ATOM Wars: Seeding Hydro's buckets

Hi All,

Thought it would be good to address some of the concerns we’ve seen and provide a bit more context on where Informal is

A major motivating purpose of Hydro is to address what has become an unaccountable mess of PoL proposals to the Hub’s CP. There are 4 of them outstanding already (>2M ATOM worth), no one seems to track them, they pay no direct rewards back to the Hub, they’re painful to deal with on a one-off basis, and there’s more coming. The goal of Hydro is to create a proper platform for managing that instead. There seems to be general alignment behind that goal and a Hydro style solution. If you think that’s misguided, or if you think there’s a better solution or if the original problem is misidentified, we’d be eager to hear why.

It’s definitely true that the funds for Hydro should come from the existing PoL outstanding. Our feeling was that this will be a bit complicated and take time, and we thought folks might want to see Hydro proven out more before rerouting those funds. But we definitely agree all of those funds should be clawed back and rerouted through Hydro, and have been saying as much the whole time. We can certainly work up a proposal for how to claw them back in advance in order to fund hydro. Perhaps we can claw back half of it (~1M ATOM), use that to seed Hydro instead of a new CP ask, and clawback the rest over time.

As for the stATOM component, since stATOM is a major use of ATOM in DeFi, and a major target of existing PoL props, we thought it made sense. Plus, Stride is a consumer chain of the Hub, and one of the key value propositions of ICS is that if you bet on the Hub the Hub will bet on you in return - this is a powerful capability that distinguishes the Hub from other shared security providers and should not be lost. In any case, our plan (as we’ve written) was to add support for other LSTs as well, but there’s more complexity in doing so, and since we’ve also gotten feedback on the importance of getting to market faster, we thought it was a reasonable approach to start with stATOM. But it’s something that could absolutely be changed, we could just not include the stATOM bucket to start with and go with 100% ATOM bucket while we work on the code to support LSM shares directly and/or other LSTs. No problem. There seems to be widespread support for this and we support it too. The post from Stride itself above captures this well.

As for Informal x Stride conflict, Informal never invested directly in Stride. We hold less than 30k STRD, which we primarily received from auditing them. It’s normal practice for us to receive some tokens as part of an audit. Beyond that we earn some small rewards from being a validator, which is public info. I can’t comment for others but I do not own much STRD personally beyond what I receive from staking. Frankly I feel underallocated in that regard ;). In any case if we remove the stATOM bucket, this becomes less relevant, but wanted to clarify anyways.

As for the committee and their conflicts, we wanted people with expertise in specific roles, as articulated clearly in the prop, and that will inevitably come with certain conflicts with top DeFi-related projects in Cosmos. We should include some basic guidelines for managing conflicts. The goal of the committee is accountability, similar to Informal/Hypha’s prop 839 committee and to AADAOs committee. As Hydro is getting started, and especially until the Valence integrations are ready, the committee will have more responsibility, but the goal is to reduce their responsibility to minimal oversight. Hub governance can always change it. Perhaps it would be valuable to add/change some members, for instance people from Drop/Kujira to balance Stride/Osmosis. If there are particular people that would be great for particular roles on the committee, and those people are willing to do the job without pay to start, it would be great to hear recommendations.

Now for a bit more context on Informal. Informal is currently funded for Hub work by prop839, along with Hypha. The primary mandate of that prop for Informal was R&D and maintenance. However, we have received consistent feedback from our oversight committee that our R&D/maintenance is great but that they expect more BD leadership from us. So we have been trying to take that feedback into account. Our effort around Hydro is part of that. Since we have not really been resourced for Hub BD, we are aware that there is a lot to improve on that front, and we are working to do so. You can read more about this in our recent Q2 report.

The prop839 funding was for a total of $5.7M (plus 100k ATOM in discretionary bonuses). 4.5M of that 5.7M is for Informal’s work, and the remaining $1.2M is for Hypha. We have been publishing detailed quarterly reports of the use of those funds. There is typically a surplus (ie. we don’t use all of it), and this surplus is returned to the community pool. See for instance the report on Q2 finances and the $71k + 3k ATOM to be returned to the CP this quarter.

For more on Informal, see our recent post on the org’s evolution and funding. Our 2024 budget with the ICF is 5.5M and covers CometBFT, Hermes, and ibc-rs. Our 2024 budget with the Hub is 4.5M. Together, a pessimistic estimate is this will be about 2/3 of the company’s 2024 revenue. Optimistically it will be half. The rest of our business is growing steadily, especially since we stopped throttling it (we put a lot of business growth on hold in ‘21/’22 to support Cosmos in a difficult time). We are happy to continue working on the Hub and on core cosmos public goods for the ICF. We are also happy to not. We’d love to see other teams step up to take these projects forward as well.

We will work on a set of edits to the Hydro proposal to address the substantial feedback. Always appreciate the level of engagement around Hub topics, it’s clear how much people care about the Hub. Let’s try to keep it courteous and professional and keep building this thing out together.

Cheers.

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Thank you for this clarification. I really like the idea of kuji/drop involvement too. You guys are doing a great job i believe. Many critics are subject to strong outcome bias which is not entirely correlated to your work.

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I noticed there were a few people asking for clarity on the proportion of stATOM in circulation that is made up of POL + the general organic demand / utility for stATOM, so I ran some rough numbers.

Note: these are rough numbers taken from over a dozen defi apps where ATOM and stATOM are deployed, but this should be quite close.

Because it’s very difficult to get data from Osmosis on the composition of tokens in a pool without querying the position ID directly, I just assumed the stATOM / ATOM composition in that POL position was 50/50. This represents an overestimation on the number of stATOM minted due to POL, but I figured it’d be better to overestimate than underestimate in this case (margin of error probably 5-10%). I can probably get a more exact count this coming week if folks are interested!

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GM! Thank you for putting this proposal out on the forum!

There are some clear benefits associated

  • The strategic goals and benefits for the Cosmos Hub and ATOM are well-articulated, showing that this is a good-faith proposal
  • The potential for additional revenues and improved liquidity management would most definitely benefits the depth of cosmos markets.

These are a few concerns I have:

  • The initial transfer of a significant amount of ATOMs is somewhat risky. Especially when the success of the Hydro platform and committee’s effectiveness remains to be proven.
  • To this end, the plan needs to be re-adjusted to a milestone-based seeding, where each milestone such as X% increase in TVL or trading volume yields X amount of TOM from the committee

Overall, as a community, we should be cautious when it comes to the significant transfer of community funds and ensure that there are adequate performance monitoring and accountability mechanisms in place.

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I agree here with you that it would be much better to have the committee members go full-time. But since this not a reasonable thing to ask for an unpaid job, we’ll have to wait for Hydro to be proven successful & profitable before we can make it happen. In the meantime, if you have some “fresh” people to suggest, we would definitely consider them

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We’re looking at dynamically liquid-staking the required amount of ATOM as needed (based on what projects bid for) instead of creating buckets. If we have that, all LS protocols will be able to export their tokens through Hydro. We are also talking to Drop to integrate them after they launch

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Yes. Committee members have agreed to work unpaid for the next few months so we can all get a better sense of the workload first.

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I agree with essentially everything you wrote here. The main issue is that the round duration is currently 1 month, so with a 21 days un-staking period, this would only give an effective export duration of 9 days. As you point out, we can increase the round duration, but it would have to be closer to something like a 6-12 months to be worth it. The other option is to swap instead of un-staking, and this is what we’re currently exploring

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Hey guys just want to voice out that I am leaning more towards a no for this proposal.

I am still unclear what the ROI for hydro will be in the next year? What’s the end benefit in dollars/ATOMs to the community pool.

As much as I am a fan of stride I would like to hear more about why they are the only provider and what about the already given grants? Maybe first plan for claw back and then issue the same amounts via hydro?

One million is $6Million USD and very big portion of the community pool can we split this into multiple proposals with different stages with each stage having a clear goal before the next segment can be handed out for this deployment?

Best,
Mohammed

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Thanks for the feedback & questions.

The ROI will be the tributes paid by bidders to the Hydro voters & community pool. The more competitive the bidding, the higher the ROI.

Based on community sentiment, we’re planning to make a number of updates to this proposal. One of them is to re-route all the existing PoL exports through Hydro. We’re trying to find the best way to do that without affecting these projects negatively.

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I don’t like this return on investment, it can never be as good as the pledge profit of the total assets

I think it’s a simple math
1 person participates and you can get all the meat
100,000 people participate and you can only get soup
If the universe were successful, there would not be only 100,000 people
It is no longer necessary to divide it into four ratios of locking time

Long-term staking and locking in exchange for disappointing profits will be a disaster

I prefer to use atom locking to be able to bid

If allowed, the original 21 days can be changed to four ratios: 3 days, 1 month, 2 months, and 3 months, to obtain different pledge interest rates and bidding rights

Collect profits, use or destroy them

Keeping a simple, easy-to-use and sustainable universe

For the Osmosis share of the POL:
90% that was deployed in a static position is now out of range - it is entirely backing ATOM rather than being stATOM.
The 10% in a vault is still in use at about 50/50
Source

As a specific range was quoted in the proposal this can’t be directly rebalanced, but does still provide the key purpose of this liquidity in enabling liquidations to occur smoothly.

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Then still it would be interesting to put out a request for people before assigning them.

What would be better; having to replace people later on for fresh ones who then have to catch up OR have the fresh people already in and grow with the product where needed?
It already goes wrong with the initial setup to not spend some time finding fresh insights, but to keep fishing in the same pool.

People who I have positive experiences with are for example @RealVovochka or the guys from StableLab. But that is just from my small circle and I can imagine there are tons of others out there who will just fit the profile perfectly as well and who do not take focus away from other projects.

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First, thank you Thyborg for your time/effort in helping shape Hydro’s vision/putting this prop up. I can only imagine how much bandwidth you have with everything on your plate already, which i’d imagine is no easy feat.

Concern #1:

Despite the appointed committee agreeing to work w/o pay for the first few months, which is commendable, what immediately comes to mind is why wasn’t input sought from the general Hub community in regards to the makeup of this team? Perhaps, and understandably so, this is due to the call/push for “faster development,” but within the current, chaotic climate that is Cosmos Hub governance, I don’t believe it would have been a bad idea.

As clearly voiced in many other comments, there seem to be clear conflicts of interest via affiliations that are not made fully transparent, which is one of Cosmos Hub’s original values.

Considering select feedback is still considering feedback, so thank you.

Concern #2:

“…Committee is compromised…” seems to be a very valid piece of feedback well worthy to be considered/responded to.

As the main leader, thank you for clearing the concern regarding why Stride. Makes sense.

Respectfully speaking, the levity in your tone does not seem to help revive/restore confidence that there are no, as Cosmos-Nanny stated, “potential self-dealing.”

If Hydro is to move forward, this sounds like a valid compromise.

Until these concerns are addressed, this prop should respectfully receive a “No/NWV.”

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Thank you @FHZ we’ve been working on a revised version of this proposal which hopefully will address some if not all of your concerns.

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Strong support for Hydro, it’s about time Cosmos Hub has product with a market

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