Cosmos - $ATOM, Asset Review
Figure A
General Information-What is Cosmos?
Cosmos Background
Cosmos Funding/Collaboration
Token Information-Tokenomics
Staking
Additional Information-
ATOM 2.0
Technical Analysis
Conclusion
General Information-
What is Cosmos?
Cosmos is a Layer-1 Hub where developers can build and connect blockchains that can transact with each other. By doing so, it will allow for a decentralized way that blockchains may communicate and brings together multiple chains. This vision has been completed through open source tools like Tendermint, Cosmos SDK, and IBC which allows developers to build interoperable applications securely. In my opinion, I believe the IBC is the secret sauce that brings the most value to the Cosmos network. No blockchain currently offers the framework at this level for public and private blockchains the way IBC has allowed. Cosmos also can process 10,000 transactions per second with an average confirmation time of a few seconds. Impressive.
Figure B
2. Cosmos Background
Cosmos is a project based out of Zug Zug, Switzerland, and was founded by Ethan Buchman, and Jae Kwon in 2016. The founders created Cosmos because they wanted to: (1) Create a blockchain that is powerful and easy to develop. (2) Enable other blockchains to transfer value with each other via IBC. (3) Having a blockchain that can scale to millions of users through both horizontal and vertical scalability solutions. The founders believe they can help build a decentralized internet & global financial system with the tools they’ve built. It's also important to note both founders, created Tendermint. Tendermint was created in 2014 and it helps developers build their blockchain. Tendermint allows one to write in any language and creates an interoperable network. So you can see, that even in their early days they wanted to make networks communicate via interoperability.
3. Cosmos Funding/Collaboration
The Interchain Foundation held a few private and public sales in 2017, raising a total of 17 million dollars. Cosmos has prominent investors like HashKey, Pantera Capital, DragonFly Capital, Paradigm, Blocktree Capital, Dokia Capital, and 1Confirmation. At the time of writing, there are currently about 49 zones that are connected to the Cosmos IBC. Blockchains like Osmosis, Juno, Secret, Injective, Cronos, Fet, and Evmos are all connected via the IBC per the graphic below. Earlier this year in January there were only 22 and it has doubled which shows how useful connecting via IBC is. Cosmos doesn’t have many click-baity partnerships but they did partner with Forte gaming to integrate blockchain enable games. While there is no confirmation of a game just yet, I am sure soon we will hear more unfolding.
Figure C
Token Information
Tokenomics
$ATOM is the native token for the Cosmos Hub. Currently, the circulating supply is 292,586,163 with no max capped supply according to Coingecko. The token $ATOM is used for paying out stakers for securing the network, similar to other Proof-Of-Stake blockchains. $ATOM is also used to pay transaction fees, take part in the governance, and delegate their tokens on the network. The supply breakdown of the initial supply is referenced in Figure E(below). 80% of the initial supply is allocated to investors and the remaining 20% was allocated to the founders and the project. Regarding the supply schedule, it appears that $ATOM has a 7% inflation schedule yearly according to Messari.io.
Figure D
Figure E
2. Staking
$ATOM token holders may contribute to the network by staking. Staking rewards are 18% and have no minimum requirements of tokens to delegate. Validators may earn 19.44% rewards and have no minimum required tokens as well. Both options have a lock-up period of 21 days to stake tokens. Currently, 66.4% of all circulating supply is staked and 150,981 unique addresses are staking their $ATOM tokens. It is quite interesting that stakers have doubled during the time the ATOM 2.0 release was shared amongst the public.
Figure F
Additional Information-
ATOM 2.0
ATOM 2.0 was recently introduced which will impact the blockchain in major ways should the community vote for it. The main takeaways are interchain security, liquid staking, and token issuance. With these features being enhanced/introduced the goal is to make the token more deployed across the interchain which may* drive the $ATOM token higher. In a recent interview, Ethan stated that as long as 2/3 of the network is staking $ATOM, the issuance will drop significantly. This feature was highly requested amongst the community and now may be integrated. This soon-to-be-integrated update has already attracted developers to build on the Cosmos ecosystem per the below image.
Figure G
2. Technical Analysis
Figure H
$ATOM has had a great run from $.96 to $45 yielding ~40x returns. Ever since $ATOM hit all-time highs, we have seen the price fall and start rallying upwards into resistance(blue box). Price is likely to consolidate before making a new move. The way the correction subdivides will give hints on how the next move plays out. Bottom structures typically take a long time to form and reverse when the bears are exhausted, so it's best to stay patient for a clear pattern. It is possible to retrace back to $9 again as the structure is not very clear. All in all, the price action of this chart is bullish over the long term. Holding above the grey zone is crucial which is the key support/resistance level.
Conclusion
I think after learning about the Cosmos hub I can confidently tell you that it's vastly different than any other layer-1 protocol. Usually, when you think of a layer-1 you may check out things like TPS, Fee cost, and scalability, but Cosmos is aiming to be way more than that. Yes, those things are important but I think there is a lack of interoperability in this space, and that’s what Cosmos is solving. Cosmos’s main agenda is to link as many chains to their network which will allow other blockchains to communicate with each other. It doesn’t have to benefit Cosmos directly which is the hidden element, there may be a $CRONOS to $JUNO connection that happens on the IBC, but that isn’t achievable on many other blockchains. When you think about a world that is going into DeFi, GameFi, and so much more interoperability opens new realms of imagination. This makes me bullish on the future of Cosmos, however, it doesn’t mean it’s correlated to the value of $ATOM. (p.s. Ethereum just merged to a PoS consensus which may mean they will soon integrate into the IBC, should be fun to watch 😉)