Capture IBC value... Possible ?! Yes

How Can Cosmos Hub Capture IBC Value?

I. Three Possible Approaches to Capturing IBC Value

From the most elegant to the least elegant:

  1. Capture +++ (Elegant and Sustainable)
    Cosmos Hub becomes an Interchain Security (ICS) provider, securing consumer chains in exchange for payments in ATOM. This creates continuous demand for ATOM and reinforces the Hub’s central role without introducing economic friction.

  2. Capture-Extraction ±+ (Balanced but Less Seamless)
    Cosmos Hub implements IBC routing fees, taking a small percentage from transactions passing through it. While this generates revenue, it may incentivize some chains to bypass the Hub.

  3. Extraction — (Intrusive and Risky)
    Cosmos Hub imposes a tax on IBC flows or captures part of the transferred value through coercive mechanisms. This discourages adoption, pushes chains to avoid the Hub, and undermines its neutrality.


II. Why Approach 3 is Impossible & What Alternative Exists?

Approach 3 (forced extraction) is not feasible because IBC is open-source. Chains can simply establish their own direct IBC channels, bypassing Cosmos Hub entirely and making any taxation attempt ineffective.

A more viable alternative is for the Hub to become a key IBC infrastructure provider, acting as a guardian of light clients and a maintainer of relayers.


III. Cosmos Hub as an IBC Infrastructure Provider

  • Hosting IBC Light Clients (Capture +++)

Cosmos Hub could centralize the hosting and maintenance of IBC light clients, ensuring their security and availability.

Mechanism: Chains would pay in ATOM or another token for Cosmos Hub to host and secure their light clients, offloading a major technical burden.

Benefit: A stable revenue source and a stronger role in IBC infrastructure.

  • Professionalizing IBC Relayers (Capture-Extraction ±+)

Currently, IBC relayers operate on a voluntary basis, which causes reliability issues. Cosmos Hub could establish a structured relayer marketplace, ensuring consistent service quality.

Mechanism:

Cosmos Hub could stake ATOM to guarantee reliable relayer services.

Chains using these relayers would pay usage fees, monetizing the infrastructure.

Benefit: A more robust and reliable IBC network while capturing value for the Hub.

  • Cosmos Hub as an “IBC Finality Layer” (Capture +++)

Cosmos Hub could also serve as an IBC finality layer, recording state checkpoints on-chain to secure IBC transactions.

Mechanism: Chains submit finalized state updates to Cosmos Hub, which anchors them on-chain in exchange for registration fees.

Benefit: Increases IBC reliability and reinforces Cosmos Hub as the ultimate validator of cross-chain transactions.


IV. Capturing IBC Value via ICS and Cross-Chain Governance

A more subtle and sustainable approach is to accumulate as many tokens as possible through ICS and redistribute their governance power to ATOM stakers.

  • Accumulating Consumer Chain Tokens via ICS

With ICS, Cosmos Hub secures consumer chains in exchange for rewards in their native tokens. The key idea is not to sell these tokens but to strategically hold them.

IBC Impact: Many of these chains depend on IBC for liquidity and utility, meaning Cosmos Hub captures indirect IBC value through its governance holdings.

  • Redistributing Voting Power to ATOM Stakers

The core concept is to turn these accumulated tokens into governance influence through a dedicated governance interface (e.g., a wallet that allows stakers to vote through the Hub).

Cosmos Hub becomes an interchain investment DAO, actively influencing the governance of the chains it secures.

Network Effect: The more chains it secures, the more influence and assets it accumulates, strengthening ATOM without selling assets.

  • Towards an On-Chain Investment Fund

This mechanism could evolve into a decentralized treasury where ATOM stakers decide how to allocate funds and influence the ecosystem.

Compounding Effect: By supporting strategic projects, Cosmos Hub fosters IBC adoption while maximizing its own economic influence.


Conclusion

Instead of trying to tax IBC flows directly (ineffective and bypassable), Cosmos Hub can capture value by:

  1. Monetizing IBC infrastructure (light clients, relayers, finality).

  2. Accumulating governance tokens through ICS and using them for strategic influence.

  3. Creating a virtuous cycle where ATOM becomes a key economic player without selling assets.

This approach reinforces Cosmos Hub’s sovereignty, positions it as the economic heart of Cosmos, and allows it to capture IBC value organically and sustainably.

Just an idea.

Guinch

3 Likes

How to attract projects with the argument of offering a permissionless IBC infrastructure?

A strategic approach would be to create a model where Cosmos Hub provides high-quality and low-cost services for existing projects.

This could include:

  1. Reducing infrastructure costs: Offering a turnkey solution for managing relays and IBC clients, allowing projects to save on maintenance and infrastructure costs. These services could be billed based on usage, making the transition to Cosmos Hub attractive for projects looking to optimize their expenses.

  2. Stability and finality: By emphasizing the rapid finality and enhanced security of Cosmos Hub, it would be possible to attract projects looking to guarantee a high level of trust in their cross-chain transactions. Offering a robust and reliable infrastructure would be a major selling point for these projects.

  3. Improved interoperability: Promoting connectivity and interoperability with a wide range of chains, enabling projects to increase their visibility and facilitate the exchange of value between them. Projects interested in expanding beyond their native chains might be attracted to Cosmos Hub’s ability to seamlessly handle multiple IBC connections.

  4. Shared economic model: Creating a system where part of the revenue generated from IBC infrastructure services (e.g., transaction fees, usage fees) is redistributed to participating projects. This would provide an additional incentive for projects to join Cosmos Hub while benefiting from reduced infrastructure costs.

In summary, the idea would be to offer them a clear value proposition: a reduction in infrastructure costs while ensuring enhanced interoperability and security through Cosmos Hub’s IBC infrastructure.

But…

Having discussed with a knowledgeable Osmosis user, according to him, Osmosis would probably not be swayed by this proposal. Why?

I just learned that Keplr and the Osmosis team themselves fund the costs associated with the chain’s IBC infrastructure, but even with a hypothetical offer from the Hub to provide this need, the choice would likely remain the same.
This is because routing transactions through a single chain would undermine the core value proposition of IBC (I’m thinking of permissionless exchange and the ease of connection without third parties). Furthermore, performance would be reduced. (If you place a router between two chains, you double the number of IBC transactions required, which would increase latency).

So, unless IBC V2 is a total change of mechanism, is the “IBC infrastructure provider” argument dead in the water? Or is Osmosis an isolated case?

I am trying to test my ideas against each other to come up with potential solutions if there are any.

3 Likes

I favor your approach towards increasing the reliability and availability of back end services. As it stands cosmos’s main value prop is: Infrastructure in service of applications. We simply need applications to service. In my opinion IBC stays free (for the most part - maybe only pay for a specific niche of transactions). The real value capture comes from orchestrating app/product development efforts. Making chains interoperable and then softly telling everyone “sort it among yourselves” is one side of the coin.

Making chains interoperable then orchestrating the goal-directed development of products between sovereign chains in pursuit of credible revenue generating apps is the win condition. Shared revenue from co-developed products as a consequence of interchain orchestration makes sense.

Tl:dr: Band together and build the next generation of credible products then revenue share among each other = adoption.

Hello

I think yes, the best solution is to offer good infrastructures for IBC through a hub relayers for all chains as a service. IBC is open source so we cannot tax that and I still think it was a good decision as any chains can simply modify the code and delete this part. In the contrary, if the Hub offers something like a Relayer Hub as a service, for a small fee, playing with the “economy of scale” it could be a very good and elegant solution as it would cost way more for chains to set and manage their own relayers than paying a smaller fee for using the Hub ones.

The point would then be, not to make huge money on this, but rather placing ourselves as the center of IBC. Once links and partnerships of that kind are put in place between the Hub and all chains it will be more easy to make new products and services with them.

Edit : Note that, I think chains would still set their own relayers to not have a single point of failure, but, they would still want the Hub ones if they are more secure and professional.

5 Likes

Sir, I think that I solved it.