"ATOM ONE" Constitution Proposal

Hub Proposals Proposal Ideas
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My original understanding of ATOM2.0 after a brief convo was this: that the inflation’s 7% minimum bound would be removed, but that otherwise the 2/3 bonding ratio would be preserved. What I’m seeing here is WILDLY different. Inflation should stay below the dotted line.

https://t.co/Zo3oo2DtkV

2/3 of inflation, in the first year 70M ATOMs going to treasury is honestly ludicrous. We barely have an accountable/transparent ICF with a fraction of 2/3 x 70M in its treasury, let alone good DAO tooling for public funds management. The notion that any initial inflation will be offset by new deflationary mechanics is as faulty as a drug addict taking one final hit to “go out with a bang”. It’ll happen again & again.

Treasury DAO should have some requirements: it should be funded solely through the 2% tax (or by increasing that tax, or by donation). It should experimentally support multiple DAO frameworks built on various systems (inc. SDK/WASM/GNO based systems) over next 2+ years. In fact, the ICF should be the initial significant DONOR, as the ICF was created with a mandate to support Cosmos without regards for its own profit potential. Moving its own treasury to a chain DAO system should be the next step. To propose for more inflation rather than donating its own treasury is a breach of mandate IMO, or at least a failure to progress logically.

Any new inflation beyond the default inflation to target 2/3 bonded tokens should have to go through a higher bar; 2/3 should vote YES rather than 51%, the minimum quorum might be higher, the proposal should be a specially marked as an inflation proposal, and it should be a minimal proposal that sends new ATOMs to some treasury DAO or multisig. While we’re at it, the governance voting period should be extended if necessary to ensure sufficient time for voting after the quorum is met.

Liquid staking is really easy to solve minimally: simply allow the unbonding destination to be permanently set to any interchain address, esp one in a zone that supports smart contracts. That’s all the hub should do regarding liquid staking. Liquid staking somewhat usurps the point of bonded staking, and thus by nature its utility is limited.

Interchain staking should be the ATOM token’s SOLE revenue model, allowing “consumer zones” to be run on behalf of other projects. But no existing functionality should be affected by this final feature. For the hub to be viable as a hub, and to retain its Schelling point and identity, it should not compete with other chains/tokens that are maximalists for their tokens in their own way. Otherwise, those other projects will choose a different minimal hub.

Anything else should be a fork of the hub rather than a modification to the hub, or a new zone that might have ATOMs IBC transferred onto it. In general we should ALWAYS prefer forking (like http://gno.land independence day) or “budding” (new zones) over changing nature. Especially if it involves major tokenomics or functionality changes, it should first be proven in a zone before becoming integrated into the conservative hub. Litecoin proved that this is a viable model for a new chain. We should go further and make this the main path to innovation, and allow people to vote with IBC token transfers rather than force features upon everyone via governance.

Treasury DAOs should be judged based on how accountable and functional they are; “real” people should hold roles (1 person max 1 role) including possibly 1,2,3 executive roles, and be fired by the DAO’s oversight committee (or hub gov) for failing their job description.

The hub should not have any VM functionality, but be plainly implemented in a single garbage collected language as reference (namely Go; and other clients can implement it all in another language like Rust). See prop69 and gno.land independence-day.

New updates to the hub should be broken down into independent components and discussed/proposed separately with adequate time between, regardless of any omnibus whitepaper like ATOM2.0. There should even be some system of checks to ensure that proposals are well factored. Anything else will result in “pork barrel” corruption, which is how governments are corrupted today.

The salient points here (and from other proposers) should be drafted into an ATOM ONE constitution proposal to compete with or restrict the ATOM2.0 proposal. Please propose modifications or more points to be added in the comments below. ETA for proposal submission: 1~2 weeks.

(originally from Twitter: https://twitter.com/jaekwon/status/1576869177796620290)

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通胀和质押是稳定方式，想要发展还需要生态的进化。否则都会走向枯萎！！

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Good day/eve Jae.

Allow me to ask some questions in response to your post.

What is your opinion of the inflation dynamics? Isn’t current inflation a pitfall for $ATOM? Do you think it should remain as is, in your perceived as the ideal path forward?

Also, regarding the significant donation from ICF you referred to, do ICF hold sufficient $ATOM (or assets) to the end of facilitating the plan of onboarding consumer chains? if we additionally e.g. raised community pool to 5%+ would that help? And if so, how about the hub’s long term sustainability if ICF breaks the bank by supporting these new consumer chains that will be coming by the dozens?

Also, do I understand well that ATOM ONE Constitution renders the ATOM 2.0 plan void?

Is there any middle path in your mind? To be more specific, would there be any tweaks in the ATOM 2.0 WP that would make it more attractive?

Thanks for your input Jae, always good to read your perspective and looking forward to your response.

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It’s difficult to create a constitution when the very basics of governance are not even set.
This is a problem all over Cosmos Ecosystem imo.

Far to many times the discussions start once the proposal is already in voting period, people flock to twitter or discord to have their say in a very anarchistic way, where one says something and someone else says something different.

The main trigger is always that a proposal is not clear, open for different interpretations, … If it’s about money, most of the time it’s not detailed and explained enough who gets what or when for doing what.
Basically people have to vote on unclear proposals, just like the promises that politicians make before an election.

With foundation or other companies involved, this makes it even more difficult because they make the decisions with next to no input from the community.

I think this is something that Jae is trying to sort out for the second time this year with this proposal on the Hub.

As for Gno.Land I’ve taken the liberty to start asking people to interact about the basics but it’s hard to get people involved when you’re ‘just’ a community member.

My repo on github ( sorry I’m not allowed to post links yet in my post)
/KorNatten/gnomes/tree/main/GnoLand-Governance is about GnoLand but should equally be as important for an already existing chain like the Cosmos Hub

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Hey Jae,
I’ll try and break down your observations below.

  1. Why an ICF donation to the on chain DAO is challenging/won’t work?

    • Demand for the ICF supported set of public goods like Tendermint, the Cosmos SDK and IBC has never been higher. Reducing funding for these projects starves them of engineering resources they need at a critical time. With the TAB, we are organizing and accelerating the technical evolution. We are working on getting more funding from the ecosystem for these public goods through the Cosmos Builders Foundation.

    • The ICF is a heavily regulated Swiss Stiftung. My understanding is that donating a significant amount of the endowment to the on chain DAO would run into significant regulatory headwinds that make it untenable. Given that the Hub needs working capital now for the imminent launch of interchain security and that returns of that capital need to be controlled by ATOM holders, the white papers issuance plan seems like approximately the only alternative. When legal entities are required, they should be independent of the ICF and legally accountable to ATOM holders and the Council hierarchy.

  2. I want to really focus on the conceptual framework of the Treasury. We expect the dilution of ATOM holders from the Treasury issuance to be minimal over the long term because we expect the value of new assets in the Treasury to exceed the opportunity cost of the ATOMs that were distributed. But the rate of release of liquid ATOMs need not be comparably as fast as to be meaningful compared to staking issuance in next 3 years.

  3. The best opportunities for ATOM holders to grow the Treasury are likely going to be in the next 3 years because of the inflection point we observe in Cosmos network adoption. We observe a lot of private capital being deployed on this thesis. We have an exceptionally strong cohort of founders building in Cosmos right now.

  4. Interchain security is going very well. I don’t see any short term pressure for a VM on the Hub. Jehan’s tweet was very off script. I’m aligned with you on technical vision. We’ve envisioned doing the scheduler and allocator logic as consumer chains. No VMs on the Hub in the next 2 years. My only reason for hesitating longer scales is that we might need for a VM in the IBC Client eventually either for non-tendermint consensus or verifying light clients for fraud proof supporting clients.

  5. The white paper requires a charter before the Councils can start to function. Your ideas are a potential starting point for the charter. The charter could also cap the total number of ATOMs to be distributed to a number consistent with your goals.

“Treasury DAOs should be judged based on how accountable and functional they are; “real” people should hold roles (1 person max 1 role) including possibly 1,2,3 executive roles, and be fired by the DAO’s oversight committee (or hub gov) for failing their job description.”

  1. Liquid Staking. The ADR is ready is available here: cosmos-sdk/adr-061-liquid-staking.md at main · cosmos/cosmos-sdk · GitHub

  2. Bias towards forking. We observe that airdropped tokens quickly evolve into their own sovereign community and do not remain ATOM aligned. Ie. If the tokenomic design of ATOM 2.0 is actually superior to ATOM, it will outcompete ATOM and draw mindshare away from ATOM. We’ve already seen this with both OSMO and JUNO. An intended goal of ATOM 2.0 is to not repeat this. ATOM stakers should decide if they want to continue the pattern where the most exciting tokenomics in Cosmos are not in ATOM.

  3. On demand issuance. We could achieve adequate funding via on demand mints but we think that there is a large amount of capital waiting for ATOM to have a more predictable issuance policy. Between the minting in the white paper and the constraints in the charter, a potential ATOM holder can then define a worse case circulating supply with precision and speculate how much lower it could be.

Respectfully, Zaki

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GM sers

While I’m pro treasury, and pro Atom2.0 my concerns go entirely on the dilution of atom Stakers .

And it’s not about just the money so please don’t come with ICS shitcoin n°345 covering the loss under the hub umbrella.

No

This also means a dilution on governance power.

And a gargantuous proportion of the Atom supply allocated in a treasury ( no matter saying under community power ) is subject to corruption.

Corruption corrupts the corrupted, as long there’s man behind it it can thus therefore will be , and the dilution of community power favours this.

I saved the worst for last

I find it preposterous the fact after 36 months of milking inflation with +50million Atom ( no small deed ) to treasury and once , finally the inflation on atom is settled , all of it continues to go to treasury and nothing to Stakers.
I can’t see anything but a NO WITH A VETO if this is included on the prop.

Not one single atom more should go to treasury, if it dries up, and further funding is needed, then ask the stakers for more, at the time we will have knowledge on how well spent the treasury was.

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@Sheville I think your comment is off topic for this thread. Belongs on the Hub White Paper thread.

But I hear you on the tail emission needing to go to stakes.

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@jaekwon @zaki_iqlusion

@sunnya97 's mesh security is a great idea, and (just IMO) the Hub should run it once it is finished and secure. Currently, work on the module is being done in CosmWasm. There are 3 options for bringing mesh security to the Hub:

  1. Port it to Cosmos-SDK. It seems like this would be more work and lead to possible lags in fixes and updates in one version or the other.
  2. Put CosmWasm on the Hub. This would likely be the easiest course of action.
  3. Run mesh security on a consumer chain. This would likely involve a lot of work to make staking and slashing packets pass through, and could involve extra complication, but maybe it could work.

I just don’t want to see a situation where the Hub is not able to iterate as quickly or adopt current technologies because of arbitrary limits on the software framework.

Other than mesh security (and I could be wrong), I think almost everything else can and will go on a consumer chain.

I also shouldn’t have flippantly dissed Cosmos-SDK in that tweet. That was wrong. I was more complaining about it in the way I (and a lot of other people) complain about Solidity, Javascript, or Go, even though really we love them and use them heavily.

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You can proxy all staking and slashing actions via a consumer chain.

There is no reason why mesh security cannot be a consumer chain.

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Thank you for the detailed and measured response Zaki, I will formulate a response here soon within the next 24 or 48 hours. Best case I’m hoping for is for us to come to a mutual compromise by having discussions here, to ultimately have both proposals pass.

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I’ll start with partial response.

  1. Governance driven funding will fail, like central planning fails. - where-ever possible we should ensure that intelligence is preserved or amplified in decisions. The way to ensure that good decisions are rewarded and bad decisions punished, is to require individual decision makers to put skin in the game. This is why innovation happens in the private sector, and why governance funding is seen as a corruption of private sector innovation, and why central government planning historically has led to failure. It turns the incentive model of individual merit, into a game of politics. This is true even when decision making is weighted by relative capital.

    We can see this clearly in the private sector investment world. The best performing funds do not have their decisions made by weighted voting of LPs. Rather, the LPs are free to join and leave, while the investment thesis of each fund is maintained by select GPs. The ATOM2.0 tokenomics model is akin to taxing all investment funds and putting the proceeds into a giant super-fund controlled by LPs. If this were to happen in the real world, the super-fund would create such a large distortion of incentives as to destroy innovation in general. It would turn into a game of media/mind/political control, and actual innovators would fail to get the funding they need, and even if they did get funding, the entire private sector would become swamped with the resulting dumb money, making it harder for innovators to compete with incumbent politicians. The world would not accept such a policy toward central planning, and we should not accept it either, as it will lead to sure failure not only of the Cosmos Hub, but of the entire ecosystem.

  2. The proposed treasury inflation is ludicrously high. - there was another tweet by someone extolling the virtues of treasury funding, of how 100,000 ATOMs were able to accomplish so much. The ATOM2.0 proposal creates FIVE HUNDRED (500) TIMES as much to go into treasury in the first year alone. Not only are there enough funds within the ICF alone to complete the featureset of the Cosmos Hub, it is certainly unnecessary to inflate so much in addition. No single centralized entity can responsibly distribute such funds in a responsible way. In fact, it will lead to failure as per point 1 above. Queue all the crypto projects that raised so much money that are not even breaking even. EOS comes to mind, but there are numerous examples.

  3. Even if there were inflation to fund for common goods, it should not be pre-allocated to treasury. - not only is one governance DAO incapable of distributing such allocation of funds responsibly at this time, it will also decrease the price of the ATOM unnecessarily. So either we are depreciating the price of the ATOM token unnecessarily, or we are committing to allocating funds irresponsibly. More likely, both. It is obviously not true that ATOM2.0 can commit to a more deflationary tokenomics model for the Cosmos Hub, because it would already create the precedent of changing its tokenomics. It might make sense to put a hard cap on inflation in a constitution, but it should be more like a certain % every year (an allocation cap) and not be pre-allocated anywhere. The amount of inflationary funding by ATOM/hub should also increase each year as our reach, community, and thereby intelligence pool increases, just as corporate shares are expanded exponentially; not the other way around.

  4. The ICF should demonstrate usage on a functional DAO first before suggesting additional inflation. - the ICF cannot responsibly suggest additional inflation to be managed by treasury without first demonstrating that a DAO can work. Since the ICF has a for-Cosmos mandate, it should publish its activity in a transparent way (has that happened yet?), and the best way to do that is on a DAO. Even if the funds cannot be controlled by a DAO, it can publish its internal working structure in a DAO platform, and use a DAO as a coordination/publishing tool, and disburse funds only if the foundation council agrees with the internal (same as DAO) decision making. This should be the first logical step.

    The other thing the ICF should be doing is looking into the regulations to allow more to happen. The selling point of Swiss stiftungs is that the regulators are a phone call away, and there is already a close working relationship (such as custom tailored tax breaks for each stiftung). Even if the ICF cannot unilaterally move the DAO relationship all the way as to donate all of its treasury to a DAO, a small portion should certainly be possible, and even if that is difficult, given the public mandate and purpose of the ICF (and its original mission, which know because I did the work of founding it), the Cosmos Hub could play an active role in forcing the ICF’s hand. (That said, this is a last resort to demonstrate all options, not what I am proposing here; my point is, there are clear options on the table that should be considered from all practical, social contract, and moral angles, that are not being pursued).

  5. Zone developers are already incentivized without central treasury ATOMs. - anybody can port existing functionality of the Cosmos/crypto open-source world and make them available in a new zone secured by ICS with its own native token and premine. Cue Evmos for example, that ports EVM functionality to Cosmos. The incentives are already there, and central planning will only distort things for the worse, as per point 1 and 2.

I’ll write more as time permits. Thank you for reading.

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Hi @jaekwon , first and foremost: thank you for your time engaging in this discussion, your perspective is deeply appreciated. The below post contains some responses to your above post, particularly in regards to DAO driven funding models. Given @zaki_iqlusion’s comments above, I feel that there is additional room to address these points within the scope of the proposed ATOM 2.0 whitepaper.

#1

As I understand it, a key mandate of the ATOM 2.0 whitepaper is to “[…] provide a general specification for DAOs to self-describe their organizational structure and relationships with one another.” As such, given this component, there is no reason to assume that all funding activities that occur on the hub need to follow a centralized planning model. If the primitives for delegating authority and allocating funds are sufficiently powerful, the ratification of loosely connected organizational cells can result in the utilization of a variety of incentive models without sacrificing accountability. For example, it is very reasonable to expect a hybrid model to arise in which funding possibilities range from specific sector funding granted by a panel of experts to a massive quadratic fund which is open to all participants, each within a separate DAO funding container on the Hub.

#2

I will refrain from commenting on the amount of treasury inflation from the whitepaper, because I do feel that there is a larger design space to consider for this token emission than the method outlined. However I do think that this is also addressed by the above point that the funding model you envision is unnecessarily narrow, and needn’t be if the tooling is sufficient to implement more complex models (which it currently is not).

#3

I wholeheartedly agree with the sentiment that it is better to have more funding available after our collective intelligence improves. However, it may be worth noting that the token value is probably expected to increase and so the majority of emissions are front-loaded in order to achieve higher $ value funding for projects to kickstart the flywheel.

#5

While it is true that they are already incentivized, that incentivization lacks expressive coordination tooling. The “Cosmos Economic Engine” (Section 4.2) driven by the funding mechanisms briefly outlined above would create infinitely more long term value for ATOM stakeholders than the current model. Additionally, it would ensure long-term and predictable alignment.

Thank you for your thoughts and attention as well as those that maintain this forum. May it continue to engender constructive long-form discussion that leads to better outcomes for the Cosmos.

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Thanks for your post Jae, your points re governance driven funding and the ICF are well taken. I totally agree that the ICF should take lead in funding any ecosystem bootstrapping, and assumed this was not possible because the ICF had run out of funding, but per your note this is not the case. My question continues to be, why hasn’t the ICF published an audited asset report of late? The last update that I could find is from June 2021, with assets totaling just over $500 million. This amount seems like more than enough for bootstrapping DAO experimentation.

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I think that the way that inflation was discussed in the whitepaper was very unclear.

Thus, I’m in support of a one-time issuance of 69,420,808 atoms into the treasury.

I am also in support of a minimal hub, to the degree that I’d like to write it over the next few days. Gaia’s code has become a little unuly for minimalism, with a good example of that being the defunct exchange code that must linger because LP’d tokens have been sent all over IBC.

Atom 2.0 isn’t minimal. Here are the risks as I understand them:

  • technical complexity is increased
  • there is a chance that the mev related stuff sells out the hub to mevoors. There are safeguards to this but it’s worth mentioning.
  • the issuance thing is and always will be a gamble

Jae I had the same reaction that you did to the wp. (specifically the changes to inflation – it is a vast wp and I need to get my head around your specific ls concerns still)

I felt that the section on new issuance wasn’t clear at all. Also, after speaking with some of the paper’s authors, I think it is well intentioned.

Your concerns about the hub competing with other cosmos chains are super legit. I think that we should try and get something about that that into the charter.

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Hello everyone! I’m glad to see this forum and see everyone’s discussion on COSMOS. I am a member of the Chinese community, please forgive my poor English, I use google translate, although I still don’t know how to express my inner thoughts, but I still want to say a few words.
Background: The cosmos project was released early, and compared to the current L2 project, it lacks funding. However, through a long period of practice, it has been proved that the advantages of the cosmos network have been reflected. I personally think that cosmos is also L2.
ATOM is similar to ETH
EVMOS+OSMOSIS+Gravity bridge+NFT+…Similar to OP (=zk=Arbitrum=…)
As you can see, cosmos is more like modular, so he is flexible. In the future, if zk is also introduced into cosmos (for example: zkEVMOS), if there is a problem with a certain project, it will not affect others, or the impact will be very small.
However, for so many years, Atom lacks the ability to capture value and lacks an anchor in the cosmos ecosystem. It has the same status as ETH. Although ETH is converted to POS, it still cannot expand rapidly, so there is L2. Therefore, the same cosmos 2.0 is proposed, I am very optimistic about it, thank you for your dedication to cosmos.
From Bitcoin to today, everyone is constantly exploring, and many models are also being explored. I hope that everyone can compare the existing models of other projects in many aspects, how can we take the essence and remove the dross, innovation belongs to us model. Grasp the main contradiction of the problem and grasp the main aspect of the contradiction.
cosmos is different from OP/zk/arb… They have a lot of venture capital institutions and have enough money, but we have enough advanced concepts, and our mechanism allows us to join forces, such as: EVMOS+OSMOSIS+ Gravity bridge+NFT+… Everyone should help each other, and at the same time, bind everyone together through atom.
I will continue to pay attention and learn with you. I will say this first.

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Non sequitur.

Some specific questions regarding that ADR:

4.1: “A larger exemption factor allows more tokenized shares to be issued for a smaller amount of exempt delegations.” → shouldn’t this say that a larger exception factor allows more tokenized shares to be issued for a LARGER amount of excempt delegations? Why smaller?

4.2: “This design allows the chain to force an amount of self-delegation by validators participating in liquid staking schemes.” → how does it force any amount of self-delegation?

4.3: “It provides a pathway to security under non-exponential issuance policies in the baseline staking module.” → why wouldn’t this work with exponential issuance?

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:saluting_face: :vulcan_salute:

Indeed I’d like to explain it a little bit, in my opinion the biggest feeling of the atom 2.0 paper is that well after reading it I kind of felt that it obfuscated increases to inflation I think a lot of other people felt that way as well and for a minute I was kind of upset about it and then I realized it had a pretty easy solution, one could literally just mint them all in one batch and then what you get is clarity that section in particular suffered from a lack of clarity.

Also the number itself was intended to be a little bit of a non sequitur, here’s how it came about:

  • my friend worked out this:

image
image1800×707 127 KB

see how in year one 56,253,799 hits the treasury?

Simply minting at upgrade height is much easier and it strips the wp of fairly needless math – and – big perk – it becomes clearer. Community members shouldn’t need to put together docs on the numbers and piece them together by guesswork, but that’s the current state of the wp.

why 69,420,808?

69 - nice
420 - :jamaica:
808 - :loud_sound: - after the musical instrument

Here’s the tweet thread: https://twitter.com/gadikian/status/1577112480559804416?s=20

The other saying that doing it all in one batch can due to improve the clarity of the proposal overall is that we could have that one batch and then remodel the mathematics about the 100 million per month which I think includes the current level of inflation-- that section of the paper still isn’t fully clear even to me. So I don’t know if you saw any of my tweets on the matter but basically:

  • before learning how the inflation works because a friend of mine modeled it, I was highly supportive, I think there are good concepts in 2.0.
  • After learning about the inflation changes I kind of freaked out a little bit and actually kind of felt rug pulled in terms of supporting it at all.
  • then I talked to several people about the inflation characteristics because many people were telling me that I was simply wrong but I still felt rug pulled
  • what I didn’t realize was that treasury funds aren’t dilutive when they’re in the treasury, they’re dilutive when they exit the treasury and if they bring returns and enhance protocol onwned liquidity then the dilution is canceled out.
  • so I came full circle but then I realized that 2.0 shouldn’t pass and its current form if I can read the section on inflation changes and not get it very very few people can get it and it means we found a bug

further food for thought

  • 2.0 isn’t a minimal hub
  • the social coordination features on the allocator are :fire:
  • I’m pretty sure that the driving force behind 2.0 is to attempt to leave inflation behind and I really like that
  • more complexity means more risk
  • the inflation add some more risk too, and we need to express it in a way that people can understand or it’s probably not a very good idea at all
  • I can really only vote yes on what I can understand and promote a yes on what I can understand so what I’d like to do

my current understanding on liquid staking

the impact on security ought to be nil, because the underlying atoms can be slashed. I do have some questions about what happens to liquid staked atoms when they hit – for example, osmosis though. Is a slash just reflected in the price of the liquid staked asset?

I am not sure that liquid staked atoms that are transmitted to osmosis can be slashed, though I’d like ton get feedback on that.

update

I don’t want a billion dollars in a standard sdk multisig.

I may have misunderstood the wp.

I withdraw support and encourage others to veto until the chain of custody is clear in the whitepaper. Gov can veto the group, not the SendTx from the multisig wallet. Also, one of the reasons given for not updating the ICF delegations was the inability to do multisig transactions and I get it, it is legit hard.

I do not want community members in harms way.

How’s that for a non sequitur?

https://twitter.com/gadikian/status/1577522325783707649?s=20&t=vKxAFa-kfs75tFQV_Cr4NQ

NB: all the upsides I mentioned still exist but we should not take north korea risk with the treasury.

NB: where is the paper source code?

The paper is written latex, a document compiler. The paper is not open source, only the binary has been released.

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There are 2 topics about governance. I posted my thoughts on the Community Council on the Charter topic. Full text below:

The WP set a long term roadmap for the development of the Hub while the Charter role is to make sure the implementation is done with a certain standard of decentralization, ethics and accountability that protects $ATOM holders.

This is why it is crucial for the ATOM community to put sufficient mindshare and thinking into the charter.

I’ve taken some time to review work from one of the most brilliant minds in the Cosmos for governance related matters: @sacha. There are some nuggets out there that I can’t recommend enough. Before interacting with this topic, I invite everyone to get familiar with his thinking so here are a few resources to consider:

There is a lot to cover so I’ll only discuss in this post the soon to be established Community Council, which should be the backbone for governance on the Cosmos Hub for the time being and until a full Cosmos Assembly is formed.

The ATOM 2.0 paper requires us to develop new mental models for governance. The WP is ambitious and its implementation will be challenging, requiring novel governance foundations.

The WP suggests the creation of multiple Councils. The sum of those Councils will form the future Cosmos Assembly.

My suggestion is to adopt a progressive, measured approach when forming those Councils. To initiate this work, I believe the first governance piece we need to establish is the Community Council.

This Council will represent the interests of the ATOM community at large. The Community Council can be used as a platform and launchpad to form the other Cosmos Councils until there are enough Councils to justify the creation of the higher order Cosmos Assembly. Less is more. As such, the Cosmos Council should be representative enough of the ATOM holders.

Regarding the responsibilities of the Community Council, I thought of the following aspects (non exhaustive list):

  • Lead to completion the governance aspect of the ATOM 2.0 vision that ends with the launch of critical Cosmos Councils & the Cosmos Assembly (final step)
  • Enforce public accountability, notably with other Cosmos Councils that will be created further down the road
  • Create a framework for managing the Treasury Pool
  • Act as a bridge to the broader ATOM community.
  • Reduce the information gap and facilitate access to information by making it digestible.
  • Create and maintain reporting on various Hub entities: state of decentralization, work being done in other Cosmos Hub Councils, product feedback.

The composition of the Community Council is as important as its mandate. A few suggestions:

  1. It should be representative enough of the entire ATOM community. As such, it should include a basket of: core developers & validators + regular ATOM holders
  2. It should be large enough to avoid excessive centralization and cartelization. I don’t have an exact idea about the number of members, maybe somewhere between 7 and 11 members. Less than 7 encourages centralization while more than 11 makes effective governance challenging
  3. It should NOT be pro bono. Working for free encourages dubious behavior and conflicts of interest.
  4. It should be funded separately from the other Cosmos Councils to avoid competing for the same resources, which again favors dubious behaviors
  5. Members should NOT figure on other Cosmos Hub Councils

Thank you for reading. Looking forward to engaging with other members of the community.

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… continuing from point 5 above …

  1. We want to incentivize 2/3 to be bonded. - responding to the below comments:

6.a: Keeping 2/3 of ATOMs bonded is good.

6.a.0: Not everyone should focus on mastering blockchains or crypto-economics.

6.a.1: Staked ATOMs, being more like shares rather than money, separates the users into the cryptoeconomic/PoS aware, and the general population (laymen, or “grandma”). This allows the ATOM distribution to remain more intelligent than the general population. This in turn allows ATOM to represent a differentiated stakeholder class that can best steer its function, BFT-PoS, ICS, and IBC.

6.a.1.A: Without it, it is like letting the Apple computer company make business decisions based on the collective intelligence of its customers, rather than the specialized class of founders, stakeholders, and employees. Apple would have never been created under a communist regime, it was made possible by private self-selection and private equity. If you had asked people what they wanted before cars were invented, they would have said faster horses.

6.a.1.B: This is also why we should encourage the slashing of airdropped tokens based on governance votes, ala prop69 independence-day. This keeps ATOM stakers accountable for their votes, just as we should slash them for malicious consensus votes.

6.a.2: Removing this goal is akin to attempting to make ATOM money, which is intended for use by the general population, not any differentiated class. If ATOM were to become money, it would either force laymen to making staking decisions, unless we remove the 2/3 bonding requirement.

6.a.2.A: The market cap of “money” will always be significantly greater than the capital that can intelligently making staking decisions (unless we go with the WEF model of “you will own nothing”).

6.a.2.B: If laymen make decisions (governance or delegation), the decisions will be worse for the competency of the hub, AND they would be committing to an environment of slashing where they have no competency.

6.a.2.C: If the 2/3 bonding requirement were removed, any conspiracy of whales can easily take over the decision making of the hub. This will only guarantee that capital will take it over.

6.a.2.D: 1/3 of unbonded tokens is sufficient to establish a liquid market of ATOMs, while 1/3 is also the threshold for Byzantine voting power for partially synchronous consensus systems. Thus it is arguably the most natural factor to keep bonded.

6.b: Inflation is really a proxy for punishing non-bonding. It is more simple to inflate tokens and reward them to stakers, than it is to reduce the balance of non-stakers both from a computational and UX point of view.

6.c: The minimum inflation bound of 6% could be removed to allow natural deflation.

6.c.1 The 20% upper bound is needed for safety.

6.c.2 The minimum inflation rate was put in place for two reasons: one, to force the concept of an inflationary token as separate from deflationary/maximalist tokens (this clearly hasn’t succeeded as well as I had hoped, but maybe this ATOM ONE & ATOM2.0 conversation is accelerating it). Two, to ensure that validators can be bootstrapped by capital, to ensure that some level of transfer of ownership happens toward the validator operators.

6.c.3 The minimum bound after bootstrapping isn’t strictly necessary after bootstrapping the validators.

6.c.4 With a full ICS implementation and thus more transaction volume, there will be more incentives just from transaction fees for ATOM holders to stake beyond the ATOM inflation mechanism. So we may even see, naturally, the inflation rate to go down close to zero, or even negative(!!) to peg the bonded token ratio at 2/3. In short, removing the minimum inflation bound allows inflation to naturally decrease toward zero (or below) as the network grows and the functionality of the hub matures.

  1. Continuation inflation with tax-cap is better.

7.a: Inflation came be granted as deemed necessary. There is no need to pre-commit to inflation up front.

7.b: The notion that a proposal to significantly inflate ATOMs “one time” is fundamentally flawed. ATOM3.0 would inflate more and promise even more deflation, and so on. The only thing that this narrative will prove is that the hub is in denial, like a drug addict promising to quit by going out with a big bang.

7.c: There is barely any understanding of the need for a constitution, of structured governance powered by naunced UX, of differentiated proposal types, or even any mechanism to prevent pork-barrel corruption of proposals. The governance system of the hub is as of yet too minimal.

7.d: In 3 years we might approach the size of Ethereum today, and even after there will be more exponentially more talent that will be joining the system, and exponentially more development to be done.

7.e: The maximum inflation of staking is already up to 20%. By raising the tax to 50%, there can be up to 10% (non-compounded) inflation that can go toward the treasury. The amount of inflation going to treasury can be limited by setting a cap on the tax rate. This can all be done with no changes to the existing ATOM tokenomics, and simply by setting additional limitations on tax by constitution. This avoids the pitfall of 7.b as well, avoiding uncertainty which will reduce demand for an indefinite period of time.

7.f: Private capital doesn’t need the hub treasury to function; rather private capital is in competition with the hub.

  1. Nothing prevents the hub/ATOM/ecosystem from creating additional deflationary tokens.

8.a: As previously mentioned, any PHOTON/BETA token can simply be air-dropped to ATOM holders, and have special status on the hub as the deflationary fee token, complementing the ATOM. Existing ATOM holders would benefit from such an air-drop, while also benefiting from the differentiation as per point 6.

8.b: Allowing premissionless ATOM-derived deflationary tokens allows for more deflationary token experiments.

8.b.1: For example, one could create a deflationary token airdropped onto both ATOM and ETH, or ATOM and BTC, or all three.

8.b.2: Gno.land GNOTs will be primarily air-dropped to ATOM holders to demonstrate this approach, leading by example, but there are numerous other projects too.

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Removal of the notion that any inflation authorized will be counter-balanced by less inflation in the future, which is obviously untrue.

The amendment of governance procedures first described in plain English in the form of a constitution (much to be implemented in code later) which requires proposals to be well factored, to prevent pork-barrel clauses (and consequently corruption), and the assurance of conservatism in its evolution by not making too many experiments at once. A well functioning hub should naturally not require bleeding edge innovations on the hub itself.

The usage of said constitution to set limits on inflation and treasury, such as by requiring a higher threshold (2/3) to vote in favor of any inflation, and the requirement that those inflated tokens are allocated for a specific purpose and managed by an accountable DAO system; and in the future, by setting limits also on the tax rate.

Also see 6.c:

Combined with the idea to remove the minimum bound inflation rate of 6% (but keeping the 20% upper bound for safety), I think makes for a good compromise. The minimum inflation rate was put in place for two reasons: one, to force the concept of an inflationary token as separate from deflationary/maximalist tokens (this clearly hasn’t succeeded as well as I had hoped, but maybe this ATOM ONE & ATOM2.0 conversation is accelerating it). Two, to ensure that validators can be bootstrapped by capital, to ensure that some level of transfer of ownership happens toward the validator operators.

It isn’t strictly necessary (and in retrospect I think I would rather consider a flattening factor for validator rewards to allow large validators to subsidize smaller ones for decentralization.) Furthermore, with a full ICS implementation and thus more transaction volume, there will be more incentives just from transaction fees for ATOM holders to stake beyond the ATOM inflation mechanism. So we may even see, naturally, the inflation rate to go down close to zero, or even negative(!!) to peg the bonded token ratio at 2/3. In short, removing the minimum inflation bound allows inflation to naturally decrease toward zero (or below) as the network grows and the functionality of the hub matures.

These are just points already made above. Here is another one:

  1. Preserve the principle of “skin-in-the-game”.

The modification of the governance system to allow those who vote YES to collectively pay for any donations toward any treasury DAO. If the argument is that there will be significant return on investment by incurring a self-imposed inflation tax, then voters should feel comfortable donating their own funds toward that purpose and reaping any investment rewards. Preserve the principle of “skin in the game”; just as validator slashing only slashes those delegations toward that validator, allow ATOM holders to contribute their funds by their own investment thesis.

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