Cosmos is a rapidly growing ecosystem of interoperable services and applications. Cosmos can be referred to as the “Internet of Blockchains”.
What is Cosmos?
Cosmos is an ecosystem of blockchains, if you have read our Polkadot article you can relate to the basics behind Cosmos. Cosmos is a proof-of-stake blockchain which adds to energy efficiency and positive price action, less Cosmos on exchanges, less supply. Cosmos can be viewed as an “Internet of Blockchains”, imagine each blockchain as a website, they communicate to each other through an internet connection. Cosmos aims to be that connection, in the past blockchains have suffered from interoperability issues. Cosmos allows each blockchain to have its own consensus and governance while maintaining the ability to communicate with other chains.
Cosmos uses the Tendermint engine to allow developers to save hundreds if not thousands of hours of development[1]. Tendermint is fully customizable. By using this base engine, developers do not have to worry about the intricate underlying protocol and can instead focus on application development. Tendermint allows for both public and private blockchain development, it also has the capability of creating 1 block per second and thousands of transactions per second. Since Tendermint has instant finality of transactions, this reduces the possibility of Forks, or a lapse of consensus among validators.
Tokenomics
Cosmo’s ATOM token is used for transaction fees on the Cosmos hub. The Cosmos hub is an intermediary between all of the projects built upon Cosmos. Cosmos uses three layers to help create this hub, the application layer, the network layer, and the consensus layer. Different blockchains building on Cosmos can utilize each layer as they see fit to customize their needs. Nodes staking and validating Cosmos gain governance voting rights, this is weighted by percentage of ownership. 75% of the total ATOM tokens were released upon initial funding. The initial token allocation seen below is favorable, they did add a cap to the crowdfunding as to avoid inflating the initial supply. ATOM has an inflation between 7-20%, this fluctuates based on how many ATOM tokens are staked overall. The two private companies that aided in funding had a 2 year vesting schedule, since Cosmos launched in 2017 this has long since passed, there is less worry about initial funders dumping on the market. A downside to ATOM currently is that there is no hard-capped currently the token is inflationary. Also since founders did not need to vest, they likely have taken some profit in the past 4 years. If there is enough demand to buy up the inflation, the price should maintain stability. Tokenomics can be changed favorably over time through on chain governance.
Projects Built on Cosmos
This is perhaps the most important part of Cosmos, and why I am bullish on the blockchain system. BNB, one of the largest tokens, with an all-time-high of over 100billion for its market cap was built on the Cosmos Tendermint engine. Luna, which is part of my medium risk smart contract test portfolio is built on Comsos. Luna has climbed substantially over the past year and is up about 30,000% these past 355 days. I believe Luna will continue to climb because it offers nearly 20% APY on stable coin yields through the Anchor Protocol. Other great projects include the crypto.com coin, Kava, Thorchain, Akash, and Injective protocol. Cosmos offers over 30 different wallets for computability, users can stake through these wallets on a computer or smart-phone.
Cosmos is implementing the Gravity Bridge that will allow for cross chain swaps. This will be able to function similar to Uniswap, but prevent front running since it will match orders, this could be a game changing development for crypto.
Investor Thesis
Comos recently formed a cup and handle pattern on the charts and broke into new all-time-highs. At a nearly 10-billion-dollar market cap, it has a long runway to reach even a fraction of Ethereum’s market cap. With the recent Solana hack, people are going to be taking profit into other Ethereum competitors to avoid the insanely high fees on Ethe. Luna is an incredibility strong project, a nearly 20% yield on stable coins would be a great option for institutional investors to get involved with crypto carrying low risk. Cosmos is usable, has developer interest, and finds itself dwarfed by other main blockchain systems. All of this combined makes me believe Cosmos is under-valued. I hope this information was helpful to build investor thesis and possibly consider Cosmos, remember this is not financial advice, but instead education and research to aide in your own decision, I personally am dollar-cost averaging Cosmos at this time because I see the potential.
[1] https://v1.cosmos.network/intro
