This is clearly a paradigm shift proposition. We are so grateful to have such innovative mindsets in the broader Cosmos community and to see that the Hub is still acting as a gravitational force for the best minds. Additionally, we want to emphasize the radical change perceived in this initial post compared to previous shifts in the hub’s history (such as Atom 2.0, etc.). The author doesn’t advocate a global vision but rather exposes the idea and potential high-level design choices, allowing the community to express feelings and make suggestions. In our humble opinion, this approach is much healthier.
Analysis:
Regarding the proposition itself, we think this is clearly an interesting topic that merits a lot of attention. On the contrary, we believe simple questions require simple answers. Should the Hub install the Babylon's Comet Extension ? The answer is YES. Refusing this would simply mean the Hub falling behind competition in the Security as a Service business (SaaS).
Design Choices:
On the design side, a minimal tax from the Hub seems like a reasonable rationale to explore. It is worth to mention that validators will already take a minimum 5% fee (and more depending on the validators the users choose to delegate to). We could consider using a community tax on top of it and redirect toward a dedicated covenant or even directly into the community pool. We recommend to assess this distribution design choice in a global comprehensive debate on ICS rewards in general. We plan to initiate this debate soon enough in the forum as we received initial signaling support in this post:
Strategy Choices:
This shift in shared security introduces many new elements to an already complex puzzle. The emergence of a new type of security could be viewed by ATOM holders as a threat to the collateral value of the token in the replicated security offering. The positive feedback on this integration proposal suggests the Hub’s community might be more mature today. Instead of focusing on short-term value accrual and engaging in a pointless competition game, they seem to adapt to an ever-evolving landscape and seek cooperation whenever possible. We think this is an important thing to point out.
To this collaboration topic, we feel like we have to ask that important question which haven’t been posted yet (at least not that we know so far): Wouldn’t it be a mutual benefit to integrate Babylon as a consumer chain ?
If we think about it, this could make a lot of sense. We often refer to ICS as a mutual agreement contract that can only work where symbiotic relations can emerge. Let’s break it down:
Babylon Chain’s Benefits: People need to understand the various primitives Bitcoin uses to secure over PoS chains. More detail about the actual handling of the custody and slashing via “accountable assertions”, “finality gadgets” and “convenant emulation” can be found in the Babylon’s original light paper. In simple terms, the protocol uses a combination of the aforementioned three primitives along with a fourth one, “timestamping.” This ensures the slashing transaction can be spent before unstaking. To reduce costs, the protocol proposes using a dedicated chain to gather and compile multiple timestamps from multiple PoS chains into one. Therefore, as the protocol grows and expands to more Cosmos chains (not only), the Babylon chain becomes a growing center point of failure. As the Babylon chain itself will be a Cosmos SDK based chain, its validators’ accountability and collateral at stake become an important part of the risk design. In our humble opinion, this makes it a perfect candidate to opt for the reputation of the Hub’s validators and the ATOM stake, better concentrating the Babylon token on its chain utility & governance parameters.
Cosmos Hub’s Benefits: The Babylon chain offering a timestamping aggregation service could also try to compete with the Hub’s Shared Security and offer it’s own replicated security, backed by their native token and BTC “staking”. To compete, the Hub would build its own consumer chain to provide similar aggregated timestamping. To avoid such harmful behaviors, it is worth reasoning over potential cooperation. The hub could become a Security Aggregator adding Babylon’s BTC stake to its existing ATOM security and credible neutrality. In return the Hub validators would secure the Babylon chain’s consensus which plays an essential role in the overall Bitcoin Staking Protocol primitives. Expanding this new service accross the whole Cosmos further strengthen the Hub’s central position as a Cosmos Public Good contributor.
Conclusion:
In summary, this integration is a no-brainer, but we think the actual scope is much broader than the initial question asked. This pertains to a crucial opportunity for the Hub to create a fruitful partnership with Babylon’s project. As the Hub currently lacks any Business Development representatives, we invite the community to initiate open discussions regarding the potential mutual benefit that could arise from a consumer chain integration of the forthcoming Babylon’s chain. From our initial research, this could be beneficial to both parties.
The Babylon Team would like to express our gratitude for the various proposals and thoughts presented, focusing on the strategic alignment between Babylon and Cosmos Hub. We are actively following the proposals and thoughts and currently working to create a detailed roadmap for Babylon and Cosmos Hub to work together.
Our initial thoughts and analysis were categorized into two primary segments: Economic Alignment and Narrative Alignment.
Economic alignment - What are the mutual benefits for Cosmos Hub and Babylon ?
Narrative alignment - Are we (Babylon & Cosmos Hub) planning to work on siloed business models or integrated business models ?
While working with Jehan and his team, the objective was to first get the community’s ideas into what are the best potential opportunities between Cosmos Hub and Babylon. The initial ideas was to activate the Hub in brainstorming and debating us about the various next steps
Babylon brings Bitcoin (external capital) for the first time to complement the native token of PoS chains to bootstrap securities, starting with Cosmos and then the broader PoS economy. Babylon is trying to understand how best the BBN token should be used and scaled ?
Some data points we have collected in our research about Bitcoin Holders
There is a 5.5 billion dollar WBTC market, with 80% of the capital remaining idle, which is waiting for disruption and Babylon can be used to onboard this capital into the Cosmos Ecosystem.
Bitcoin holders are extremely risk averse, and would like yield in potentially blue chip tokens (ATOM) in the initial bootstrapping period.
Bitcoin holders would be open to taking a lower inflation APY with vesting, if the risks are properly outlined and the onboarding process is seamless.
Merging Babylon’s Bitcoin staking tech with the Cosmos Hub is an interesting idea that looks harmless at face value. Still, when you take a deeper dive, I don’t see any significant economic benefits to Atom Stakers.
The proposal has not clearly articulated the direct economic benefits for Atom stakers. While there may be purely speculative indirect benefits, such as increased ecosystem security and potential onboarding of new users, how does this proposal directly translate into tangible economic advantages for Atom stakers.
What’s in It for Atom Holders?
Rewards Might Get Thinner: First off, there’s a worry that Atom holders might end up getting less out of the deal. With Babylon bringing Bitcoin into the mix, the rewards that used to go mainly to Atom holders will have to be shared with more Stakers from outside Cosmos. This will mean Atom holders will experience a net decrease in rewards for keeping the network safe. This is known as dilution.
Could Atom Lose Its Shine?: Atom has a unique role in making the Cosmos network secure and rewarding its holders. If we start mixing in Bitcoin, then this will dilute Atom’s value. People might start questioning if holding Atom is still worth it. I know that I am beginning to doubt whether my holdings of Atom will maintain its value. Hence why I am opposed to the continued push towards centralization and “communal pooling”.
Atom’s primary value proposition is derived from its role in securing the Cosmos Hub and earning staking rewards. Introducing external assets like Bitcoin into the security model will diminish Atom’s exclusivity and attractiveness, potentially leading to a depreciation in its perceived utility and value.
Are We Mixing Up Priorities?: The plan assumes Bitcoin holders will jump in and help make the network more secure because they want the rewards. But it doesn’t really talk about whether this helps the Cosmos network in the long run. Show a proof of concept where Babylon’s integration on other chains have resulted in a net gain for the native PoS assets.
Direct Benefits Are Unclear: The big pitch needs to spell out how Atom holders directly benefit from all this. Sure, a more secure network and new users sound good, but how does that translate into tangible benefits for Atom holders? I would prefer the focus to be placed on building out the Atom Economic Zone (AEZ), with Atom at the center of the Cosmos. Not Bitcoin.
More Competition: Good or Bad?
ICS Isn’t Fully Used Yet: The whole idea behind ICS (Interchain Security) still needs to be used to its fullest. So, why rush to bring in more competition? We should be focusing on getting the most out of what we already have before adding new competition models into the mix.
Could Make Things Messy: Bringing in Bitcoin and other assets might make the Cosmos ecosystem more complicated. It could make it harder to manage everything, mix up how rewards are given out, and generally make it more challenging to keep things running smoothly.
Shifting Focus Away from What Matters: The Cosmos Hub should be all about innovation and making its core tech better, including ICS. If we get too caught up in adding new shiny bells and whistles, things like Bitcoin staking (which I am very skeptical will be at all appealing to Bitcoiners), we might lose sight of what’s really important for making Atom and the Cosmos network better.
Perhaps we should put more energy into making the most of what we’ve already got with ICS before diluting Atoms tokenomics model any more than it already has been. Our focus should be all about making sure Atom holders and the Cosmos network benefits, and not transferring our wealth over to Babylon and Bitcoiners.
but then you may not wanna flood them with CC tokens. I don’t think that is a nice UX. Bitcoin in and 10s of tokens as rewards? Seems a bit overwhelming, especially when they are worth close to nothing.
I view both as core Cosmos Hub offerings that align with the “port city” vision - infra services for other chains. Commerce in the ATOM economic zone should happen in ATOM as it greatly reduces fx costs (the same reason why every multi-national corp wants to transact in US dollars instead of handling a portfolio of 50 currencies and their quite pricey foreign exchange costs)
You’re making a very general claim that could apply to any proposal, which doesn’t really dig into what’s good or bad about this specific idea. I’m not totally sold on why using Babylon’s way of staking BTC through ICS is something that would benefit Atom Stakers and the Atom Economic Zone (AEZ). Sure, it’s a “Use Case” that can be implemented as part of ICS, but why? Is it going to improve ICS?
There are already like 25 liquidity pools (LPs) on Osmosis that work with WBTC, holding around $8 million USD in liquidity. This makes me think those looking to earn some extra yield from their BTC are probably already using these options. Are the staking returns on BTC going to have to be higher than the yield from the LP’s in order to incentivize BTC Stakers? For what benefits?
The vision for the Cosmos Hub as a “port city” envisions it as a hub for trade, exchanges, and interactions, where the AEZ is central. In this vision, Atom is meant to be the main currency that facilitates transactions and ensures Interchain Security.
In my opinion, Atom should be exclusively positioned as the “ONLY” Cosmos “global reserve currency,” minimizing friction across the network. This vision capitalizes on Atom’s unique position to offer infrastructural services to other chains, guaranteeing seamless interoperability, security, and economic fluidity within the Cosmos ecosystem. Why do we want to compete with our own ICS business model? This would potentially divert value out of the Cosmos ecosystem.
Adhering to the “port city” concept with Atom at its core ensures the Cosmos ecosystem remains secure, interoperable, and economically efficient. The proposed integration of Babylon as a consumer chain through ICS would potentially conflict with Atom’s pivotal role in the AEZ, seemingly offering no clear advantages.
What you are overlooking is a fundamental understanding of security. Bitcoin is not just another token. This is a token backed by massive amounts of energy. By contrast, every proof-of-stake token is backed by social consensus. These are fundamentally very different types of security arrangements for monetary value. At the end of the day, the 180 validators of Cosmos can collude with each other and steal everybody else’s money. That’s not possible to do with Bitcoin where you have to generate energy to do the same. Overlaying the social consensus security with the energy security of Bitcoin is a fortification of the Cosmos Hub of massive proportions. While you trust the Hub and its validators (and so do I) hardly anybody else does. That is why the TVL numbers in Cosmos are so small. Ethereum has TVL in the tens of billions, not a couple of piddly millions. In order for Cosmos to grow as a technology and as a chain to the billion person adoption level, its current security offering is insufficient. Augmenting Cosmos Hub with Bitcoin security and making it the premier Aggregated Security provider for the interchain is a cornerstone capability. It will also make ATOM investable for Wall Street. Right now, without Babylon, it isn’t.
Obviously Cosmos Hub can build its reputation organically over time. For blitzscaling purposes it needs Bitcoin’s security overlay today.
Babylon will also unlock the liquidity embedded in the Bitcoin network to ATOM and the AEZ. Currently, no Bitcoin guy will sell his BTC for ATOM. They won’t sell their BTC for anything else. That is because they only trust the Bitcoin security model. They think all other security models will separate them from their money (ie Bitcoin). These guys simply don’t believe in the ATOM security model. And that’s fine. People can believe what they want. However, by aggregating the two security models, the BTC market opens up for ATOM. And in the crypto space, the Bitcoin guys have the most cash. Like it or not - that is the situation. The money is in Bitcoin.
You also have to understand another aspect of finance. Wall Street trusts the Bitcoin network. That’s why its market cap is $1 trillion. That is $1 trillion of trust. You have futures markets, ETFs, etc. Wall Street institutions trust Bitcoin. As such Bitcoin guys are essentially the VCs for the crypto world for Wall Street. Wall Street’s money is not going to come directly to ATOM. It will come through Bitcoin. That is why a bridge needs to be built from Bitcoin to Cosmos and Bitcoin level security needs to be provided for Cosmos SDK chains. The Cosmos Hub is the natural bridge between Bitcoin and the Cosmos ecosystem. In other words, Bitcoin secures the Hub and the Hub in turn through ICS secures the AEZ.
In this situation Bitcoin is not a competitor to ATOM, it is an enabler of ATOM and the interchain money vision.
Babylon will make Cosmos Hub a “joint security” provider or some are calling it “aggregated” security. I prefer the term “joint security”
Thanks for your detailed response. I am no longer going to comment on any proposals. I only just became aware of the upcoming hard fork and realized that all this effort is probably a waste of my time. Although, I agree that most of what you say is correct, I don’t think this proposal is going to play out the way it’s described. If it does then that’s awesome, then everyone wins. Good luck to everyone.
Yes, the Cosmos Hub (ATOM) is moving in a different direction than Jae Kwon’s original vision. There is now enough differences to where he is creating a different IBC hub with which to implement his original vision - Atom One (ATONE). The last thing anybody in Cosmos wants is for people to self-censor. Please feel free to post your concerns at any time. You raised good questions and by answering your questions other people get more clarity as well about what’s going on.
There is several caveats to this. 1 Bitcoin not being the shiny, glittery object it is. I.e. its decentralization level influences its POW security precautions.
Great module to have in the SDK. Unsure that the hub (at this point) will have any benefit from this whatsoever apart from “omg, its working”
Dear @sbneo2022, there’s actually a lot more to this story of mutual benefits between Babylon and the AEZ than meets the eye. Among those, we have listed a few in our recent coverage of the project we made as part of our educational mandate towards our delegators:
Babylon as a de-facto bitcoin oracle for the AEZ (and the whole Cosmos by extension via interchain queries) which critical role will likely require the best security guarantees to be accepted as such. Using the well established reputation of the Hub validators as well as the already liquid and decentralized supply of ATOMs makes it by far the best offering in the Cosmos today.
The Capital/Currency duality problem and the complementary role that Bitcoin & ATOM can play to achieve to this balance. As quoted from the following video: Like Yng and Yang, BTC and ATOM are assets that oppose but complement each other. This also brings the two parts of the role of both currency and PoS capital together.
The Security Aggregation benefits, as BTC and ATOM blockchain have two consensus that make opposite compromises. Bitcoin does all-in on the Livness where ATOM does all-in on finality time that is simply instantaneous. The security compromises on the capital to slash are thus opposed, one slow and heavy, the other fast and light. If the Hub needs to slash with a big capital, BTC will prove very useful and if it needs to slash an average amount but instantly, ATOM will be the first source of security. They are two sources of safety at opposite size and speed and this is what makes it a perfect mix.
For those who are interested into the video coverage, here is a link you can use:
Before we wrap it up, we would like to profit from the opportunity to have a Babylon Team member here to let you know that we still have to conduct our due diligence and therefore we would like to ask if you would be opened to share 30m of your time with us to discuss your project’s vision and strategy. Feel free to send us a message at contact@pro-delegators.com.
Yeah, well the way this thing works is that blocks get a Bitcoin timestamp which means it becomes very difficult for an attacker to split the chain. Which means you need to pay substantially less in inflation to secure the chain. Right now ATOM has a problem in that its inflation has to be higher regardless of demand for the token in order to secure the network. That means number go down. With Bitcoin timestamping, inflation can be lowered to a level where it meets demand for token or lowered below. In other words implementing a 0-10% inflation range with a number go up token becomes possible.
With Babylon, ATOM monetary policy becomes guided by the desires of tokenholders instead of fundamental network security considerations. Then we get to a point where Bitcoin is like the Gold in the Federal reserve balance sheet and ATOM is the Treasury bonds where the interest rate is set by the Fed board. The Fed board in this case is ATOM tokenholders.
Why $BTC staker can unbond their token quickly while $ATOM stakers has to wait 21 days? If they complement each other, the unbonding time should be equal
why BTC stakers have voting power on cosmos hub?
Reward for BTC stakers should be decide by governance instead of decided by validators individually, otherwise if a validator decided to give 100% of reward to BTC, BTC can replace ATOM completely and this make me think why not just invest in BTC which can do everything ATOM does without the inflation!
the difference in unbonding times between BTC stakers and ATOM stakers is due to the unique security mechanisms of their respective blockchain networks. This difference is reasonable, considering the varying unbonding periods across different platforms.
More harmonized unbonding process. This could involve adjusting the unbonding period for BTC stakers to be closer to that of ATOM stakers, while still maintaining the security of both networks.
BTC Stakers’ Voting Power : Currently, BTC stakers do not have direct voting power on the Cosmos Hub. Validators’ voting power is determined by the amount of ATOM tokens they have staked. Although adding Bitcoin stakes via Babylon does not grant direct voting rights to BTC stakers, there might be future developments that allow for a more balanced representation of both ATOM and BTC stakers in the Cosmos Hub’s consensus algorithm. This could involve exploring alternative methods for determining voting power or incorporating BTC staking as a factor in the validators’ influence.
Reward Allocation Decisions : The governance process may evolve to include more diverse perspectives and better representation of various stakeholders, including BTC stakers + other stakers.
This could lead to more nuanced and inclusive decisions regarding reward allocations, grants, better representation, restaking
allowing Bitcoin holders to earn rewards from multiple PoS chains simultaneously.
I understand you, @michiboo . Users who are wanting to “restake” their asset into restaking protocols without having their restaked repricing token yield-bearing asset locked.
The potential for re-staking to evolve into more dynamic forms that could indeed attract broader participation.
These factors may contribute to increased adoption, usage, and overall growth of the Cosmos Hub.
