To The Moon: Is Investing in ATOM Cosmos Crypto a Good Idea?

To The Moon: Is Investing in ATOM Cosmos Crypto a Good Idea?

Interoperability—talk about a $10 word, eh. But what does it mean? And will Cosmos make it a reality? Here's what you need to know.

To The Moon: Is Investing in ATOM Cosmos Crypto a Good Idea?
Guy Ovadia

Published Mar 29, 2022Updated Mar 29, 2022

Crypto

Crypto

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With all these new blockchains popping up, interoperability is quickly becoming the name of the game. Investors who are heavily exposed to assets on one network, like Bitcoin or Ethereum, are constantly looking for secure ways to transfer crypto across networks. 

Cosmos is an innovative network and IBC is, hands down, one of the best interchain protocols.

While cross-chain solutions are nothing new, Cosmos crypto is taking a different approach by creating a network of independent blockchains connected through the Inter-Blockchain Communication protocol (IBC).

What is Cosmos crypto?

Cosmos is a network that connects independent blockchains together but is also an open-source software development kit (SDK). These independent blockchains are called zones, with the first zone being the Cosmos Hub. The native ATOM coin and other compatible assets can be transferred between zones through the intermediary Cosmos Hub, so you can think of it as the central blockchain which connects and secures a network of interconnected blockchains.

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Cosmos Tendermint

Cosmos is secured using an open-source proof-of-stake consensus protocol called Tendermint. Tendermint was developed for the Cosmos ecosystem to be byzantine fault-tolerant—which means the network can continue operating even if one node breaches protocol to behave maliciously. 

Cosmos ATOM staking

Nodes are computers that store the blockchain data, and the top 100 nodes that stake the most ATOM on Cosmos can become validators. This grants them voting power to participate in the protocol for which they earn transaction fees and newly minted ATOM. Delegators can also earn ATOM without a node by staking it with a validator.

Inter-blockchain communication protocol (IBC)

Cosmos is able to scale rapidly because new zones can be easily integrated with the Cosmos Hub. The Cosmos ecosystem relies on the IBC protocol to keep track of assets throughout different zones and to transfer them between zones. The IBC allows for cheap, practically instantaneous transfer of crypto assets between any two IBC enabled blockchains such as Terra, THORchain, Osmosis, and many more. 

Who is behind Cosmos crypto?

Cosmos was founded and developed by Jae Kwon and Ethan Buchman in 2014 and the network was launched in 2019 by the non-profit Interchain Foundation. The duo also developed the Tendermint consensus protocol, the Cosmos SDK, as well as the IBC protocol and the foundation held an initial coin offering for ATOM in 2017. According to the cosmos roadmap, the next item on the agenda is to enable liquid staking, which will allow users to transact with their staked ATOM.

ATOM price prediction

While ATOM plays a central role in the cosmos ecosystem, ATOM has little utility outside of providing incentives for securing the network. From a tokenomics perspective, the ATOM staking rewards Cosmos validators and delegators receive consist mainly of newly minted ATOM since transaction fees are usually cents. This means that ATOM's year-over-year inflation rate is high and can be anywhere from 7% to 20% year-over-year depending on the total staked supply, according to Kraken.

This high uncapped inflation rate and limited built-in utility doesn't exactly make ATOM enticing as far as cryptocurrency investments go, but the de facto use case of ATOM that gives it value is being the central currency of the Cosmos ecosystem. Although each Cosmos zone is an independently secured blockchain with its own native cryptocurrency, some zones have decided not to list their native asset on central exchanges and have instead relied on ATOM liquidity and IBS as the gateway to their blockchain. 

 

For instance, Osmosis is an IBC-enabled blockchain that operates within the Cosmos ecosystem as a decentralized exchange (DEX). However, Osmosis rejected offers from central exchanges to list their native OSMO token since they were essentially considered competitors, and instead encouraged investors who wanted to purchase OSMO to buy ATOM and convert it using their DEX. While this may support the ATOM price for a while, it surely won't last since ATOM has to compete against OSMO and other IBC assets with more inherent utility.

Is Cosmos ATOM a good investment?

The conclusion on ATOM is mixed. On the one hand, Cosmos is an innovative network and IBC is, hands down, one of the best interchain protocols. On the other hand, ATOM is really only used to secure the network and has no supply cap, which means it currently inflates in perpetuity. Since the ATOM price hit $20 one year ago, the price has maintained the same price range that has barely breached $40. With such high inflation and an uncapped supply, upward price action will be unlikely unless a new utility is introduced to ATOM.

How to Invest in ATOM Cosmos

Investors who want in on Cosmos can buy ATOM at most cryptocurrency exchanges like Coinbase. If you want to earn a yield on your ATOM but don't feel like messing with DeFi, Coinbase allows Cosmos investors to earn 5% APY by holding ATOM on the exchange. Although you might earn slightly more with DeFi staking, it's hard to beat the convenience Coinbase delivers.

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Coinbase

4.4

Crypto

Still here? You must be a person who wants some serious yield on your ATOM. Coinbase is all great fun and games for the kids, but if you're investing in crypto and don't have an account on Kraken, then what are you doing? Kraken is one of the top exchanges for staking cryptos like ETH, DOT, and, of course, ATOM. Stake ATOM on Kraken to earn 12% APR—a rate most centralized exchanges can't beat.

kraken
Kraken

Crypto

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