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Cosmos is a group of independent blockchains, designed and created by All In Bits Inc (also known as Tendermint Inc). Its mainnet took a start on March 14, 2019. The project was created as a next-gen internet model. The main idea is not to divide different blockchains but unite them. This is the fundamental part of the IoB concept — the Internet of Blockchains.
ATOM (spelled as ‘Cosmos’) is the reward token for supporting this blockchain’s work.
The Cosmos team created two basic things that helped them to fulfill their idea.
So, the whole system is, in fact, a group of different blockchains called ‘zones’ connected to a central one called ‘the hub’. The hub runs the proof-of-stake algorithm to hold everything together. There may be several hubs for the consolidation and validation of transactions within the zones. The proof-of-stake system is also designed to support hubs as well.
ATOM is not mined. It is earned in the special hybrid PoS-algorithm. A user stakes ATOM and takes part in a challenge. The person who has more tokens staked wins and becomes the validator. It means that this node confirms the next pack of transactions and earns the reward. This is close to the classic model of the proof-of-stake.
It may seem that rich users get richer and the ones who have minor amounts will never reach the top. But it’s not really true for the Cosmos project. Its blockchains support the so-called delegation. If someone wants to have some benefit but doesn’t have enough ATOM to become a validator, they can delegate present tokens to get staked as a part of a more significant amount. The delegator gets a part of the reward in case of success.
Validators take a fee for other people’s ATOMs staked on their account. Fees are chosen by validators and obey the market rules and usually fluctuate within 1% and 25%. The final percent depends on the amount.
The blockchain is adjusted to set the perfect amount of staked ATOM of ⅔ total circulation amount. If the amount goes below or above that mark, the system artificially changes the inflation and block reward parameters in order to adjust the amount. As of this writing, the ATOM staking ROI is around 13%.
The Cosmos has its own security algorithm. If someone is suspected in any sort of fraud, this nod gets removed from the network and its stake is frozen. The case is investigated within 21 days. If everything turns out to be alright, the stake is returned. If not, the whole stake gets burned even with the delegated amounts. The user goes to the ban list in this case.
The process of ATOM staking with the Atomic Wallet is very simple. Check our step-by-step guide on how to stake ATOM.