How to buy Cosmos (ATOM)

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robertstevens

Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.

One of the biggest problems with the blockchain market today is that rival blockchains still have a difficult time speaking with one another. Although an Ethereum protocol can easily connect with another of its kind, it’s tougher to get it to work with, say, Bitcoin or Cardano or Solana.

It’s a little ironic, especially since blockchains are often touted as the solution to the Big Tech incumbents of yore, which created “walled gardens” around their products that make it tricky for consumers to jump ship to a competitor.

Blockchains, to be clear, are decentralised ledgers of transactions maintained by a network of anonymous actors. The most famous examples are Bitcoin and Ethereum. These are the opposite of say, a centralised payments network like Visa or Mastercard, which controls its entire network. They’re open-source, and anyone can spin up a new blockchain in a matter of minutes.

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A lack of interoperability wasn’t a problem when Bitcoin was created in 2008, or when Ethereum created the first blockchain to support decentralised applications in 2015. There weren’t many worthy rivals, and it wasn’t as big of a deal if blockchains couldn’t connect with each other. But it is now, not least because decentralized finance, an industry that grew off the back of Ethereum’s programmability, holds well over $100 billion.

If rival blockchains can’t talk to each other, the industry is still closed off from that ethos of decentralisation, and the industry may struggle to grow. It breeds factionalism and brand loyalty, and leads to frustration when a popular blockchain lacks the speed, cheapness, decentralisation, or programmability of a rival.

Cosmos is a solution to this new-fangled problem. It’s created an “internet of blockchains” that lets different blockchains connect, share information and transact with one another.

What is Cosmos?

“With Cosmos, blockchains can maintain sovereignty, process transactions quickly and communicate with other blockchains in the ecosystem, making it optimal for a variety of use cases,” reads the official documentation. Cosmos hopes to achieve this through something called the IBC, or the Interblockchain Communication protocol.

This protocol fashions a standardised line of communication between blockchains that use Cosmos’s infrastructure. Any blockchain that integrates IBC can freely share information and assets with other IBC blockchains, giving people more choice about how they use blockchain technology. As a result, under Cosmos’s vision, no one blockchain needs to dominate the market, meaning that the industry can get over the tribalism that has dogged it for several years.

Cosmos is the first blockchain to integrate the IBC protocol. When we talk about Cosmos, we’re talking about a network of blockchains that are centred around the Cosmos Hub, the first of these “interconnected blockchains”.

Cosmos blockchains run on something called Byzantine Fault-Tolerance consensus mechanisms. These algorithms protect the network. On a decentralised network, where the validators are anonymous and independent, you need a system that lets you confirm transactions with some authority; if people are approving spurious transactions, the data is bunk and the whole operation falls apart. The BFT algorithm guarantees security, even if up to a third of actors on the network are malicious.

The Cosmos Hub, and many blockchains on Cosmos, run on a BFT algorithm called the Tendermint consensus mechanism. It was created by Jae Kwon, Zarko Milosevic and Ethan Buchman in 2014. Kwon stepped down as CEO of the InterChain foundation, which administrates the Cosmos project, in 2020 amid bitter infighting over the governance of the network and conflicts of interest.

The Tendermint consensus algorithm is designed to be fast. According to the documentation, it takes just a second to produce a block: a batch of transactions that are then uploaded to the ledger and connected in strings called a chain (this is where the term blockchain comes from). The algorithm can handle up to thousands of transactions per second and completing a transaction is instant.

Cosmos can support both private blockchains (networks that only a select group of entities can use, like a consortium of businesses), or public blockchains (that anyone can use. Bitcoin and Ethereum are examples of private blockchains). Cosmos is a proof-of-stake blockchain, which means that those with the most coins, not the beefiest computers, get to validate transactions.

Anyone can create another blockchain on Cosmos using the Cosmos SDK (software development kid). In Cosmos-speak, these blockchains are called zones. All the zones are backed by the Tendermint consensus mechanism. As a test, Cosmos created Ethermeint, a module that ports the Ethereum Virtual Machine into Cosmos. All the tools that Ethereum developers use to build Ethereum’s panoply of decentralized applications also work on Cosmos, plus wallets like Metamask.

What is ATOM?

The Cosmos network is backed by a coin called ATOM. This token does lots of different things. The first use is as a governance token—a token used to vote on the future of the network. You can also stake ATOM as a validator to confirm transactions on Cosmos, or use it to pay validators to process your own transactions.

ATOM can also be used to back other zones in the Cosmos ecosystem. This way of structuring blockchains is called a bridge-hub model. In Cosmos, the Cosmos hub is—no points for guessing—the hub that connects these other zones. Each zone can secure itself with its own coins, but it can also use ATOM to ensure that it has enough money backing it.

Validators can earn a cut of transaction fees. You can also delegate your tokens to other validators, and earn a cut of the money that they make from validating transactions. A small proportion of validator fees is also taxed by the network; this money goes to a reserve pool, held by the network, that increases Cosmos’s security. The network started with 100 validators in its first year and plans to expand that to 300 over the following decade.

In this proof-of-stake system, the ATOM token is used as a work token, whereby users can stake their ATOM or delegate their ATOM to other validators who are participating in validation. If you plan to delegate fees to a validator, note that each one is different. Some will take larger cuts, and some aren’t online as much. Those at are inactive might not earn as much in fees as other validators, and may even get “jailed”—when the network forbids them from validating as a punishment for not being good enough.

Like Solana, Cardano, Polkadot and Ethereum, Cosmos also supports smart contracts: self-enforcing financial contracts that run on blockchain code. When the code receives some input, like money, it can modify another section of the code and provide a service, like a loan or an insurance policy.

These include Anchor, Flares, Dawn Protocol and Gravity Dex. Functionally, dapps like these can run the gamut, offering services as diverse as decentralized identifiers for privacy enthusiasts and decentralized exchanges on GravityDEX, which let you swap tokens without the need for an intermediary (like, er, Wealthsimple).

You can also buy and hold ATOM as a speculative asset. It’s a cryptocurrency that trades on regular crypto exchanges, just like Ethereum and Bitcoin. At the time of writing, the 11th of November 2021, ATOM has a market cap of $7.5 billion. Precisely 224,379,539 ATOM tokens are in circulation.

Two private token sales in 2017 raised $16 million, selling ATOM at a rate of $0.1 (not a bad investment, considering it is worth $33.36 as of this writing). About 80% of all tokens went to investors, and the final 20% was split between All In Bits and the Interchain Foundation. All in Bits created the Tendermint Protocol and the Interchain Foundation.

How to buy ATOM

So, how do you actually get your hands on ATOM, the coin that backs the Cosmos blockchain network? Well, you have several options—although you can’t buy it on Wealthsimple as of this writing. You can choose a decentralized exchange, peer-to-peer change or a centralized exchange.

By far the most popular way to buy ATOM, and the one we’ll walk you through now, is on a centralized cryptocurrency exchange. These are companies that operate a little like the New York or Toronto stock exchanges, albeit with less regulatory oversight. Cryptocurrency exchanges maintain order books of cryptocurrencies and incentivise market makers to trade on their platform so that there is always enough liquidity.

Popular examples of centralized crypto exchanges include Binance, Coinbase and Gemini. These exchanges vary wildly in terms of security, regulation and cost. Binance, for instance, does not operate in Ontario and has been kicked out of many countries, including China, Japan and Malta. (Despite this, it’s still the largest exchange by retail trading volume).

Some crypto exchanges are well integrated with the Canadian banking system, although some of the largest—Newton, Shakepay and Coinsmart, do not support ATOM as of this writing. Given how unregulated the crypto market still is, it would be wise to carefully research your exchange of choice before depositing funds. These exchanges might not cover your assets in the event that the whole ship starts to sink.

To buy ATOM on these crypto exchanges, you need to create an account. Exactly which type of identification is required depends on the exchange, but usually, you’ll have to provide some proof that you are…you. Once you have done this, you can create an account. They look a little like stock trading sites, and the principle is the same, too. The only major difference is that you are buying cryptocurrencies, not stocks.

When you buy ATOM, you’re going to have to buy it with something else. This can be a cryptocurrency or a fiat currency (regular money, like the Canadian or US dollar). You can check the most popular markets on sites like CoinMarketCap and CoinGecko; the most popular markets are for USDT, a cryptocurrency whose value is (somewhat contentiously) tied to the US dollar. Next up is USD, the trusty old US dollar, and then Bitcoin, the original cryptocurrency. The Canadian dollar pairing doesn’t even rank in the top 100, according to CoinMarketCap.

So, if you want to buy ATOM with Canadian dollars, you’ll have to buy it with another fiat or crypto currency. To do this, you have to first deposit your Canadian dollars on an exchange. Or, after ensuring the exchange you have chosen lets you buy ATOM in the currency, US dollars. Supposing you want to buy ATOM with CAD, you then need to buy a cryptocurrency that pairs with ATOM. You can check which one you need by typing ATOM into the coin ticker bar, and then pick a pairing that also supports CAD trades. Often, this will be a stablecoin, like USDC or USDT, or a major coin like Bitcoin or Ethereum.

Once you have picked one of these coins, you can buy your ATOM tokens. If you just want to buy them outright, you’re looking for a ‘spot’ trade at the market rate. You’ll probably have to pay a trading fee for this purchase. These fees usually decline if you spend more money.

Once you have bought your ATOM, it’ll go into the wallet held on the exchange. This is known as a ‘custodial’ wallet, since the exchange is looking after your money, a little like how a bank looks after the money in your account. However, since many of these exchanges are scarcely regulated, it is generally advisable to self-custody… There are two ways to do this. The first is to store it in a web or mobile wallet, like MetaMask or Trust Wallet. The second, which is slightly more secure, is to store it on a hardware wallet like a Ledger or a Trezor, and then store this wallet in your house. These are ‘non-custodial’ solutions, since looking after the money becomes your sole responsibility.

Last Updated December 8, 2021

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