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đź’ˇ10+ Essential Metrics for Understanding ATOM Token.
Laura & Sooraj
October 21, 2023
Layer 1 Spotlight: Cosmos[ATOM]
Read time: 5 minutes
https://www.justthemetrics.com/
Greetings, Metrics Explorers!
Laura & Sooraj here, back for another chapter.
We appreciate your questions and votes, which contribute to the direction of our investigations.
This week, we shift our attention to ATOM.
Your queries and interest drive our content, so please continue to submit your questions.
Ready to dissect the critical metrics of ATOM?
Let's proceed.
What you’ll learn today
Insight 1: Security and Participation: What Staking Metrics Reveal
A thorough examination of Cosmos' key staking metrics, including staking ratios, market cap, and staking wallet numbers to assess network vitality and user participation.
Insight 2: Upcoming Proposals and Their Impact on ATOM's Economics
Investigating the proposed changes in tokenomics, from liquid staking to burn proposals, and how these could fundamentally alter the economic landscape of ATOM.
Insight 3: Is Cosmos's Inflation Rate a Boon or a Bane?
Navigating through Cosmos's Token Supply Growth to understand its implications on supply, demand.
Primer on Cosmos and Atom
The Cosmos Hub serves as a network of interconnected blockchains, often referred to as the "internet of blockchains."
This network facilitates the transfer of digital assets and data via the Inter-Blockchain Communication (IBC) protocol.
The Cosmos network's native cryptocurrency is ATOM, which performs key roles in the platform as outlined below:
Transaction Fee
Governance: Staked ATOM enables direct voting on network decisions, with influence proportional to stake.
Security Contribution: ATOM can be temporarily allocated to enhance Cosmos Hub security.
1. Market Overview
Circulating Market Cap
This metric serves as an indicator for evaluating the asset's relative size in the broader cryptocurrency market.
Current value in USD: $1.87 Billion
90-Day Trend: -33.2%
Current value in BTC: 23,865 BTC
90-Day Trend: -28.5%
Daily Volume
The daily trading volume of a crypto asset indicates both market interest and market liquidity. Higher volume corresponds to lower volatility, and vice versa.
Current value: $109 million
2. Supply and Demand
Token Inflation Rate
Inflation Rate's Significance
A high rate could dilute the token's worth, turning it into something less exciting. A low rate, however, could drive up both demand and price.
Current value: 16.5% Token Supply Growth
Annualized Fee Revenue
Annualized Fee Revenue serves as a gauge of the financial health of a protocol. Elevated revenue figures point to vibrant transactional activity within the network, whereas diminished numbers could hint at waning user engagement
Current value: $587,073
Supply/Demand (S/D) Ratio
The S/D ratio measures the network's financial balance. A ratio close to 1 indicates fee revenue and reward payouts are nearly equal.
A ratio below 1 suggests that more rewards are being paid out than fees are being earned, which could potentially call into question the long-term value of the token if this trend continues.
Current value:
▪️ Annual Fee Revenue: $0.58 million
▪️ Ratio: 0.0018
With an S/D ratio of around 0.0018, Cosmos’s reward payouts are approximately 554 times greater than its annual fee revenue.
Valuation to Demand (V/D) Ratio
Here we are looking at the valuation-to-demand ratio. So what does it mean?
All L1 token prices (Cosmos is not exactly an L1 but we will talk more about that in another section) are based on optimism about the level of adoption achievable by the network in the future.
The market cap of L1 tokens in dollar terms suggests the speculative price people are willing to pay for future adoption.
However, the transaction fees paid in the last 365 days in dollar terms suggest the actual demand for the L1 network.
So let's take a look at how many times these networks are valued today compared to the transaction fees paid in the last 365 days.
Annualized Fee Revenue: $0.58 million
Current Market Cap: $1.87 billion
The cumulative market cap of ATOM token is valued at 3224 times the total fees paid in ATOM
To give you some context
Ethereum is valued at 95.74 times the total fees paid in the last 365 days.
Solana is valued at 554 times the total fees paid in the last 365 days.
MultiversX is valued at 1433 times the total fees paid in the last 365 days.
Cardano is valued at 3082 times the total fees paid in the last 365 days.
🗳️ What's Next? Your Vote Counts!
3. Security & Participation: Key Staking Metrics
Source: www.stakingrewards.com
Staking Ratio
Staking ratio can provide insights into the level of network participation among token holders, as well as the overall health and security of the network.
Current value: 66.86%
90-Day Trend: -2.45%
When compared to Ethereum's 20.51%, Cardano's 62.41%, and Solana's 71.19%, the staking ratio of Cosmos/ATOM looks strong.
Staking Market Cap
The staking market cap reflects the total value of staked tokens and indicates network security and participant commitment. A high staking market cap suggests a more secure and stable network.
Current value: $1.58 Billion
90 Day Trend: -31.4%
In terms of staking market cap of leading platforms, Ethereum leads with $44.45 billion, followed by Solana at $10.78 billion, Cardano at $5.76 billion.
Staking Wallets
The number of Staking Wallets indicates network participation and decentralization. A higher number suggests an active, engaged community, while a lower number might indicate centralized control or lesser community involvement.
Current value: 992.7 k (almost a million wallets)
90-Day Trend: +10.09%
This is comparable to Ethereum, which has 781,320 staking wallets, and Cardano, which has around 1.3 million staking wallets.
4. Reward Metrics
Reward Rate
It is the current annualised average reward rate across the network. This is the rate at which stakers can earn rewards for participating in network consensus and/or governance.
Current value: 20.73%
Reward Stability
This is computed by comparing the realized reward rate over the last 365 days to the expected reward rate 365 days ago.
Current value: 100%
According to stakingrewards.com Tezos’s reward stability is relatively high, with minor fluctuations observed over the past 30-90 days.
Remember: this metric may not be that accurate as it is currently in beta, and continuously being worked and improved upon to better the scoring framework.
5. Risk
Decentralization
A. Governance
The Cosmos ecosystem focuses on governance mechanisms to realize its aim of creating a network of interoperable blockchains. These are facilitated through the Cosmos Hub's Governance module, which coordinates blockchain modifications via parameters, upgrades, and proposals.
ATOM holders can participate in governance of the Cosmos Hub by voting on proposals with their staked ATOM.
The ecosystem also has additional on- and off-chain processes that exist to set technical direction and inculcate social norms.
B. Initial Token Distribution
ATOM token has a relatively fair initial distribution, when compared to Tokens like ETH or ADA.
C. Network
In total Cosmos Hub has 561 allocated validators, of them 180 are active validators.
For clarification:
Active validators are validators that are currently participating in the consensus process and earning rewards.
And allocated validators are validators that have been selected by delegators to receive their staked ATOM, but are not currently participating in the consensus process.
The current Minimum Attack Vector (MAV) for Cosmos Hub stands at 8.
In the context of networks using pBFT consensus protocol, like , an MAV of 8 indicates that an attacker would need to control a minimum of 33% of the network's nodes to successfully launch an attack on the network.
Fully Diluted Market Cap
The Fully Diluted Market Cap (FDV) indicates potential value dilution. If any tokens are set to enter circulation, this could exert downward pressure on the asset's price.
Similar to Ethereum, which does not have a maximum supply and is technically infinite, ATOM also lacks a hard cap on the maximum supply of tokens.
Due to the absence of a hard cap, the fully diluted valuation of ATOM tokens cannot be determined solely based on the current circulating supply.
Slashing
Validators in the Cosmos ecosystem can be slashed if they misbehave, and this can result in a partial loss of staked ATOM.
Validators can also be jailed, during which time they will not earn any rewards. Validators can be slashed up to 5% for double signing events, and the slashing penalty is just 0.01% for downtime.
Delegators who have staked ATOM with a validator that is slashed will also be penalized in proportion to their bonded stake
Unbounding Period
The unbonding period for ATOM is 21 days.
When a user decides to unstake their ATOM, the amount they choose to unstake becomes unbonding, and they will need to wait for 21 days, making staked tokens illiquid during this time.
During this period, the unstaked ATOM does not earn rewards.
Upcoming Unlocks
Upcoming unlocks can influence the token’s price as large amounts of tokens might enter the market.
For ATOM, there are no upcoming unlocks according to our research!
6. Conclusion: Narrative vs. Metrics
Current Market Sentiment
In the cryptocurrency landscape, narratives often ignite interest, but the metrics illuminate the underlying truths and potential trajectories.
Cosmos/ATOM 2.0 Proposal
In September 2022, Interchain Foundation, the team behind the development of Cosmos, introduced the Cosmos ATOM 2.0 white paper.
The document proposed significant changes to Cosmos’s design, including a new tokenomics framework, interchain security, and other features that would enhance the value proposition of ATOM as a modular chain.
Interchain Security:
This feature will allow new blockchains to borrow security from the Cosmos Hub and pay Cosmos hub validators. This feature is expected to enhance the value proposition of ATOM token.
Token issuance:
Under the new tokenomics proposal, ATOM issuance undergoes significant changes over the course of 36 months.
In the beginning, issuance increases for the first nine months in order to bootstrap funding for a new Cosmos Hub Treasury which will be utilized to support the expansion of the ecosystem.
Issuance then begins to decrease significantly at the end of nine months until it reaches a constant rate at the end of 36 months. More specifically, 10,000,000 ATOM are initially issued per month.
Burn proposal:
There have been proposals to reduce inflation, reclaim, or burn ATOM. One proposal suggests that within the ATOM economic zone, 50% of the income will be used to buy and burn ATOM, while the remaining 50% will be given to ATOM stakers. The income can come from ICS chain revenue or economic zone MEV revenue.
Liquid staking:
Cosmos is deploying a liquid staking mechanism to enable more capital efficiency and the rehypothecation of ATOM, the protocol’s native currency, and Interchain Security, an extension of Cosmos’ core security layer which enables more function, efficiency, and cooperation. These features will sit above the Cosmos Hub and serve to create a new layer for secure economic scaling.
Current Status of Cosmos/ATOM 2.0 proposal:
The Cosmos 2.0 proposal, which was introduced in September 2022, has been rejected by the Cosmos Hub community in a hotly contested vote. The Cosmos team continues to work on the upgrades mentioned in the proposal, and the other improvements in tokenomics will be introduced as a separate proposal to the Cosmos community.
Adoption
The adoption of Cosmos in the blockchain space is growing. The Cosmos network has 64 zones, and the Cosmos Hub is one of those zones.
While ATOM is the native token of the Cosmos Hub, it is not the only token used in the Cosmos ecosystem. There are many other tokens used in the various appchains that comprise the Cosmos ecosystem.
The migration of dYdX to Cosmos is an indicator of the ecosystem's increasing adoption. dYdX will introduce its own native token and validators. According to available information, this is separate from the Cosmos Hub, making it unlikely to significantly affect the value of ATOM.
Nevertheless, features such as Interchain Security, which allows new blockchains to borrow security from the Cosmos Hub and compensate its validators, are expected to enhance the value proposition of the ATOM token.
The Balancing Act
Positive News:
Strong Staking Participation:
The current staking ratio for Cosmos stands at 66.86%, which is significantly robust, outpacing Ethereum's 20.51% and nearly matching Cardano's 62.41%.
Growing Adoption:
The Cosmos network hosts 64 zones, and the migration of projects like dYdX serves as a testament to its growing adoption.
Cosmos ATOM 2.0 Initiatives:
Though the Cosmos 2.0 proposal was not accepted, the team continues to work on upgrades, including promising features like Interchain Security and new tokenomics.
Cautionary News:
Negative Market Trends:
Cosmos currently has a market cap of $1.87 Billion, which has seen a decline of 33.2% over the last 90 days.
Fee Revenue to Reward Imbalance:
The network's reward payouts are approximately 554 times greater than its annual fee revenue. This could be a point of concern for long-term sustainability.
High Token Inflation:
The network's token supply growth is 16.5% annually, which could dilute the token's worth and potentially impact its long-term value.
Low MAV:
The Minimum Attack Vector (MAV) stands at 8, which is low compared to networks like Solana or Cardano.
Knowledge is power, and in the dynamic world of cryptocurrency, staying informed is crucial.
Below, we’ve compiled a set of indispensable tools that will aid you in navigating through the intricate web of Cardano metrics and data.
🧰 Your Toolbox - to boost your token metrics research
mintscan.io and mapofzones.com block explorer for Cosmos ecosystem.
Stakingrewards.com - Continues to be a valuable resource for staking metrics, including EGLD's staking ratio and reward rates.
Tokenmetrics.com - One of the best sources of reliable on-chain metrics.
Remember: Cross-verify information, understand each metric, and stay updated with reliable sources. Especially researching outside the network’s databases to verify the numbers.
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.
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