A Comprehensive Guide to Cosmos (ATOM): Interoperability and Staking Rewards
Posted On February 26, 2023
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Cosmos (ATOM) is a cryptocurrency and blockchain platform that aims to solve the problem of blockchain interoperability. It was founded in 2014 by Jae Kwon and is developed by the Interchain Foundation, a Swiss non-profit organization. Cosmos allows for the creation of independent, sovereign blockchains that can communicate with each other using a common protocol called the Inter-Blockchain Communication (IBC) protocol. In this article, we will explore Cosmos in more detail, including its staking rewards, use case, and factors that could drive its demand.
Cosmos is built on top of the Tendermint consensus algorithm, which is designed to be fast, secure, and energy-efficient. Tendermint uses a proof-of-stake consensus mechanism, which means that users can stake their ATOM tokens to help secure the network and earn rewards in return. Cosmos also has its own native token, ATOM, which is used for staking, governance, and transaction fees on the network.
Cosmos has a total supply of 266,682,630 ATOM, with a circulating supply of 236,625,142 ATOM as of February 2023. The current market capitalization of ATOM is over $3.5 billion USD, making it one of the top 50 cryptocurrencies by market capitalization. ATOM is available for trading on several major cryptocurrency exchanges, including Binance, Coinbase, and Kraken.
One of the unique features of Cosmos is its staking rewards program. In a proof-of-stake consensus mechanism, validators are chosen based on the number of tokens they hold and stake on the network. Validators are responsible for validating transactions and blocks on the network, and are rewarded for their efforts.
Cosmos uses a bonded proof-of-stake (BPoS) mechanism, which means that validators must put up a certain amount of their own tokens as collateral, or bond, to become a validator. The amount of tokens required to become a validator is known as the minimum self-delegation, which is currently set at 1 ATOM. Validators are also required to maintain a minimum uptime of 95% to remain active on the network.
Users can stake their ATOM tokens by delegating them to a validator. Delegators earn rewards in proportion to the amount of tokens they delegate, and validators earn a commission on the rewards earned by their delegators. The current annual staking reward rate for ATOM is around 7%, which is subject to change based on network conditions and governance decisions.
Staking rewards can provide a passive income stream for ATOM holders, as well as a way to participate in the governance of the Cosmos network. Governance decisions on the network are made through a proposal and voting system, where ATOM holders can submit and vote on proposals that affect the network. This gives ATOM holders a voice in the direction of the network and helps to ensure its decentralized governance.
The primary use case for Cosmos is blockchain interoperability, or the ability of different blockchain networks to communicate and exchange information with each other. The IBC protocol allows for the creation of independent, sovereign blockchains that can communicate with each other using a standardized protocol. This can help to solve the problem of siloed blockchain networks and allow for greater collaboration and interoperability between projects.
Cosmos also has its own decentralized exchange (DEX) called Osmosis, which allows users to trade different cryptocurrencies directly on the Cosmos network. Osmosis uses a liquidity pool system that allows users to earn fees by providing liquidity to the network.