Cosmos 2.0: How the new economic model will act on ATOM prices

The draft Cosmos Hub 2.0 white paper has been officially released in the governance forum, describing Cosmos Hub’s new ecological role and ATOM’s new token economics. The white paper will be on-chain and subject to community voting on October 3.

Previously, Delphi Digital, a well-known investment institution in the industry, announced that its protocol research and development department, Delphi Labs, will turn to research and development of the Cosmos ecosystem, and released a research report comparing different public chains to choose Cosmos, ATOM ushered in a 23% increase on the same day.


With the new token economics of ATOM proposed in the Cosmos Hub 2.0 white paper, does ATOM have the momentum to continue to rise under the new token economy? Odaily Planet Daily will take an in-depth look at the white paper to analyze the impact of Cosmos 2.0’s new token economy on the price of ATOM coins using token supply and demand.

Issuance decreased

First of all, in terms of token supply, the issuance of ATOM is gradually decreasing.

Cosmos 2.0 introduces new ATOM release rules. The release of ATOM will be adjusted to a transition phase and a stabilization phase. The transition phase is 36 months, starting with the issuance of 10 million ATOM per month, and if approved for implementation immediately, the inflation rate will soar rapidly in the short term, briefly reaching 40%, and then steadily decreasing until it reaches 300,000 ATOM per month in issuance, effectively reducing the inflation rate of ATOM to 0.1%.

As shown in the following figure, the release of ATOM will no longer be linear.


Reduced liquidity

With the advent of ATOM liquidity pledge, more and more ATOM will be pledged, and the supply of ATOM in the market will decrease.

Buchman, core developer of Cosmos, said that Cosmos Hub will soon incorporate liquidity pledges into the core of the network’s code. ATOM holders can earn interest by staking their tokens against validators, but doing so involves locking the tokens to an address on the blockchain, at least for a period of time, they cannot be sold, and only third-party applications provide “Liquid staking” solutions that enable users to trade their collateralized assets through derivative tokens that represent their staked share.

Gas settlement

After mentioning the changes in supply and liquidity of ATOM, we will introduce the changes in demand of ATOM. In Cosmos 2.0, some networks in Cosmos use ATOM to settle Gas, which increases the demand for ATOM.

Cosmos is moving towards 2.0, how will the new economic model act on ATOM prices?

To lower the barrier to entry for blockchain development and operation in Cosmos, Cosmos has launched an Interchain Security solution. That is, other chains can share security with Cosmos Hub. Simply put, with Cosmos Hub, developers can focus on product development without having to design complex token mechanisms themselves, while sharing security with Cosmos Hub (ATOM has a market value of $4 billion and costs about $2.6 billion) at the cost of using ATOM to settle Gas. To add, the custom consumer chain allows the project party to create its own Gas tokens, and the Cosmos Hub receives the customized Gas tokens of the project party.

Treasury revenue

The white paper describes two application-specific features, InterChain Scheduler and InterChain Allocator. InterChain Scheduler is a cross-chain block space market in Cosmos, where cross-chain MEV revenue is collected by InterChain Allocator to facilitate inter-chain collaboration and expand the potential market for Scheduler. To put it simply, Scheduler is a block market on Cosmos, and a chain with leisure blocks can sell its own blocks to a chain in need, and the difference in price is collected by Allocator as revenue for Cosmos Hub.

Cosmos is moving towards 2.0, how will the new economic model act on ATOM prices?

At present, Cosmos Hub said that it will be included in the treasury of Cosmos Hub according to this part of the revenue, and may set up an ecological fund to promote the ecological development on Cosmos and further increase the use case of ATOM (Gas settlement). On the other hand, the possibility of distributing income to ATOM holders is not excluded.

Community governance

ATOM also has governance powers.

For example, the Cosmos Hub community launched a proposal on September 20 to spend 20,000 ATOMs from the community funding pool for incentives for the inter-chain security public testnet, of which 10,000 ATOM tokens will be awarded to Cosmos Hub validators who have completed the testnet milestone. In addition, since ATOM is also a Gas settlement token, ATOM may also be used in the future to modify the governance proposal of Gas rates.

Overall, with the release of the Cosmos 2.0 white paper, new token economics have impacted the supply and demand of ATOM. On the supply side, ATOM issuance and liquidity are gradually decreasing, and on the demand side, the demand for gas settlement and network governance will further increase. Therefore, we can expect that ATOM will become in short supply in the future and the price will rise as a result.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-10-01 23:24
Next 2022-10-02 11:41

Related articles