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SymbolATOMCirculating Supply (estimated)286,370,297
Rank (MCAP)#24Total SupplyNo supply cap
Price (2022-12-16)US$9.45Market CapitalizationUS$2,705,790,719

Complete historical ATOM/USD price chart. Source: CoinGecko

In this report, we’ll answer the following:

What is ATOM?

ATOM is a layer-0 proof-of-stake (PoS) protocol that connects different blockchain networks. Its founding team calls it an “Internet of blockchains.”

Each independent network within ATOM (a “zone”) connects to the Cosmos Hub. This hub records the state of each network. It also allows these networks to exchange data with each other.

Illustration of Cosmos’ existing zones (blockchains connecting through Cosmos Hub). Source: Map of zones

How does ATOM’s ecosystem work?

ATOM has several components that form its ecosystem:

What are the ATOM token’s uses?

ATOM tokens have three uses.

Network users pay for transactions using ATOM tokens. These payments disincentivize spam transactions, helping the network keep high performance.

Holders can stake (bond) their ATOM tokens to earn rewards. Staking tokens help increase the network’s security. The more staked ATOM, the higher the cost of attacking the network.

Finally, holders can vote with their staked ATOM on governance proposals. This voting gives them a say in the network’s future. Governance topics include strategies, upgrades, development grants and protocol parameter changes.

Stakers are also eligible for potentially valuable Cosmos-ecosystem coin airdrops.

Who’s behind ATOM?

Jae Kwon and Ethan Buchman are ATOM’s co-founders. In 2014, they created Tendermint – the algorithm that powers ATOM. Later, they released ATOM’s software in 2019 and authored its white paper.

The Swiss non-profit organization Interchain Foundation (ICF) maintains ATOM. This organization funds and develops ATOM’s ecosystem, including:

ATOM’s team has delivered a robust and working product. This past success makes it more likely that Cosmos 2.0 will also thrive.

How are ATOM tokens distributed and released?

In 2017, ICF held several investment rounders. It distributed 236,198,958.12 ATOM tokens in the following percentages:

ATOM supply distribution. Source data: Messari

Now, tokens only distribute as rewards for ATOM stakers. This rate of inflation changes depending based on the number of staked tokens.

At the time of writing, the inflation rate is approximately 14% per year. The protocol’sprotocol’s code aims for 7 to 20% inflation per year. Meanwhile, staking APY (annual percentage yield) is near 21%, which outpaces inflation.

Governance proposals may one day decrease or counter this inflation rate.

Why could ATOM be valuable in the future?

Interoperability, customizability, and scalability are major long-term narratives

During the last bullish cycle, Ethereum (ETH) encountered severe scalability issues. Slow speeds and high fees pushed many users to alternative layer-1 (L1) blockchains.

These new blockchains highlighted a new problem: a lack of interoperability. Decentralized applications (dApps) became siloed on individual blockchains.

To capitalize on investment opportunities, users needed to transfer funds between blockchains. These transfers are often tedious, expensive and slow. To make matters worse, “bridges” that moved funds between chains became hackers’ targets.

Cosmos provides an alternative solution:

ATOM stakers profit from a growing ecosystem

Cosmos Hub provides an ideal platform to solve many of blockchain’s current issues. Teams are still building through the bear market.

Cryptocurrencies may see another bull run within the next several years. ATOM is ready for ecosystem growth and a token price increase if this occurs.

One of the ATOM token’s primary uses is for staking. Stakers receive part of the network’s transaction fees.

More applications on Cosmos increases the network’s traffic. This traffic results in more transaction fees paid to ATOM stakers.

Higher staking returns increase demand for the token. This demand helps the tokens’ price to climb.

ATOM stakers receive free airdrops

Token holders receive rewards for staking ATOM. They also receive passive income as token airdrops (free tokens).

These airdrops can be extremely valuable. One user on ATOM’s subreddit estimates they received between US$10,000-$20,000 from several free airdrops.

Cosmos subreddit user discusses the value of ATOM staking and airdrops. Source: Reddit r/CosmosNetwork

What’s next for ATOM?

The Cosmoverse conference during Q3 2022 unveiled the new Cosmos 2.0 whitepaper. This three-year roadmap brings significant changes to the network. It also aims to make the ATOM token more valuable.

Monetary policy changes

Currently, ATOM’s inflation is inverse to the amount of staked ATOM. During the three-year roadmap, this issuance will shift in a deflationary direction.

Less issuance decreases available supply, helping the token’s price to rise.

In the future, governance proposals may make the token more deflationary or add use cases. These proposals could significantly increase the ATOM token’s value.

ATOM’s old issuance schedule compared with its new issuance schedule. Source: Cryptotimes

Interchain security

Having many validators helps a blockchain remain secure. Cosmos 2.0 will introduce interchain security.

This interchain security will allow Cosmos appchains to rent security from Cosmos Hub. ATOM stakers will receive 25% of the rent.

These increased staking rewards make the token more valuable. The resulting demand helps the token’s price climb.

Liquid staking

Staking tokens often means the staker must lock up their tokens for a specific time. Liquid staking helps increase “capital efficiency” by making these locked tokens reusable. For example, stakers could trade or stake the locked tokens on another platform.

By introducing liquid staking, Cosmos 2.0 increases the value of ATOM tokens. Users can repurpose their staked tokens to increase their rewards.

What is the market saying about ATOM?

ATOM’s social volume remains steady despite the market crash

ATOM’s social volume decreased after the market’s euphoric peak in Q4 2021. Yet, it’s maintained consistent levels after 2022’s initial drop. This consistent social volume shows a strong core interest in the project.

ATOM’s social volume since December 2020. Source: Santiment

ATOM’s community has room to grow

ATOM has a large community with:

Polkadot (DOT) is a close competitor to ATOM. It’s similar in design, connecting and securing “parachains.” These parachains are individual blockchains like Cosmos’ zones. Polkadot has:

DOT’s community is bigger, although ATOM has a larger community on Reddit. This size difference shows that ATOM still has room to grow as the Cosmos 2.0 upgrade begins.

What are the risks for ATOM?

Bugs, hacks, or other exploits

ATOM has a strong reputation as a secure chain. Yet, every technology has vulnerabilities.

For example, on 13 October 2022, co-founder Ethan Buchman announced a security vulnerability. This weakness affected all IBC-enabled Cosmos chains.

Developers quickly released a patch and fixed the issue, demonstrating their competence. Yet, it’s always possible that similar problems could arise.

No max supply cap

ATOM currently has no maximum supply cap. This unlimited cap may concern some investors since it implies infinite inflation. No limit on supply creates constant downward pressure on the token’s price.

Yet, ATOM’s staking does offer rewards and airdrops that outpace current inflation. Monetary policy changes in Cosmos 2.0 also help the ATOM token gain more value.

Additionally, future governance changes could impose a hard cap. They may also create more incentives to lock up circulating ATOM supply. These changes would help the token’s price to climb.

Bottom line

ATOM is a battle-tested layer-0 that aligns with powerful crypto industry narratives. 

While other projects flounder or die in the bear market, ATOM continues to grow. Ambitious changes proposed in Cosmos 2.0 roadmap make the network more valuable. 

In particular, this roadmap addresses monetary policy issues. In the past, these issues discouraged investors from buying ATOM. The changes could help the token’s price climb significantly during the next bull run.

What can I do from here?

  1. Buy and hold ATOM tokens [Difficulty: Easy]
  2. Explore Cosmos’ 266 dApps [Difficulty: Easy]
  3. Stake ATOM tokens to receive rewards and potential airdrops. [Difficulty: Moderate]
  4. Take part in ATOM’s governance by submitting and voting on proposals. [Difficulty: Hard]

Who should I follow?



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