ATOM Tokenomics Research Kickoff

Tokenomics Research Workstream
66

Thanks for the thoughtful reply, much appreciated.

Just to clarify one or two points that weren’t explicit in my initial message: the hybrid idea is intentionally agnostic about the source of revenues and about the exact security numbers. What matters for the mechanism is observing net, non-circular ATOM flows on-chain over time, rather than relying on abstract accounting assumptions or recycling inflationary rewards.

Also, the goal isn’t to replace the current staking-based inflation logic, but to keep it as a guardrail, while allowing real revenues to progressively substitute issuance in normal conditions.

That’s why i totally agree: having good data on security costs and ATOM in/out flows is a prerequisite for making any of this actionable.

1 Like
67

Thanks to everyone contributing here. As a front-office operator running a small validator (Snow-Fall), I’m following this closely—not from a dev angle, but from an economic survival and decentralization lens.

I’ll be blunt: the current inflation model creates constant sell pressure. Many validators (not us, yet—we’re funded by other projects) have to sell rewards to cover operational costs. Large validators sell to scale. Holders get diluted. We all know this cycle.

So when I look at proposals like Hydro’s (Inflow vaults, hATOM, buy & burn), my first reaction is: finally, someone building a cash-flow engine instead of just talking about “ATOM 2.0” for two years.

That said, I have three operational concerns worth addressing:

1. Governance of Treasury Deployments

If we’re moving community pool ATOM into vaults that “sell when ATOM outperforms” and “buy back when it underperforms,” who holds the keys?

  • Is this fully algorithmic (immutable smart contract)?

  • Or is there a multisig/committee making judgment calls?

As a validator, I trust code more than committees. If there’s human discretion, we need transparent governance rules published upfront.

2. hATOM vs. Existing LST Providers (Stride, pStake)

The Cosmos LST market is already fragmented. How does hATOM coexist with Stride’s stATOM?

  • Direct competitor?

  • Or deeper integration (e.g., hATOM as collateral for Stride products)?

If we’re cannibalizing existing liquidity instead of growing the pie, we’re just rearranging deck chairs.

3. Reducing Validator Sell Pressure (New Idea)

Here’s a thought: what if we gave validators an opt-in mechanism to redirect their commissions into a yield-generating vault (like Inflow) for a fixed period (say, 30–90 days)?

Instead of:

  • Validator earns ATOM → sells immediately to pay servers → sell pressure

We’d have:

  • Validator earns ATOM → ATOM goes into vault → generates real yield (USDC, fees, arbitrage) → validator receives USDC or ATOM+yield after lock period

Why this could work:

  • Reduces immediate sell pressure (commissions are locked temporarily).

  • Generates non-inflationary revenue for validators (real yield from DeFi, not just staking rewards).

  • Voluntary — validators who need instant liquidity can opt out.

  • Aligns validators with the Hub’s DeFi strategy (we become users of the system, not just infrastructure).

Technical feasibility?

  • Cosmos SDK’s distribution module could theoretically be modified to support this (similar to how Stride auto-compounds).

  • Would need smart contract audits and governance approval.

  • Could start as an optional feature before any protocol-level enforcement.

I’m not saying this is a silver bullet, but if we’re serious about reducing sell pressure and creating real yield, we need to think beyond just “cut inflation and hope price pumps.”

Small validators are willing to experiment—we just need the tools.

Overall: I support the direction. ATOM needs to become a revenue-generating asset, not just a governance token with infinite dilution.

But let’s not sacrifice decentralization and validator sustainability in the rush to “fix the price.”

Looking forward to the research proposals.

Best,
Olivier / Snow-Fall Validator

4 Likes
68

Thanks Olivier. It’s really valuable to have the validator’s on-the-field perspective in this discussion.

Your point about trusting code over humans highlights the need for predictable, rule-based visibility on how security is funded, rather than relying on ad-hoc governance decisions or discretionary treasury actions.

In the hybrid framework I mentioned, that visibility comes from making the required security flow explicit (S_target). Importantly, S_target isn’t a fixed or arbitrary number: it’s constrained by observable economic anchors, such as a minimum viable yield for validators and a macro security budget derived from the value actually secured by the Hub. Governance only adjusts those inputs, and the required issuance follows automatically in code.

Operational tools like vaults, buybacks, or opt-in yield strategies can improve how rewards behave in practice, but a policy layer is still needed to define, in a rule-based way, how much issuance is actually required.

1 Like
69

Agreed. There needs to be a fully mechanical system for token inflation/issuance/security, etc. based on clear metrics (that can be tweaked by governance as needed) in the manor Gregory lays out. Other incentive structures could be valuable but would need to rest on top of a base layer of the most fundamental tokenomics metrics.

Vaults to incentivize validators to hold vs sell sound great but it sounds more like an ecosystem thing not necessarily something at the ATOM protocol level. There would need to be competing models to find the best incentive models over time. Liquidity fragmentation is an issue like klendhaar said but again that sounds more like it gets solved by cultivating an ecosystem.

Buybacks seem different to me, like they could potentially be woven into the basic tokenomics to a greater degree.

I didn’t see where this was proposed, but its not viable. Any kind of market-timed buying/selling associated with the base Cosmos protocol turns the protocol into a trading shop and fundamentally undermines security no matter how transparent. That said, I think the ICF should not be holding any other coins than ATOM and should start selling their BTC, ETH, and any others for ATOM at a steady pace.

1 Like
70

I think we largely agree here. Burn-only narratives tend to shortcut tokenomics discussions because they focus on stock effects without addressing the harder questions around security funding, validator sustainability, or future dilution.

What enables a truly mechanical system is starting from clear, observable flow metrics: how much security costs per year, how much real revenue comes in, and how much issuance is still required as a residual.

In that framing, buybacks aren’t a policy or a trading tool, they’re simply one way to convert off-chain revenues into on-chain inputs. Once those inputs are observable, the policy layer’s role is to reduce issuance deterministically, not to manage price.

Vaults and other incentive mechanisms can then live at the ecosystem layer, experiment, and compete, but they rest on top of a base-layer rule that keeps security funding predictable and non-discretionary.

2 Likes
71

Reposting here:

2 Likes
72

ATOM is a Critical Patient - Let’s Stop Debating the Hospital Menu

I’ve been reading Gregory_C’s proposals on mechanical systems and Drooo’s interventions on the ecosystem layer carefully. However, allow me to use an analogy to recenter the debate.

:police_car_light: The Emergency Diagnosis

ATOM is currently a patient in critical condition.

  • Continuous hemorrhage: Relentless sell pressure from validators.

  • Weak vital signs: Near-zero retail/institutional interest.

  • Failing immune system: No effective value capture from the 200+ chains using the Cosmos SDK.

  • Life-threatening prognosis: Fierce competition from Solana and ETH L2s.

And here we are, debating the post-recovery dietary menu.

:adhesive_bandage: Life Support First

When jacksteroo says, “the monetization model already exists, we’re just not capturing it,” he is making the correct diagnosis. But before building a sophisticated $10-15M licensing model (as discussed previously), the patient must survive the night.

Immediate Stabilization Protocol:

1. Stop the Bleeding (Within 30 days)

  • Temporary freeze of inflation at the current rate.

  • Emergency mechanism: Mandatory 90-day vesting on 50% of validator rewards.

  • ICF Directive: Progressive liquidation of BTC/ETH → ATOM buyback (fixed rate, non-discretionary).

2. Emergency Transfusion (Within 90 days)

  • Activation of a simple mechanical buyback: X% of IBC fees → automatic ATOM buyback.

  • Crucial: No “sell when outperforming / buy when underperforming” logic. I fully agree with Drooo on this: that is trading, not protocol mechanics.

  • Goal: Incoming revenue = constant buying pressure.

3. Stabilizing Vital Signs (6 months)

  • Transparent Dashboard: Real security cost vs. Real revenue vs. Residual issuance.

  • Gregory_C’s mechanical rule: Required_Issuance = Max(0, Security_Cost - Real_Revenue).

  • Monthly publication of metrics by the foundation.

:warning: Rebuttals to Current Proposals

To Drooo:

“Liquidity fragmentation is an issue like klendhaar said but again that sounds more like it gets solved by cultivating an ecosystem.”

No. When a patient is in the ICU, you don’t outsource blood coagulation management “to the ecosystem.” ATOM liquidity fragmentation is a protocol issue because it prevents any efficient value capture. Competing ecosystem-level vaults come after stabilization, not before.

To Gregory_C:
I appreciate the distinction between “buyback as trading” vs. “buyback as mechanical revenue conversion.” But who codes this mechanic? Who maintains it? Who audits the flows?

My question “who holds the keys?” is not rhetorical. It is the central question of any decentralized financial system.

  • If the answer is “an audited, non-upgradeable smart contract,” I approve.

  • If the answer is “a team with a 3/5 multisig,” we are simply reproducing TradFi failures.

:bullseye: Triage Proposal

Phase 1 - Intensive Care (Now - 6 months)

  • Simple, mechanical, auditable actions.

  • Goal: Stabilize the staking ratio, reduce sell pressure.

  • Success Metric: ATOM stops systematically underperforming the market.

Phase 2 - Rehabilitation (6 - 18 months)

  • Enterprise licensing model (jacksteroo’s path).

  • Competing ecosystem vaults.

  • Sophisticated tokenomics based on Phase 1 data.

Phase 3 - Recovery & Discharge (18+ months)

  • ATOM as the DeFi-TradFi nexus.

  • Structural value capture from the 200+ chains.

  • Programmed inflation reduction based on observed revenues.

:speech_balloon: My Final Stance

I am not against complex mechanical systems. I am against implementing them on a critical patient who requires basic life support first.

The beauty of a phased approach:
:white_check_mark: It allows us to test assumptions (Phase 1 validates metrics for Phase 2).
:white_check_mark: It avoids going “all-in on an untested model” costing $15M.
:white_check_mark: It gives time for community consensus.
:white_check_mark: It demonstrates that the Cosmos Hub can adapt (a strong signal to the market).

Open question to the community:
What is the minimum viable metric that would prove we have stabilized the patient?

For me: 30 consecutive days where Net Validator Buys > Net Validator Sells.

If we cannot reach this low bar, no sophisticated licensing model will save ATOM.

klendhaar - Small validator operator @ Snow-Fall | Active Set #179 | Pro-decentralization, anti-hype

3 Likes
73

Some proposals may come from Telegram

74

I certainly agree with the critical patient metaphor and the urgency of turning the ship asap but I don’t see the opt-in ATOM vault for stakers as a way of stopping the bleeding for the reasons below.

If this were implemented, that would mean validators would be choosing between opting into the ATOM vault to earn the yield or selling as usual and farming yield elsewhere with the proceeds. So, the ATOM vault would have to be more compelling than having USDC in hand and looking for yield anywhere else. I don’t see how we can offer alpha in that regard, especially since it would be locked up so they are dealing with opportunity cost. It would basically mean we are competing with DeFi specialists across the whole crypto ecosystem. That strikes me as a losing battle.

Responding the the more recent post separately.

2 Likes
75

So I generally agree with phased approach and most of the proposed elements.

Adjusting inflation rates is popular and important but it should be done on a schedule instead of all at once because yes, the patient is critical but “First, do no harm” still applies. Case in point: As discussed in the other tokenomics “kick-off” thread that there are a significant number of stakers that are delta-neutral on ATOM price and selling the staking rewards as ‘free-money’ and there is risk of a big sell-off if those people are disenfranchised by a major and abrupt change in staking rewards. They need to be phased out obviously but not in a way that crashes the ATOM price violently.

Similar reasoning applies to a vesting schedule of staking rewards. Overly aggressive adjustments could make more people leave than necessary.

ICF selling of BTC/ETH into ATOM is definitely the low-hanging fruit and should be started immediately at a set rate.

Agree with all this. Mechanical buy back seems key to capturing value to ATOM. That could be burned or partially burned with some amount (probably relatively small for now) going to an ecosystem development fund.

Also sounds good. Seems like there should ultimately be metrics made available in real time.

My previous response addresses why I think we have no choice but to let this be an ecosystem thing. We are simply not in a position to offer a competitive yield opportunity.

To me that’s not an issue though because sell pressure from stakers is a current issue but the most fundamental problem is the lack of value capture to ATOM. Once a viable path to solving that problem is implemented, ATOM becomes a buying opportunity. So sell pressure is mitigated by smooth inflation adjustments plus doing what should have been done yesterday and capturing value to ATOM. There is not time to waste but neither does all this need to be done overnight to reverse the sell pressure it just needs to be clear to people that Cosmos is handling its s$%t.

Gotta eat lunch. I’ll continue this response later. Good, important debate going on here.

2 Likes
76

Thanks for the quality and depth of the points raised here, the different perspectives (business, validator operations, urgency, mechanics) have been very illuminating to me. At this stage, here’s where my own thinking stands.

The Medium article is helpful in making potential revenue paths around the Cosmos stack more concrete, especially in a discussion that can otherwise remain abstract. That said, it’s important to distinguish the level at which it operates. It mainly frames a business model, starting from a fixed inflation defined ex ante and then exploring how enterprise revenues, buybacks, or distributions might offset or reduce its effects. This can certainly improve outcomes, but it doesn’t fundamentally change how monetary policy itself is defined.

What the recent exchange around urgency and validator stress highlights, and where concerns raised by Drooo around yield-oriented solutions seem entirely legitimate, is that a more basic question remains open: what level of security does the Hub actually need, and how much ATOM per year is required to sustain it? In practice, this question seems inseparable to me from validator viability, participation, decentralization, and the persistent sell pressure being discussed.

Framed this way, revenue models, whether enterprise licensing or others, are best seen as potential inputs that can reduce reliance on issuance, rather than as the starting point for defining inflation. Without first anchoring the security requirement, we risk addressing symptoms with ad hoc tools rather than clarifying the policy foundations. This is my main intuition and concern.

In that sense, the value of these contributions is that they help surface where economic activity may exist, while reinforcing the need for tokenomics research to focus on metrics and rules that connect security needs to issuance in a way that can evolve with the Hub’s economic reality.

2 Likes
77

Good point that inflation rate in relation to baseline security requirements is a more fundamental question than growth and value accrual to ATOM because they are at the very base of the protocol layer.

That can perhaps be the initial focal point of community discussion and researcher proposals.

What is the lowest inflation rate possible without compromising security.

(Reminds me to go restake my staking awards)

78

@RoboMcGobo a new question regarding the data.

Structural Downgrade Risk & The Need for a Catalyst

1. Factual Status (Data Snapshot)

Analyzing current market data, ATOM’s safety margin has become statistically critical. We are currently teetering on the edge:

  • ATOM (#95): Market Cap ~$1.018B

  • LBTC (#101, first unranked): Market Cap ~$960M

  • The Safety Gap: Only $58 Million (approx. 5.7%)

Therefore, an adverse variation of less than 6% (either a drop in ATOM or a mechanical rise in competitors) is enough to trigger a mathematical exit from the Top 100.

2. Competition Analysis: A “Passive” and “Mechanical” Threat

Looking at the composition of projects ranked #96 to #110 pushing behind us, the danger isn’t just selling pressure on ATOM, but a mechanical surge from pursuers:

  • The BTC Beta Effect (LBTC #101, SOLVBTC #101): These are Bitcoin Wrappers. If BTC appreciates by March, their Market Cap rises mathematically. They will overtake us without needing specific buying volume, simply through correlation with Bitcoin.

  • The RWA/Yield Effect (USDTB #105, OUSG #107): These assets do not suffer from bearish volatility. They gain market share through constant issuance. It is an inexorably “rising floor.”

3. The Impact of Waiting (Horizon: March – Vision 2026)

In a morose market, narrative inaction until March creates a vacuum. If ATOM remains stable (or bleeds slowly) while BTC wrappers benefit from even slight Bitcoin volatility, exiting the Top 100 is a mathematical certainty before the deadline.

While rankings may seem symbolic to developers, they are structural for:

  • Institutional trading algorithms (strict Top 100 filtering).

  • Retail Visibility (Page 1 vs. Page 2).

  • The “Critical Infrastructure” brand image necessary for our 2026 positioning.

4. Strategic Question: Defining the “Move” (CTA)

Beyond the technical delivery scheduled for March, we must address market psychology. History shows that the market reacts to anticipation (Buy the News) well before execution (Sell the News).

My question is as follows:

To avoid this passive downgrade by March, what type of Call To Action (CTA) or intermediate announcement are we envisioning to trigger this anticipation dynamic?

Have we identified the specific narrative lever (partnership, tokenomics, burn, acquisition) capable of serving as an immediate catalyst and signaling to investors that the 2026 strategy is already in motion?

3 Likes
79

Roadmap 2026: The Engine is Ready, But Where is the Business Model?

I’ve just completed an in-depth analysis of the 2026 roadmap. As a validator actively engaged with the Hub daily, I feel compelled to share a clear assessment, at the crossroads of tech and investment.

:one: The Technical Assessment: Hats Off.
It must be stated clearly: technically, this roadmap is excellent.
The work on performance (5,000 TPS, 500ms blocktimes), BlockSTM integration, the IAVLx rewrite, and native EVM/Solana openness is exactly what the stack needed to remain competitive. Kudos to the engineering teams. Cosmos Labs proves here that they know how to build the best blockchain engine on the market.

:two: The Economic Assessment: The Great Absentee.
However, coming out of our recent discussions on token economics, I cannot help but see an elephant in the room.
For ATOM’s value capture, it’s yet another missed opportunity.

The analogy that emerges from our analyses is this:
Cosmos resembles a brilliant startup with a great product… but one that hasn’t found its business model yet.
The 2026 roadmap significantly improves the product (the software, the stack, interoperability), but it absolutely does not address the business model (tokenomics, value capture for the Hub).

The equation that worries me for 2026:

  • This technical roadmap is needed (It’s necessary, but insufficient).

  • AND an economic roadmap is needed (Completely absent for now).

Without this second pillar, ATOM risks remaining a “value trap”: a technological product used by everyone (enterprises, appchains), but a poor investment because the value doesn’t flow down to the token.

My open question to the Cosmos Labs team and the community:
How do you plan to reconcile these two aspects this year?
Is it even conceivable, within the next 12 months, to transform this technical excellence (public goods) into real profitability for the Hub?
We have a Ferrari engine, but we’re giving it away open-source. At what point do we install the toll booth or the premium service that justifies ATOM’s valuation?
The debate is open.
And don’t forget: Happy New Year! Could 2026 be THE year of ATOM

5 Likes
80

atom tokenomics simulator
atom tokenomics simulator1920×1080 262 KB

Hello Everyone,

This thread has been up for a while, and we’ve been thinking about how to contribute something concrete to the tokenomics research process.

As part of that, together with Silk Nodes, we built an ATOM TOKENOMICS SIMULATOR > https://atom.silknodes.io/ to help explore different design paths and compare outcomes under varying assumptions (adoption, staking behavior, Hydro dynamics, etc.).

The intention is to support the research with something hands-on, a way to test scenarios and reason about trade-offs rather than debate them abstractly.

Happy to iterate on it and add parameters that are most relevant to finding the best possible tokenomics design.

6 Likes
81

I agree with @klendhaar that the tech roadmap looks great but the question of ATOM value accrual is equally fundamental to Cosmos’ success and needs to be pursued with the same urgency as tech updates.

Quite frankly this has been the biggest - and its a big one - blindspot for Cosmos for a long time and it the main reason the broader crypto community scratches their head and shrugs when the topic of Cosmos comes up and ultimately doesn’t take Cosmos seriously as a place to build.

We have the open request for tokenomics proposals so there is movement on the subject but the urgency level is not the same as tech improvements which unfortunately fits the profile of the Cosmos stereotype of being all about splendid tech with no sense of creating an economy around said tech.

The ecosystem has obviously deteriorated severely. My argument is that this is because capital investment in an ecosystem with a down-only token looks to founders like guaranteed death for their project. If people think Cosmos is some ivory tower project where all we care about is an amazing tech stack, instead of a holistic blockchain protocol and ecosystem - which has to by nature include capital formation and growth - then we aren’t a viable ecosystem for people to join.

The basis of crypto is value accrual to open networks. For open networks to allow permissionless value generation and accrual, the incentives need to be well tuned. The Cosmos ecosystem won’t grow on its own in a permissionless way without the right incentives. We can’t compete without permissionless building and value generation and capture.

It seems to me Avalanche is Cosmos’ main competitor in terms of being a major, long-running protocol with a high degree of customization and sovereignty for its chains (subnets in Avax’ case). We need to keep in mind that we are part of a highly competitive business sector (crypto, blockchain) that owes its existence to the fact that open, permissionless networks scale faster than centralized, permissioned enterprises. If we are not securing our future by forging great tockenomics, we are blowing in the wind and selling out any efforts made to improve the tech and quite frankly we are conforming to the stereotype every has in their mind of Cosmos.

1 Like
82

This look great. Looking forward to playing with it.

1 Like
83

I agree that value accrual and capital formation are fundamental, and that without credible economic incentives, no amount of technical excellence will make Cosmos competitive in the long run.

The way I currently frame the problem is in three layers. The technical roadmap defines what becomes possible in terms of adoption and usage. Monetary policy defines how ATOM integrates flows once they exist, while remaining robust in their absence. What feels increasingly important and still under-articulated is the middle layer in between: the economic strategy that connects an open, sovereign stack to concrete and recurring economic activity.

In Cosmos’ case, this matters even more because value capture is not mechanical by design. The openness of the stack and the sovereignty of chains are long-term strengths, but they also mean that cash-flows cannot simply be assumed to emerge automatically from adoption. The paths by which the Hub becomes economically relevant (through coordination, security, trust, or interchain functions) need to be made visible, even if they remain optional and non-coercive.

From that perspective, the roadmap, tokenomics research, and value accrual are not competing priorities, but complementary ones. Making the strategic layer clearer would help align urgency around incentives with the technical momentum already in motion, without sacrificing the principles that make Cosmos distinctive.

1 Like