A Formal Proposal for Enhancing Cosmos Hub Interchain Security Mechanism Design

[ala.tusz.am]

This is an interesting proposal. Thanks @pupmos . Some questions / comments:

Intro

@pupmos

The resulting yield difference for delegators is insufficient to provide proper incentive alignment between consumer chain developers and the ATOM token.

@pupmos could you qualify “proper incentive alignment”?

Solutions

@pupmos

2.1 Chain-specific Validator Commission (Part 1)

To address the already-evident discrepancy in revenues between the Cosmos Hub and consumer chains, I propose implementing a chain-specific validator commission structure. Validators would have the ability to set custom commissions for consumer chains, adapting to varying revenue and cost structures.

I generally agree with Chain-specific valdiator commission, but I still hold the concern of it acting as a centralizing force (though a validator has agency over it, which is a step forward).

@pupmos

2.2 Security Deposit (Part 2)

I propose that each new consumer chain contributes a security deposit initially equivalent to 0.01% of total bonded ATOM, with a one-year unbonding period. At the time of writing, this amounts to approximately $200k—a very conservative upfront cost for leasing security from a multi-billion dollar blockchain.

I would like to see some more user research around how that would affect consumer chains’ choices to deploy on replicated security, especially at the early stages of it. I tend to agree with @Thyborg about

@Thyborg

I’d also be in favour of the security deposit, but after the onboarding of 5-8 chains with high synergies (we need to kickstart the AEZ before making it harder to join)

@pupmos How do you envision such a deposit interfacing with 1) more options for sharing security (RS, mesh, opt-in) and 2) more competitors in the shared security space?

@pupmos

2.3 Capped Community Pool (Part 3)

To ensure the inflationary security mechanisms of Cosmos Hub remain intact, while also invoking organic market demand for ATOM, I propose allocating a single total amount of ATOM allocated and vested to the community pool over a designated period (10 years).

I am pretty opposed to something like this because it feels arbitrary. I still feel that poor management of common-resources is the core issue to address here, and I’m not sure that an arbitrary but definitive cap on those resources would solve for that or further aggravate the issues – especially because future funding needs of the Hub are unknown-unknowns.

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@Noam

Besides an ATOM deposit, at the very least, I think consumer chains should actually pay a decently sized percentage of their initial token mint (i.e. 10-20%, depending on their inflation model) to some kind of treasury, so that the Hub itself becomes a significant stakeholder of the chain.

@Noam – what if consumer chains decide to launch without a token?

@Noam

Tooling could be built around this so that validators & delegators can vote on consumer chains with their native ATOM token. For example: if I have 1% of ATOM voting power, and Hub has a 10% share of consumer chains’ voting power, my vote would have 0,1% voting power on the consumer chain.

This seems interesting, but how might this affect consumer chains’ choice of governance mechanisms? What if they don’t want to use wealth-based token voting at all?

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In Summary

I believe:

• the Cosmos Hub should not explicitly or implicitly impose design choices on consumer chains
• incentive alignment is extremely important for long-term partnerships but need not be restricted to a gross-asset deposit
• the more chains that propose to use replicated security, the higher the chances the Cosmos Hub has to have long-term winners as partners
• if used well, the community pool + inflation can be an incredible resource for driving the growth of the AEZ & the ATOM token + establishing the Hub’s PMF