If the cryptocurrency industry is to reach its full potential, it is essential that blockchains can communicate with each other, which is called “interoperability”. Cosmos (ATOM) is one of the many blockchains that tackle this problem, and it has already gained traction with some big crypto projects.
Here’s what investors need to know.
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1. He gained almost 370% this year
Cosmos hit an all-time high of $ 44.59 last week (September 19), but the price has fallen slightly since. Nonetheless, at the time of writing, Cosmos was up almost 370% year-to-date, according to data from CoinMarketCap. This is a big leap, but not that dramatic when you consider that the total global crypto market capitalization has grown by almost 140% over the same period.
Cryptocurrencies can be extremely volatile, which means there is the potential for dramatic losses as well as huge returns. This is why it is important to invest only the money you can afford to lose and to make sure that you are comfortable with the risk involved.
2. It has been nicknamed “the internet of blockchains”
One of the problems faced by the crypto world is that individual blockchains do not communicate very well with each other. This is not ideal if you are considering the vision of moving crypto assets globally in a simple and affordable way. There’s no easy analogy, but it would be a bit like Walmart only accepts Visa payments, while Whole Foods only accepts Mastercard.
This is why interoperability is important. It is the driving force behind Cosmos, and the reason it is considered the internet of blockchains. Cosmos is also designed to be scalable and process transactions quickly and affordably. He says that each transaction on the network costs $ 0.01. To give you a bit of context, CoinMetrics said in March that the median charge on Ethereum (ETH) was around $ 10.
3. Cosmos uses hubs to ensure blockchains can communicate
Some interoperability solutions do not attempt to send tokens between networks. Instead, they use smart contracts to lock down those tokens on one platform and then create a corresponding number of tokenized replicas on the other. For example, rather than sending 5 BTC from the Bitcoin blockchain to Ethereum, this method can lock the 5 BTC and issue 5 indexed tokens such as Wrapped Bitcoin (WBTC) on another blockchain.
On the other hand, Cosmos uses hubs to allow blockchains to actually communicate with each other. Each hub can connect to a number of other blockchains. It works through Cosmos’ own tool – Inter-Blockchain Communication (IBC), which it launched earlier this year.
4. It has over 255 applications running on its network
Adoption is important for any cryptocurrency. Good technology is only great if people actually use it. That’s why it’s good to see that Cosmos has 255 apps running on its network, including big names like Binance Smart Chain and Crypto.com.
One area that investors should watch carefully is Cosmos’ fee structure. Where, say Ethereum, generates revenue by charging ETH transaction fees for all applications on its network, Cosmos does not work that way. For example, Crypto.com users pay a fee for Cosmos applications in its native token (CRO), not in ATOM.
5. It is available in most major crypto exchanges
U.S. cryptocurrency investors can purchase ATOM tokens from several major cryptocurrency apps and exchanges. These include:
6. There are other blockchains in this space
Regardless of the investment, it is important to fully understand the competitive space. And in the case of Cosmos, that means looking at interoperability blockchain solutions as well as programmable blockchains.
The other major players in interoperability are Polkadot (DOT) and Avalanche (AVAX). The two work slightly differently and have also seen above-average price increases this year. In fact, AVAX has increased by around 2,000% since January 1.
7. Regulation could complicate the decentralized finance sector (DeFi)
Decentralized finance is a group of products that exclude intermediaries (usually banks) from financial services. A number of applications on the Cosmos network fall into this category.
Right now, regulators fear that these products will operate like pseudo-banks, but without the same consumer protections that traditional bank accounts offer. From the SEC to the Treasury, there is growing pressure for increased regulation. We don’t yet know what form this regulation will take, but it could impact any crypto with DeFi connections, especially if it’s heavy.
At the end of the line
Cosmos is a solid cryptocurrency that solves a big problem for the crypto industry. Connecting blockchains allows individual cryptos to excel in a particular area, and then to cooperate with other blockchains that have complementary strengths. Every currency doesn’t have to solve all the problems to be successful.
However, there is also a lot of regulatory uncertainty in the industry at this time. Crypto investors should be careful about the potential impact this could have on the market.