What is Cosmos (ATOM)

8 min readFeb 21


It is very likely that if you have spent some time around the cryptocurrency market, you have already heard of layer-1, layer-2 or even layer-3 protocols and blockchains. But have you ever heard of layer-0? Maybe you have, but you did not know what it actually was.

Cosmos (ATOM) is a layer-0 blockchain that is trying to build an infrastructure mostly for other layer-1 blockchains. It is one of the most complex cryptocurrencies out there. But thanks to the mix of its technologies, it currently sits comfortably in TOP 20 based on market capitalisation, which is a reason why we have decided to dedicate a whole article to it and its ecosystem.

What is Cosmos (ATOM)?

Cosmos (ATOM) is a cryptocurrency project that builds an infrastructure for connecting layer-1 blockchains such as Kava, dYdX, Osmosis or Cronos. It consists of three different layers. These are namely the application layer, the networking layer and the consensus layer.

The application layer is responsible for updating the state given a set of transactions. To put simply, it is responsible for processing transactions. The networking layer is in charge of propagation of transactions and blockchains. The last layer, consensus layer, enables the nodes to agree on the most recent state of the whole system.

Cosmos then creates a set of open-source tools that help with connecting these various layers of different blockchains together. Moreover, it allows the developers to build dApps on top of it. Thanks to all of this, Cosmos is trying to solve some of the most difficult problems and hardest challenges of the current state of blockchain technology.

It is aiming to not only improve the scalability, usability and interoperability of the blockchain space, but ultimately Cosmos aims to be “The Internet of Blockchains.” It creates a whole ecosystem in which decentralized applications can become interconnected and communicate with each other seamlessly.

Cosmos currently uses different technologies, features and inventions which should help this project to deliver on its goals. These are rather complex and difficult to comprehend, yet are necessary for understanding what Cosmos is doing. That is why we will briefly explore the most important concepts connected to the Cosmos ecosystem. However, before we do that let’s first look at the main team and organisations behind the development of Cosmos.


Tendermint, a technology that we will shortly explain, which is also a gateway to the Cosmos ecosystem, was founded by Jae Kwon, Zarko Milosevic and Ethan Buchman. Kwon has, however, stepped down in 2020, while still remaining as a principal architect of the project. He has been replaced in his position by the CEO of Tendermint, Peng Zhong.

Currently the whole project is run by Interchain Foundation (ICF), a Swiss non-profit foundation formed to support the development of Cosmos and its ecosystem. Ethan Buchman is the president of ICF, joined by Brian Crain and Fernando Pedone as the main founding members of the foundation. The whole team of ICF consists of more than 40 people.

Interblockchain Communication and Cosmos Hub

The first technology or innovation that one needs to understand in connection with Cosmos is Interblockchain Communication (IBC) protocol. IBC lets the blockchains communicate between each other. It allows for smoother connection between different blockchains without any fragmentation and connects zones and hubs to the Cosmos Hub.

While hubs can be thought of as the individual blockchains, zones are application specific blockchains (app-chains). Zones thus usually help hubs scale. Zones are capable of authenticating accounts or transactions, creating and distributing new tokens or executing changes inside of its own blockchains.

Once a new zone connects to the whole Cosmos Hub, it is able to communicate freely with every other zone connected to the hub. In layman terms this means that different blockchains with different purposes and applications can still exchange data and information between each other once they connect to Cosmos Hub.

The Cosmos Hub is also in charge of facilitating interoperability between the zones. It does this by keeping track of their current states. Interestingly enough, it was also the first blockchain that was launched on the Cosmos network.

All of this means that Cosmos scales by allowing blockchains to communicate between each other in a trust-minimised way. The whole logic of how hubs and zones in the Cosmos Hub work and communicate can be seen at the chart below.

Cosmos Hub with zones and hubs. Source: cosmos.network


Another important element of the Cosmos innovation is Tendermint. Tendermint is a Byzantine Fault Tolerance (BFT) consensus mechanism. It allows for extremely fast transaction finality and low costs of transactions, something that many other blockchains still struggle with.

Tendermint allows for various processes connected to the blockchains, such as transaction processing or peer-to-peer networks to be bundled together into one whole bundle. This means that the developers do not need to start from scratch, but instead can use these systems and build blockchain applications with ease. Projects such as Binance DEX, IRISnet or Oasis Labs are just a few examples of projects that have used this to their advantage.

Connected right to Tendermint is Tenderming Core, a proof-of-stake (PoS) governance mechanism. It ensures that Cosmos Hub is all in sync. It uses the Tendermint Byzantine Fault Tolerance consensus mechanism, which is a variant of PoS. This simply means that validators take turns in committing new blocks of transactions in the overall blockchains.

Tendermint was also at the very beginning of Cosmos. To be more precise, Tendermint was the beginning of Cosmos, since it was created back in 2014, while the Cosmos white paper was published 2 years later, in 2016.

Cosmos SDK

One of the biggest inventions of the Cosmos team is the creation of the Cosmos software development kit (SDK). Cosmos SDK allows the proper usage of Tendermint’s consensus algorithm and helps with the development of new blockchains. It is based on the philosophy of modular blockchains. This means that the developers can plug in sets of various models to build a type of blockchain that they need with additional features they require.

Another advantage for developers is that Cosmos SDK allows the use of different programming languages. This means that it is more accessible to a wider range of developers to build their own blockchains without actually having to start from scratch.

Features of Cosmos SDK. Source: v1.cosmos.network

Last but definitely not least, Cosmos SDK obviously also helps with leveraging the core connectivity with Cosmos Hub and the whole Cosmos ecosystem. This is done not only thanks to Cosmos SDK, but also Tendermint and IBC.

Cosmos ecosystem

The Cosmos ecosystem has around 270 different projects, apps and services with the total value of assets under management being shy of $70 billion. Some of the most prominent projects that are part of Cosmos are for instance:

  • Osmosis (OSMO): AMM enabling cross-chain trading in the Cosmos ecosystem
  • Juno (JUNO): layer-one blockchain with a significantly smaller cost than layer-2 blockchains
  • dYdX (DYDX): decentralized exchange for perpetual future contracts
  • Celestia: modular blockchain network that outsources execution, settlement, consensus and data availability to separate chains
  • Secret Network (SCRT): blockchain with customisable privacy

Other than these, Cosmos ecosystem encompasses projects form DeFi, gaming, DAOs, social network, NFT marketplaces and other industries. For instance, in the finance category there are about 67 projects, in the infrastructure category about 63 and in the privacy category almost 20 projects.

The whole ecosystem is very privacy and safety oriented. This can be easily portrayed by the number of wallets that it has. Only for iOS and Android it has 26 and 25 wallets respectively. It also contains other web or browser extension options as well as hardware or Linux wallets.

Cosmos ecosystem. Source: coinmarketcap.com

Tokenomics of ATOM

Cosmos has its own native cryptocurrency token, ATOM. ATOM was compared by the creators of Cosmos to ASICs on Bitcoin. This means that ATOM represents a piece of virtual hardware that anyone needs to obtain in order to participate as the keeper in the network.

Since Cosmos uses PoS as its consensus protocol, the stakers of ATOM are the ones reaping the rewards of newly minted ATOMs. During the initial launch the token was distributed in the size of 80% to the investors and 20% to the team and creators.

What is Cosmos 2.0?

In September 2022 during a conference in Colombia named Cosmosverse, the team introduced the Cosmos 2.0 whitepaper. It looks three years into the future and depicts the main goals and aims of Cosmos. The main points are greater utility for Cosmos Hub, improving the tokenomics of the native token ATOM or addressing the main issues connected to the Cosmos ecosystem.

The conference also brought 4 main talking points and changes that Cosmos 2.0 is aiming to bring. These are:

  • Liquid staking: a process of wrapping staked tokens to use them as a collateral between different blockchains. After this innovation will be put in place, ATOM stakers will be able to use their staked tokens across the Cosmos ecosystem.
  • Interchain security: this innovation will allow smaller app-chains to defend themselves against validator attacks thanks to renting the security from the Cosmos Hub validators.
  • Interchain scheduler: a cross chain marketplace for blockspace that will be tackling the problems of maximal extractable value (MEV). Blockspace will be able to be traded by app-chains in the form of tokenised NFTs, allowing users to execute transactions in a trust minimised manner.
  • Interchain allocator: the treasury of Cosmos Hub will be actively looking for funding different DAOs to create public goods for the whole Cosmos ecosystem, with the goal of making ATOM the most desirable deployed reserve asset in IBC protocol.


Cosmos is on a mission to be one of the most important blockchain protocols in the cryptocurrency segment. It, however, does have a difficult task ahead, as it wants to make interoperability, scalability and usability of different blockchains efficient and easy. Its technologies and innovations can help the project succeed. So can the Cosmos 2.0, which, however, would need to be delivered flawlessly for the project to become “The Internet of Blockchains.”

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