Cosmos (ATOM): A decentralized platform for interconnected blockchains

Cosmos is a revolutionary platform that addresses one of the key issues in the cryptocurrency industry—the lack of interoperability between different blockchains. If you’ve ever needed to transfer assets across various networks, you know how complex it can be. Cosmos changes this paradigm by creating what its developers call the “Internet of Blockchains”—an ecosystem of independent but interoperable digital networks.

What is Cosmos and its native token ATOM

Cosmos is not just another blockchain. It is a comprehensive architecture consisting of multiple autonomous blockchains called zones, which operate in parallel and can seamlessly exchange data and assets. All these zones are connected through a central blockchain—the Cosmos Hub—operating on a proof-of-stake (PoS) mechanism.

ATOM is the native token of the Cosmos Hub, serving several critical functions within the ecosystem. First, it is used to pay transaction fees. Second, ATOM holders can stake their tokens to earn rewards and help secure the network. Third, ATOM holders have voting rights on governance and development decisions—your influence increases with the number of tokens you own.

As of February 2026, approximately 492.7 million ATOM are in circulation, with a maximum supply of 390.9 million. The current price is $1.90, with a daily change of -0.57%, reflecting market volatility. The current market capitalization reaches $935.70 million, demonstrating the project’s significant size within the crypto ecosystem.

Cosmos architecture: three layers and key components

The strength of Cosmos lies in its multi-layered architecture designed for maximum flexibility and performance. The system is built on three conceptual layers, each responsible for specific aspects of network operation.

Application layer handles all transactions occurring within the network and tracks the state of each zone. Consensus layer ensures agreement among network nodes and produces new blocks, resolving conflicts and maintaining data integrity. Networking layer facilitates communication between all zones in Cosmos, enabling secure and efficient data exchange.

To implement this architecture, Cosmos uses three key open-source components. Cosmos SDK is a fundamental toolkit for developers, allowing them to easily create new blockchains without building all components from scratch. Essentially, it provides a ready-made template for rapid deployment. Tendermint BFT is a high-performance consensus engine that guarantees transaction finality within one second and supports up to 10,000 transactions per second. IBC (Inter-Blockchain Communication) is a protocol that enables blockchains with different architectures and consensus mechanisms to interact, transferring tokens and data between networks.

This architecture allows developers to focus on building applications rather than infrastructure details. The result is accelerated development and faster product market entry.

ATOM token: role, distribution, and issuance mechanics

ATOM was created during the project’s active development phase. In 2017, an ICO was held, during which all offered tokens were sold out in just 29 minutes, indicating strong community interest. Funding of $17 million USD was allocated to develop the project infrastructure.

The initial distribution of 236 million ATOM was structured as follows: Tendermint Inc received 10%, the Interchain Foundation (ICF) also 10%, strategic partners and early supporters 7.1%, seed round participants 5%, and public ICO participants 67.9%. Notably, no tokens were reserved for market liquidity or community, ensuring a fair initial distribution.

Since Cosmos Hub operates on PoS, new ATOM are continuously created through staking rewards. These rewards are paid to validators who secure the network and process transactions. This means ATOM has an inflationary nature—new tokens are issued constantly, though without a fixed maximum limit.

The inflation rate of ATOM varies between 7% and 20%, depending on the amount of tokens staked in the network. The higher the percentage of tokens in staking, the lower the inflation. This dynamic system incentivizes participants to stake tokens but also carries the risk of periods of high inflation. Unlike some competitors, Cosmos does not have deflationary token burning mechanisms like EIP-1559 in Ethereum.

Ecosystem growth: key partners and projects

Cosmos’ history began in 2014 when Jae Kwon and Ethan Buchman, working at Tendermint, developed the concept of applying Tendermint BFT to blockchain technology. With support from the Swiss Interchain Foundation, the project was named Cosmos in 2016, and its mainnet launched on March 13, 2019.

Over the years, Cosmos attracted attention from leading investment funds including 1Confirmation, Blocktree Capital, Outlier Ventures, and Dragonfly Capital. These institutional investors helped develop the project, but a pivotal moment was Binance adopting Cosmos architecture for Binance Smart Chain—a platform now ranking second in total value locked (TVL) in the industry.

Cosmos also became the foundation for other prominent projects. Cronos Chain, Binance Smart Chain, and historically Terra Chain—all are built on Cosmos. Additionally, the decentralized exchange dYdX recently announced migrating its future network to Cosmos, demonstrating growing popularity in the DeFi segment. Projects like Umee and Osmosis have also joined forces, creating a DeFi hub within the Cosmos ecosystem.

In 2024, the Interchain Foundation allocated $26.4 million USD to support ecosystem development—less than the $40 million USD allocated the previous year but still a significant amount directed toward CometBFT ($3M), Cosmos SDK ($4.5M), and IBC ($7.5M).

Advantages of Cosmos over competitors

The main competitor to Cosmos is considered to be Polkadot, another platform aimed at cross-chain compatibility. Both projects address similar issues but employ different approaches.

Cosmos Hub can process up to 10,000 transactions per second with instant finality, offering low gas fees. Polkadot, on the other hand, can handle about 1,000 transactions per second and supports up to 100 parachains. However, Cosmos already has 49 zones operating, with no theoretical maximum, providing ample room for scaling.

A critical difference lies in architecture. Polkadot’s parachains depend on the central relay chain and rely on its infrastructure. This means that any failure in the relay chain can impact parachain performance. Zones in Cosmos operate independently—problems in one zone do not affect the rest of the network.

The combined market capitalization of all blockchains within the Cosmos ecosystem exceeds $50 billion, nearly nine times larger than Polkadot’s market cap and second only to Ethereum among blockchain platforms. Although this figure decreased significantly after the Terra Luna collapse in May 2022, when Terra was the largest zone, current metrics show ecosystem resilience and diversification.

Current challenges and potential risks

Despite its strengths, Cosmos faces several challenges. The first is high ATOM inflation. At a maximum of 20%, this can dilute token value during periods of low staking activity. Unlike Ethereum, which has deflationary mechanisms like EIP-1559, Cosmos lacks a built-in token burn process to combat inflation.

The second challenge is often described as “winning against itself.” Many projects use Cosmos to launch their own blockchains, which over time may get listed on major exchanges. When that happens, the need to use ATOM as a bridge for zone-to-mainnet interaction diminishes. However, this risk is mitigated by a steady influx of new projects leveraging Cosmos due to the success of existing applications.

The third risk involves concentration. The Terra Luna collapse, which was the largest zone in Cosmos, impacted the entire ecosystem’s perception. Diversification of current projects helps reduce this risk.

Future plans: Cosmos development roadmap

Cosmos development continues actively. The next major milestone is the v8-Rho upgrade, bringing numerous new features to Cosmos Hub, Cosmos SDK, and IBC. The upgrade will include publicly accessible multi-signature accounts, meta-transactions, improvements to governance modules, and incentives for IBC relayers.

Additionally, following a controversial governance proposal (Proposal 848) aimed at reducing ATOM inflation from 14% to 10%, founder Jae Kwon proposed creating a fork called AtomOne. Its goal is to address gaps in the current governance system and offer an alternative for those dissatisfied with the project’s direction.

These initiatives demonstrate that Cosmos remains an active platform attentive to community feedback and continuously evolving to address identified issues.

Final thoughts

Cosmos is an ambitious project that effectively tackles one of the core problems in the crypto industry—fragmentation. The platform provides developers with a powerful set of open-source tools to create their own blockchains while maintaining interoperability within the ecosystem. The success of Cosmos through projects like Binance Smart Chain, Cronos, and dYdX confirms the viability of this approach.

Although Cosmos faces challenges, including ATOM inflation and the potential loss of significance when new zones are listed, its diversified ecosystem and ongoing platform improvements enable it to remain one of the most promising projects in the crypto industry. The integration of new features and responsiveness to community proposals suggest that Cosmos will continue to develop and adapt to market needs.