards. Using any compatible private wallet, users can stake their ATOM tokens to the validator of their choice. Once the validator earns rewards, it keeps a small portion and distributes the rest to stakers. 

Cosmos (ATOM) use cases & real-world applications

The primary use case for Cosmos is interoperability of different blockchain networks. Imagine you hold a loyalty card of a specific grocery chain. You have racked up points, but that banana bread you crave is from another store. How do you spend your points from the first store to the other? Frustratingly, you can’t.

But what if someone said they could help you use your points there? That is what Cosmos is.

At the heart of Cosmos is its native ATOM token. Beyond moving money, Cosmos offers several utilities:

• Custom blockchains: Any developer or firm can use the Cosmos SDK and build a blockchain for their specialized needs. 
• Gas fee: The ATOM token is used to pay for gas fees (the cost paid to validators to approve transactions).  This includes simple payment transfers or using smart contracts (automated programs that help execute complex orders, such as trades or swaps).
• Governance: If you own ATOM, you have a seat at the table. You can vote on proposals that decide the future of the network.
• Shared security: New chains can bank on the Cosmos Hub as the base layer for their security till they can run their own.

Cosmos (ATOM) vs Polkadot (DOT)

Polkadot and Cosmos share the same multi-chain mission, but take different paths. Instead of connecting different networks like Cosmos, Polkadot has its own network of chains (called parachains).

These parachains are offshoots, each working separately, but bound to the relay chain. The hub provides all the security. This gives smaller parachains the same level of security as the strongest chain in the network.

In Cosmos, every blockchain is independent and responsible for its own security. This gives Cosmos chains more freedom, whereas Polkadot chains are more tightly controlled but benefit from shared protection.

How to buy Cosmos (ATOM)

Cosmos’ ATOM can be bought through three different methods:

• Centralized exchanges (CEXs): ATOM is tradable on nearly every major CEX like Binance, Coinbase, OKX, and others.
• Decentralized exchanges (DEXs): ATOM is available on DEXs such as Pancakeswap, Uniswap, and of course, its very own Osmosis.

You will need crypto funds in your exchange or wallet to buy ATOM. But some CEXs and crypto purchasing services allow users to acquire ATOM by directly paying with their debit or credit card.

Cosmos forked and created AtomOne

A controversial proposal back in 2023 caused a rift in the Cosmos, calling for a reduction in the inflation of the ATOM token. The community split, and co-founder Jae Kwon took the side to keep Cosmos as it is.

The split resulted in Kwon forking Cosmos (forking is the act of splitting a chain in two, where they become independent entities) and creating AtomOne.

Cosmos FAQs

How does ATOM token create value for its users?

ATOM, the native token on Cosmos, offers several utilities, such as being used for gas fees, staking to secure the network (and gain rewards), and even gaining voting rights on proposals to bring in changes in the network.

Who are the people behind Cosmos?

Cosmos was co-founded by Jae Kwon and Ethan Buchman. They are pioneers who created “Tendermint,” the engine that powers not just Cosmos, but dozens of other major blockchains.

Does ATOM have a maximum supply?

Unlike Bitcoin, ATOM does not have a hard cap. It is inflationary, meaning new tokens are created to pay stakers. However, the community is actively voting on reforms to lower this inflation and make the token more scarce over time.

Does ATOM have real-world value outside Cosmos?

As a cryptocurrency, ATOM is tradable on nearly all major crypto exchanges. If someone is willing to accept it, you can even use it as a payment method. However, unlike regular money (fiat), ATOM is a cryptocurrency that tends to be volatile.