Earlier in the year the Cosmos network enabled a function that allows users to exchange assets across blockchains, such as non-fungible tokens (NFTs). As a result, the price of the Cosmos cryptocurrency ATOM soared to hit a fresh high of $28.50 on 15 April 2021.
But that was only a foretaste of what was to come. It had fallen back from the April high to around $8 when it surged forwards again, surpassing the April peak and on to $44.70. At the time of writing it has moved back down some 30% to $30.50 but still almost five times it 2021 opening.
That, according to CoinMarketCap, makes its market capitalisation $6.87bn which in turn gives it a global ranking of 33rd in the league of cryptos.
How does Cosmos (ATOM) work and why is it important to the crypto industry?
Here is Capital.com's overview of the network protocol and the outlook for the ATOM coin price in the years ahead.
Cosmos aims to become the ‘internet of blockchains’
What is Cosmos (ATOM)? Cosmos is a decentralised network of independent blockchains that can scale and operate together, enabling an ecosystem of interconnected applications and services. ATOM is the native cryptocurrency token that runs on the network.
The Cosmos ecosystem is powered by consensus algorithms and the Inter-Blockchain Communication (IBC) protocol. This allows users to exchange assets and data across blockchains.
According to its official website: “The vision of Cosmos is to make it easy for developers to build blockchains and break the barriers between blockchains by allowing them to transact with each other.” It adds:
The Interchain Foundation (ICF) is a non-profit foundation based in Switzerland, created to support the development of Cosmos and the ecosystem that would contribute to the network. The network is being developed by Tendermint Inc, a software development company.
In February 2021, the development team upgraded the network to enable the implementation of the IBC for interoperability with other distributed ledgers. On 29 March more than 1,500 validators and delegators in the Cosmos ecosystem voted to support IBC and it was activated on the platform.
As of March 29th 8:45AM UTC, a parameter change on the Cosmos Hub has enabled IBC-compatible blockchains to send their tokens to the Hub, as well as allow the Hub’s native ATOM tokens to be transferred to other blockchains.https://t.co/HmKPyUn7m7 pic.twitter.com/kekV8DRnOf— Cosmos - Internet of Blockchains ⚛️ (@cosmos) 29 March 2021
Building a blockchain has typically required building each of the three layers – networking, consensus and application – from scratch. Tendermint Byzantine Fault Tolerance (BFT), which was created in 2014, is a blockchain engine that packages the networking and consensus layers, allowing developers to focus on applications rather than the complex underlying protocol. Tendermint was developed by co-founders Jae Kwon and Ethan Buchman.
The Application Blockchain Interface (ABCI) protocol connects the Tendermint BFT engine to the application. Tendermint offers developers several advantages:
The Cosmos software development kit (SDK) simplifies the process of building blockchain applications on top of Tendermint. It is based on two major principles – modularity and capabilities-based security. It can also be used with other consensus engines that use the ABCI. The Cosmos developers expect multiple SDKs, with different architecture models compatible with numerous consensus engines, to emerge.
The emergence of decentralised finance (DeFi) and NFTs has increased interest in networks that enable interoperability between blockchains and the transfer of assets.
IBC enables a four-step process to transfer tokens between blockchains:
Tracking – each chain runs a light version of the other for validation;
Bonding – when an IBC transfer is started, ATOM tokens are locked up on the first chain;
Proof Relay – proof that the tokens are bonded is conveyed from the first chain to the second;
Validation – the proof is verified, and a representation of the coins is created on the second chain. The coins are frozen on the first chain.
Cosmos proposes to use a modular approach comprising hubs that are blockchains designed to connect zones of regular blockchains. When zones connect to hubs, they can automatically transfer to and from all the other zones, and hubs prevent double spending.
The first hub on the network is the Cosmos Hub, a public Proof-of-Stake (PoS) blockchain. While ATOM is the native token, users will be able to pay transaction fees in multiple tokens.
The ATOM price reaches record high
The ATOM price has climbed to make it the 33rd-largest cryptocurrency, with a market capitalisation of $6.87bn.
According to Coinmarketcap.com, ATOM was trading at $6.50 when it launched in March 2019. The price quickly retreated and had dropped to $1.99 by September that year. The coin moved up to start 2020 around $4 but fell back to $1.62 in March 2020, where it bottomed out and trended higher for the rest of the year.
With cryptocurrencies rallying across the board in 2021, ATOM has not been immune and rallied sharply in recent months. The price soared from $6.10 at the start of the year to $22.27 on 19 February. It has twice slipped back to the $17 level since, but spiked again to a new all-time high of $28.50 on 15 April. Then again in September at $44.70.
So, what is the outlook for the Cosmos coin for the rest of 2021 and beyond? Is the price expected to continue moving higher?
Cosmos (ATOM) price prediction for 2021-2025: where next for the price?
Digitalcoin’s Cosmos crypto price prediction indicates the value of ATOM will rise against the US dollar over the long term. It projects the price will average $45.39 in 2021, $54.1 in 2022, $93.62 in 2025 and $134.23 in 2028.
Forecasting service Wallet Investor is also bullish in its Cosmos forecast for 2021-2026. The site predicts that the price rise to $31.91 by the end of December 2021, $55.51 by December 2022 and $147.47 by December 2026.
The ATOM price prediction from Gov Capital puts the coin at $65.83 one year from now and at $68.85 in December 2022. Its five-year forecast is for the price to reach $330.79.
According to data from Coinmarketcap.com, there are more than 225 million Cosmos tokens in circulation, with a total supply of nearly 283 million.
Predictions from cryptocurrency forecasting services indicate there is upside potential for the ATOM price this year if the market continues to rally.
Whether ATOM crypto is a good fit for your investment portfolio depends on your individual risk tolerance and the other assets you hold.