Cosmos Hub is the central hub chain of the Cosmos network, and its native token is ATOM. ATOM is used for staking, as the primary fee (gas) token, and for on-chain governance. In other words, ATOM secures the network, pays for on-chain activity, and lets holders vote on network changes.
Design principles
Cosmos Hub runs on the Tendermint consensus engine, a Byzantine Fault Tolerant Proof-of-Stake (PoS) system. There are two main types of participants:
- Validators – run nodes, produce blocks, and participate in consensus.
- Delegators – stake their ATOM by delegating it to validators.
Validators stake their own ATOM and can also accept ATOM from delegators. Delegators assign their ATOM to a validator and, in return, share in block rewards, transaction fees, and the ability to vote on governance proposals. In this setup, ATOM on Cosmos Hub serves as the staking token.
ATOM also acts as the network’s fee token. Any on-chain action on Cosmos Hub—such as transfers, IBC cross-chain transactions, or other operations—requires transaction fees, which are primarily paid in ATOM. Part of these fees is distributed to validators and delegators as revenue, and another part is burned, creating a deflationary effect on top of inflation.
To balance security and liquidity, Cosmos Hub uses dynamic inflation and staking rewards to encourage a large share of ATOM to be staked. The higher the staking ratio, the more expensive it becomes for an attacker to buy enough ATOM on the open market to control more than one-third of the voting power. In short, a higher staking ratio leads directly to stronger economic security for the network.
What is ATOM used for?
On Cosmos Hub, the primary use of ATOM is staking.
Validators stake ATOM to help secure and operate the network. They bond their own ATOM and can also receive ATOM delegated by other users. Delegators participate by delegating ATOM to a validator and share in the staking rewards and governance rights.
As more ATOM is staked across the network, it becomes more difficult and more expensive for any attacker to accumulate enough stake to disrupt consensus. A higher total staked amount means a more secure Cosmos network.
ATOM supply and initial distribution
Cosmos held its initial token fundraiser on April 6, 2017, introducing the ATOM token. At genesis, approximately 236 million ATOM were created.
The initial supply was allocated roughly as follows:
- 75% to fundraiser participants
- 5% to early angel investors
- 10% to the Interchain Foundation (ICF)
- 10% to the core development team
After launch, ATOM became an inflationary token, with new issuance used mainly to pay staking rewards.
ATOM token economics
Staking is at the core of ATOM’s design. The higher the percentage of total ATOM that is staked, the more secure the Cosmos network becomes. To support this, Cosmos Hub uses inflation that depends on the network-wide staking ratio.
In practice, the protocol targets a certain share of ATOM being staked. The annual inflation rate moves within a range of about 7% to 20%. When the actual staking ratio is low, the inflation rate moves toward the upper end of this range (up to around 20%), increasing staking rewards and encouraging more ATOM to be staked. Once roughly two-thirds of the total supply is staked, the inflation rate is set at about 7%, which is something ATOM holders should be aware of.
This has a direct impact on ATOM holders:
- If you do not stake your ATOM, most of the new tokens created through inflation go to stakers (validators and delegators). Over time, your share of the total supply is diluted.
- If you do stake your ATOM, you receive a portion of the newly issued tokens as rewards, which helps offset or even exceed the effect of inflation.
A simple way to think about it: imagine Tom and Bob each hold 100 units of value. Tom deposits his funds into an interest-bearing account; Bob keeps his cash in a drawer. After 10 years, Tom’s balance has roughly doubled with interest, while Bob still holds 100 units that buy less in relative terms. In the same way, stakers capture a share of new ATOM, while non-stakers are gradually diluted.
Because this design encourages ATOM holders to pool and stake their tokens, the hypothetical scenario where an attacker buys enough ATOM on the open market to control 33% of the stake becomes much harder to realize in practice. As demand for ATOM rises and liquid supply on the market tightens, each additional unit of stake becomes more expensive. This significantly increases the economic cost of attacking the Cosmos network.