ATOM 2.0 Tokenomics will change the future of Cosmos hub and its native token. In this article, We’ll deep dive into ATOM 2.0
Everyone has heard about the Cosmos network but only a few of them heard about the new updates that are going to incorporate, which they revealed in their new roadmap and intend to keep Cosmos moving forward in their vision towards a fully interoperable blockchain, let’s dive in!
ATOM 2.0 whitepaper
The ATOM 2.0 whitepaper was released on 26th September 2022, which stated many new changes to the tokenomics and additional features for the (ATOM/USD) network.
Cosmos is an ecosystem of interoperable and sovereign blockchain applications and services, while ATOM is the cryptocurrency that powers an entire ecosystem of blockchains, which are purpose-built to scale and interoperate with one another.
What’s the update?
One of the most highly-anticipated updates within the Cosmos ecosystem, known as the ATOM 2.0 whitepaper, was released following a series of speeches from the co-founder of Cosmos, Ethan Buchman, the co-founder of Osmosis, Sunny Aggrawal, and the co-founder of Iqlusion, Zaki Manian at Cosmoverse.
This 27-page document which is titled “The Cosmos Hub,” was penned by Buchman, Manian as well as eight other figures within the community. It outlines new tokenomics, as well as a suggestion for the implementation of multiple new features across the broader ecosystem. The monetary policy proposed here is in two steps; a 36-month-long transitional phase will be introduced.
Here, 10 million ATOM would get issued on a monthly basis, and the issuance rate would then decrease until reaching emissions of 300,000 ATOM per month, which would bring the inflation rate down to 0.1%. The three new features include The Interchain Scheduler, The Interchain Allocator, and the Governance stack as well.
ATOM, which has $3.7B in total value locked, has bucked the selloff in the rest of DeFi in the last month, besting Ethereum’s 10% swoon and Solana’s 5% jump.
Revamp – Cosmos Hub
The Cosmos Hub is the blockchain protocol underlying an increasingly large number of blockchains built on the Cosmos Network, allowing them to communicate with each other. It functions much like how you use a computer to share files that can be opened on any operating system.
Until now, Cosmos Hub has served as a template for developers looking to create their own customized blockchains. Developers replicate the codebase, customize it to suit their needs, and deploy new blockchains using independent sets of validators staking their projects’ native tokens. However, this model has faced criticism since it doesn’t drive any value to ATOM. It also means that each chain must provide its own security, a costly and time-consuming affair.
With the proposed changes, Cosmos Hub will play a far more central role in the ecosystem through Interchain Security, allowing new projects to essentially ‘rent’ security from the Hub.
When it comes to blockchain security, a larger pool of validators makes it harder for malicious actors to gain control through a so-called 51% attack. By using ATOM validators to secure their projects, developers can ensure that the cost of such an attack increases significantly – as billions of dollars worth of ATOM would be needed to take over the network.
In exchange for securing what the whitepaper calls ‘consumer chains,’ ATOM validators will earn those respective chains’ native tokens in addition to the usual ATOM staking rewards. The feature, slated to launch in January 2023, is meant to drive value to ATOM stakers.
What is actually ‘Interchain Security’?
Interchain Security basically allows the Cosmos Hub to run many blockchains in parallel, all with the same security attributes.
The ATOM 2.0 whitepaper adds an Interchain Scheduler, a “secure block space market to avoid off-chain cartelization and provide more options for chains seeking to optimize the use of block space.” In a nutshell, the Scheduler will sell the right to front-run transactions, thereby accruing value to the protocol.
Some of the revenue from these block space auctions will go to an ‘Interchain Allocator’ tasked with funding various initiatives to grow the Cosmos ecosystem. The whitepaper calls it a “platform for delegated parties to grow and align ATOM-based markets, facilitating multi-chain trust and coordination.”
Another way the ATOM token will accrue more value, according to the white paper, is by leveraging liquid staking. ATOM holders can earn interest today by staking their tokens with validators, but doing so involves locking the tokens up in an address on the blockchain where – at least for a time – they cannot be sold. Third-party apps offer “liquid staking” solutions that free up users to trade their staked assets via a derivative token representing their stake.
The Cosmos Hub will soon bake liquid staking into the core of the network’s code. “With the native liquid staking module, it provides a better user experience for entering one of those liquid staking providers,” explained Buchman.
“The Cosmos philosophy is fundamentally long-term – a humble nod to the diversity of human communities, to the fruits of empowering them, and to the futility of frustrating their political economic expression,” wrote Cosmos co-founder Ethan Buchman in a post introducing the next phase of the project’s roadmap.
The white paper also details other changes to ATOM, including major long-term reductions to the number of tokens that are issued to the network.
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