Cosmos (ATOM)

Analysis

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Cosmos (ATOM) Marketcap: $940,711,121 USD
Circulating Supply: 190,688,439 ATOM

Analysis
Total Supply: 237,928,231 ATOM
Price: $4.93 USD / 0.00062191 BTC

Fundamentals

Background and Information

Blockchain is the Wild West. We know this from a trading/investing standpoint, but the same holds
true from both technological and governance standpoints. Although blockchain started out with
just one (Bitcoin), today there are many blockchains. Considering the amount of promise the
technology holds for nearly every industry imaginable, you can bet that tomorrow, there will be
countless blockchains all jostling for space.

The situation is quite like that of the birth of nations. They arise around common objectives.
However, in the early days of civilization, tribes, nations, and eventually, empires had little to no
cooperation with each other and certainly had no grounds for creating it. With blockchain, as of
today, we find the same thing going on.

Eventually, countries began forming alliances, global councils like NATO, and trade agreements
which standardized certain measures across all nations signed onboard. What all of these
agreements between societies have in common is that they standardize certain types of behavior
so that there are things in common which can fit anywhere. So, to use an example from Cosmos’
Sunny Aggarwal, think of shipping containers. Shipping containers have been globally
standardized so that a container leaving port in Los Angeles can easily be accepted and fit in a port
in Hong Kong.

Website: https://cosmos.network/
Exchange: https://www.binance.com/en/trade/ATOM_BTC 1
What Cosmos is doing is creating standards for blockchains that enable and encourage
interoperability as in the above example with shipping containers. Right now, blockchains are like
separate fiefdoms. But, with Cosmos’ interoperability protocol (called IBC for inter-blockchain
communication), blockchains will be able to talk to one another and send assets between each
other.

Cosmos (ATOM) Overview

Cosmos is a long-term project with deep roots in blockchain and has been under development
since 2014. Essentially, Cosmos is creating a blockchain ecosystem wherein interoperability,
scaling, and simple, modular blockchain constructions come together to bring about the
decentralized blockchain web (sometimes referred to as Web 3.0).

The idea and necessity of interoperability may seem vague, but it’s incredibly important to
blockchain’s future. The internet, for instance, would not be what it is today without
standardization protocols like Hypertext Transfer Protocol Secure, which you may know as the
https in a web address that you trust.

With Cosmos, you’ll be able to send BTC to the Ethereum blockchain, or an ERC-20 standard digital
asset on Ethereum to the Bitcoin blockchain, or an asset on the Tezos Chain to Ethereum, and so on
and so forth. The use here is that as the world, including its valuable assets, become tokenized
across all of the competing blockchains, we’ll have a way for those chains to interact so that we can
‘unlock’ assets and allow value to move freely across the web of blockchains. What free trade
agreements have done for the global economy, Cosmos hopes to do for blockchains.

Additionally, with Cosmos’ tools, a DApp (decentralized application) can take advantage of the
features across different blockchains and localize them in a single DApp. In this way, a DApp can
take the features it wants from Ethereum, NEO, Tezos, and Bitcoin, without having to be committed
to any single one of those blockchains.

Finally, and perhaps most interestingly to those of you who aren’t software engineers, the Cosmos
SDK makes creating and launching your own blockchain-based digital asset simple.

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IBC (Inter-Blockchain Communication) and Asset Transfers

At the center of Cosmos’ approach to interoperability is IBC. In a nutshell, IBC allows blockchains to
keep light versions of one another’s chain so that they stay current with the state of the other
blockchain. As long as blockchains accept the IBC standard, then people can interoperably
develop anything they want, taking advantage of different blockchains’ features to the maximum.
Cosmos itself is beginning with asset transfers.

Digital asset transfers using IBC are remarkably simple. Let’s say you want to transfer an asset on
the Ethereum blockchain to the Stellar blockchain (keep in mind, this is hypothetical — Stellar will
need to adopt IBC to make this happen). First, you’ll issue the asset on the Ethereum blockchain
and lock it in a smart contract. The Stellar blockchain will communicate with Ethereum and verify
the contents of the smart contract, and when all is well, will issue a token on the Stellar chain that
acts as a 1:1 claim of the underlying asset (the one originally issued and locked on Ethereum).

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In this way, you can easily swap assets between participating chains so long as they’re all
operating with Cosmos’ standards in place. Atomic swaps seem similar, but are nothing like what
Cosmos is proposing. With an atomic swap, you aren’t actually moving X asset on the Ethereum
chain to the Stellar chain. Instead, all you’re doing is swapping ownership of the assets on each
chain, one on Ethereum and one on Stellar, at the same time. The swap in an atomic swap is just
that swap of ownership, but not one of token provenance.

A lot of this discussion hinges on the what if regarding blockchains accepting the Cosmos
standard. The interesting thing is that even if blockchains don’t modify themselves to
accommodate IBC, Cosmos can still read their blockchains and interoperate with them using what
are called peg zones. Essentially, a peg zone creates a mirror image of a blockchain with one
modification — it’s using the IBC standard. A peg zone slots in between the blockchain wanting
to communicate and the one that isn’t standardized to and allows them to inter-communicate
anyway.

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Scaling

Cosmos isn’t only about asset transfers and decentralized application development. It can also
help blockchains scale in seemingly limitless ways. A huge part of investor focus in recent years has
been on the transaction-per-second speed of a blockchain. For understandable reasons, the allure
of TPS speed has been the subject of blockchain showdowns and show-offs. While many scaling
solutions are seemingly on the way (i.e., Lightning Network and sharding), they require huge
technological leaps before being market-ready.

Cosmos can help blockchains scale with some of its default features and capabilities. As mentioned
in the previous section, Cosmos can simply create mirrors of blockchains when making what they
call peg zones. So, let’s say a blockchain has awful TPS speed (would rather not mention any names
but...Bitcoin). Cosmos can create a mirror of that blockchain, and then another, and another, ad
infinitum, multiplying that blockchain’s effective scalability. If a blockchain maxes out at 20 TPS,
then using Cosmos, you can just mirror it over and over to bring that number up.

Doing so can help DApps scale to the needs of their users, whereas currently, most are quagmired
owing to the inability of their native blockchains to scale.

SDK

Cosmos wants developers to have as much freedom to build blockchains and decentralized
applications as possible. That’s why Cosmos is trying to interconnect blockchains — the more
connected chains are, then, as we’ve seen with a global standard internet, the freer we are to
collaborate, build, experience, and share useful things.

To push the process along, Cosmos has released the Cosmos SDK. The SDK release includes all of
the same tools the team used to build out the Cosmos mainnet itself. By releasing those tools in a
neat, organized, and modular package that is easy to understand, Cosmos is putting the means for
building blockchains in the hands of anyone with the requisite technical prowess.

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The big innovation that the Cosmos SDK brings to the table is the way it allows developers to
select from a series of modules and pre-created options. When you fire up the SDK, you’ll first
choose the foundation blockchain you’ll be building on, then you add modules on top of it like
staking, governance preferences, and interoperability options. The beauty is that when you launch
your own blockchain using the SDK, it’ll launch with as much interoperability as you choose.

In a sentence, the SDK has everything you need for creating a blockchain/token, all you need to do
is decide on the parameters/functions of your blockchain/token, input them, and you’re good to
go.

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Token + Consensus Model

There’s more to Cosmos than just...Cosmos. Running underneath the hood is Tendermint, the
software side of Cosmos which includes a BFT-based (short for Byzantine Fault Tolerant) proof of
stake consensus algorithm. Whereas Cosmos is the hub of parallel chains working together,
Tendermint is the operating system that makes it all possible. The Tendermint-run BFT consensus
protocol is so well regarded that two other projects you might have heard of — Dfinity, and
Ethereum’s Casper upgrade (also known as Ethereum 2.0) are both BFT-based now as well.

Within Tendermint’s OS, ATOM plays a central protocol layer-level role ecosystem, giving you the
ability to both stake and participate in blockchain governance. Bad actors are removed from the
PoS network using slashing, a security innovation that is elegant in its simplicity and admirable in
its robustness.

Team

Parsing through all of the foundations behind Cosmos make uncovering the team nearly
impossible. There are, however, several notable players. First and most well known is Jae Kwon of
Tendermint. He pioneered BFT consensus and, in time, will likely be regarded as one of the
figurehead blockchain pioneers of these early days. Kwon partnered with Ethan Buchman and
Zarko Milosevic, a BFT researcher from Cornell, to found Cosmos. Along the way, Sunny Aggarwal,
a proof of stake research scientist and crypto-media personality, has also become a protagonist at
Cosmos.

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SWOT Analysis

Strength: Cosmos has a lot going for it. While many projects are doing the interoperability
premise, very few have the deep crypto roots that the Cosmos team does. They’ve been working
on the project in one form or another since 2014 and are embedded within the teams and
communities of other massive blockchain projects — with Ethereum being the standout. The fact
that Cosmos has an excellent working relationship with Ethereum and many of the
Ethereum-based DApps out there today means that they should be pretty efficient when it comes
to getting other projects to work with their standards.

The other strength they have going is timing. Everyone likes to compare Cosmos to Polkadot since
they’re doing such similar things — but let’s face it, Cosmos is live today, and Polkadot is still a year
away. Whatever merits Polkadot may have over Cosmos are, at this point, hypothetical, and we’ll
have to wait for Polkadot to hit the market before finding out if it can out-compete Cosmos.

Additionally, Cosmos is an incredibly well funded project. They raised $17 million back in 2017,
locked the ICO funds/tokens, and only made it to market in April of this year. Now, the project is
valued at just under a billion dollars. As long as the team stays smart in handling their funds, they
should have far more than enough runway to see the project through to completion.

Weakness: Interoperability, as a necessity, isn’t really a question. Blockchain needs it just like the
internet needed it. The only question is surrounding Cosmos’ ability to deliver. They’ve already
gone live with their mainnet, but just because you build it, will they come? That’s the question.

Secondly, Polkadot is a serious competitor with extreme pedigree concentrated within their team.
A huge question mark surrounding the Cosmos project is whether or not they’ll take full advantage
of their headstart or whether developers, DApps, and other blockchains are already in cahoots with
Polkadot.

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Opportunity: The Cosmos opportunity is interesting and possibly immense. Blockchain
interoperability is a completely new field and Cosmos is the first to market. They have big
competition down the road, but they’re live now and, if their premise plays out, then Cosmos will
be an unavoidable presence in tomorrow’s blockchain-based internet.

Threat: The most apparent threat to the Cosmos project is that public blockchains and
decentralized application building don’t take off. Imagine a world in which enterprise (private)
blockchains rise and decide they don’t want to talk to each other. Cosmos won’t have much to
offer them.
The other issue with Cosmos is that it may devalue cryptocurrency assets since it makes it possible
for token/blockchain developers to mix and match the features of different chains. If you’re able to
take advantage of Monero’s RingCT technology without actually owning/holding XMR, then what
is the value of XMR? Owing to this, some project’s may not want to play nice with Cosmos.

And, of course, there is the threat of Polkadot getting a much better foothold in terms of
standardization protocols than Cosmos. The blockchain internet of tomorrow is surely big enough
for more than one player, but if we’re talking standards, then one project may rule the roost.

Token Metrics

Marketcap: $940,711,121 USD

Circulating Supply: 190,688,439 ATOM
Total Supply: 237,928,231 ATOM
Price: $4.93 USD / 0.00062191 BTC

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