ATOM is the native cryptocurrency of the Cosmos Hub, the project's flagship blockchain. It's primarily used to secure the network through staking and also for governance.
A brief history
Cosmos is based on the consensus protocol, Tendermint, which was created by Jae Kwon in 2014. Cosmos is a decentralized ecosystem of blockchains that aims to make it easy for developers to build separate blockchains that can interact with each other as an "internet of blockchains." Cosmos is seen as most similar to the Polkadot project, which also seeks to create an ecosystem of interoperable blockchain networks. However, unlike Polkadot, Cosmos prioritizes the sovereignty of independent blockchains, meaning they must secure themselves, have their own governance, and run their own validators. Cosmos achieves this through a network of independent blockchains called 'zones' which connect to the main blockchain called the Cosmos Hub via the Inter-Blockchain Communication protocol (IBC)- a mechanism that enables information to travel freely and securely between each connected zone. The hub monitors the state of each zone and maintains a record of the states while the zones do the same for the hub.
ATOM in practice
The ATOM token plays a key role in maintaining interoperability between all zones in the wider Cosmos network and can be used for holding, spending, sending or staking. As such, the value of ATOM is tied to the number of blockchains that are built within the network that relies on the Cosmos Hub to maintain their transaction histories. Cosmos operates on a proof-of-stake consensus mechanism, meaning that ATOM holders are able to earn a share of the network’s block rewards and transaction fees through staking. Users can do so by either running their own validator node or by delegating their ATOM coins to a validator. Validators stake their ATOM tokens and run specialized software, which maintains the Cosmos network by proposing new blocks and validating transactions. Holders can also choose to delegate their ATOM coins to validators instead of running the validator software themselves, which still allows them to receive a portion of the rewards for staking.