Discussing The Future of Cosmos Hub and Stride

Conversation Essays
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Note: this is a joint post by the Stride core contributors Vishal, Riley, Aidan, and John. It contains our personal opinions, and does not represent Cosmos Hub or Stride protocol. We are merely four of many Cosmos Hub and Stride stakeholders.

State of play

It has been a full week since the idea to convert the entire STRD supply to ATOM was first revealed at Cosmoverse. In that time, there’s been vigorous public discussion about the idea.

The “Convert entire STRD supply to ATOM” post has received 160 replies, giving it the most replies of any Cosmos Hub governance forum post in history. There’s been a huge amount of engagement with the idea on Twitter as well. And lastly, the Stride Discord has also been buzzing with discussion.

This is great!

It’s always been our intention that the conversion idea - and indeed all ideas that affect the future of Stride - be shaped through open, transparent, public discussion - not behind closed doors. So thank you to the Cosmos Hub and Stride communities for providing so much thoughtful feedback. Whether you support or oppose the token conversion, your feedback has been much appreciated.

Regarding the feasibility of the conversion idea, judging by the reaction of both the Cosmos Hub and Stride communities there is currently too much division and not enough consensus. Perhaps that will change at some point in the future, but currently we feel it would be inappropriate to move forward to working on concrete details about the conversion.

Given the above, Stride contributors will continue to fully focus on furthering Stride’s mission in the Cosmos. We intend to keep our full attention on our mission to unlock as much liquidity as possible through liquid staking. We hope that Cosmos Hub community members will continue to explore and champion some of the ideas we set forth here, as we think it could be an exciting path forward for the ecosystem.

Down below, we’ll explain the full vision and some reasons we think it might be a good idea. If the idea intrigues the Cosmos Hub and Stride communities, we would encourage them to continue discussing it.

Why do the conversion?

Now that Cosmos Hub and Stride community members have had a full week to process and discuss the conversion idea, we as Stride contributors would like to provide what we see as the justification for this novel idea.

To put it briefly, converting the STRD supply to ATOM would help Cosmos Hub fulfill its destiny as the undisputed center of the Cosmos ecosystem, which would in turn be a huge growth catalyst for the entire Cosmos.

We’ve always felt that focusing on helping Cosmos Hub and benefiting the entire Cosmos ecosystem is the best strategy for growing Stride protocol.

Cosmos Hub’s past

The Cosmos Hub blockchain and its token ATOM created the Cosmos ecosystem, as virtually the entire Cosmos stack was funded through the sale of ATOM tokens. Even as Cosmos Hub built up a vibrant ecosystem around itself, it chose not to exploit its ecosystem by extracting value. But nonetheless, Cosmos Hub’s central position in the Cosmos ecosystem has always tantalized people with the hope that it may one day accrue value to ATOM.

So due to Cosmos Hub’s ecosystem leadership and because of the hope of value accrual, Cosmos Hub became a schelling point for the Cosmos. This has given it a strong brand and resulted in significant distribution of the supply of ATOM, making it one of the most well-distributed tokens in crypto.

As the Cosmos ecosystem became more developed, Cosmos Hub began searching for a place in the ecosystem it had created. One popular idea from 2021 saw Cosmos Hub as a port city. According to the port city idea, Cosmos Hub would be the central chain in the Cosmos ecosystem, where users from across the Cosmos would come to exchange tokens, use core services, and develop culture. According to the article, “this…includes essential interchain services like chain registries, automated market makers, bridges to Bitcoin, Ethereum, and the wider digital economy.” But for various reasons, the port city idea didn’t pan out.

Another role Cosmos Hub thought it could fill in the Cosmos ecosystem was that of security provider. And so interchain security (ICS) was planned and built. At this point, Neutron and Stride blockchains are consumers of Cosmos Hub’s security. However, many people are skeptical about the future of ICS. The income from ICS has so far been less than expected, with Neutron paying only about $5,000 annualized and Stride paying about $230,000 annualized for $1B+ worth of economic security. It’s possible this income level will grow in the coming years, but currently this low level of income creates economic difficulties for Cosmos Hub. With these existing difficulties, scaling to even five ICS chains would present serious economic challenges. And to make matters worse, there’s significant competition in the shared security space from teams like Eigen, Celestia, and Mesh Security.

So while Cosmos Hub continues to enjoy the prestige and neutrality of having built the Cosmos ecosystem, and while Cosmos Hub remains the most secure and decentralized chain in the Cosmos - it has struggled to find a place in the ecosystem it created. And as a result, Cosmos Hub is slowly losing relevance.

Cosmos Hub’s future

Despite the disappointments of the past, Cosmos Hub has been on the right track all along. The port city idea still makes sense, and so does interchain security. We as Stride core contributors believe these were the right ideas for Cosmos Hub, and that the main issue was a lack of strategic direction.

That’s why we proposed the token conversion idea - because it would be the fulfillment of both the port city idea and the interchain security idea.

If the entire STRD supply were converted to ATOM, then Cosmos Hub would fully control the core Cosmos utility of liquid staking. Ideally, this would be one of many services offered by the port city of Cosmos Hub. Convert OSMO to ATOM and you’ve added an exchange to the city; convert STARS to ATOM and you’ve added culture to the city.

But unlike Ethereum, this city would not be monolithic - it would be a city composed of several chains, all secured by interchain security and linked by IBC. Thus Cosmos Hub would retain its minimalism and resilience - its purity - while still controlling a suite of interchain services and receiving rewards therefrom. Cosmos Hub, and its satellite chains governed by ATOM and secured by ICS, would form the center of the vast and vibrant Cosmos ecosystem.

This grand plan would fulfill Cosmos Hub’s destiny, achieving the full promise of both the port city and interchain security ideas. It would secure Cosmos Hub’s relevance in the Cosmos ecosystem for decades to come.

BTC, ETH, ATOM

If STRD, OSMO, and STARS converted to ATOM it would be extremely positive not just for Cosmos Hub, but for the entire Cosmos ecosystem.

Currently, BTC and ETH have achieved consensus as monies of the Web 3 economy. They both serve widely as stores of value and media of exchange. We as Stride core contributors believe ATOM has the potential to achieve consensus as money as well.

Each of these three tokens created something bigger than itself, which is the ultimate achievement for a token. As such, each one has the prestige, neutrality, and distribution to serve as money. But in the case of ATOM, it still lacks a sufficiently compelling story.

Consider the stories of BTC and ETH:

  • BTC is the oldest and most decentralized token, and has a fixed supply
  • ETH is the oldest and most decentralized token for smart contracts, and has huge demand as gas

But what about ATOM? What is ATOM’s succinct yet compelling story? We would like ATOM’s story to be:

  • ATOM is the oldest and most decentralized governance token, and controls a suite of interchain services

We believe this would give ATOM an equivalent status to BTC and ETH. ATOM is already prestigious, neutral, and well-distributed - but this would give it a sufficiently differentiated and compelling story.

If this were to happen, it would usher in a renaissance for the Cosmos ecosystem. ATOM would capture the imaginations of many crypto market participants, bringing them to the Cosmos to use ATOM onchain. A surge of economic activity would follow, creating a virtuous cycle as the price of ATOM increased. All this activity would spark new ideas and create demand for new Cosmos chains.

The whole Cosmos would benefit massively.

The past and future of Stride

But for an STRD to ATOM token conversion to take place, both Cosmos Hub and Stride would have to agree. So let’s talk about Stride.

From its launch in September of 2022, the Stride protocol has always sought to serve the Cosmos. Indeed, we as core contributors decided to work on liquid staking because we felt that what Cosmos needed most was liquidity. Stride’s North Star has always been to serve the Cosmos.

  • That’s why Stride didn’t work to build its own DeFi apps, and instead created liquid staked tokens for other Cosmos chains to use.

  • That’s why Stride obsessively focused on security, to ensure that the Cosmos chains who used our LSTs would be maximally secure.

  • That’s why Stride didn’t claw back any airdrops, and instead kept recycling them to the users who wanted to claim.

  • That’s why we worked extensively with Cosmos Hub teams to ship ICS and LSM, instead of solely focusing on our own chain.

Stride’s strategy has always been to put the Cosmos ecosystem first; we believe this is the main reason for the meteoric growth of Stride over the past year. Serving the Cosmos and focusing on growing the pie has proven to be a winning strategy for increasing usage of Stride protocol. So helping Cosmos Hub achieve its destiny and thereby catalyzing a renaissance in the Cosmos ecosystem would be the best thing Stride protocol could do to achieve its own success. Moreover, the increased decentralization that would come from being governed by the ATOM token would make chains and users from across the Cosmos more comfortable using Stride.

Ultimately, we believe that what’s best for the Cosmos ecosystem is best for Stride.

Alternatives

We as Stride core contributors are fired up about this new vision for the Cosmos Hub! And we have been enthusiastically discussing this vision with various individuals for weeks.

However, we recognize not everyone feels the same way we do. In our assessment, public sentiment about the conversion is currently leaning against it. This is totally fine. While we are passionate about helping Cosmos Hub fulfill its destiny as the port city and sustainable security provider of the Cosmos, we fully respect the opinions of others. And ultimately, we recognize that we are merely several of many Cosmos Hub and Stride stakeholders, and that broad consensus is required for big changes.

The alternative to the grand vision of Cosmos Hub and ATOM presented here is the status quo, which isn’t too bad for Cosmos Hub. Over the years, Cosmos Hub has proven itself to be not only resilient in a technical sense, but also in a cultural sense. Even with the status quo, Cosmos Hub remains a very important chain.

In the case of Stride, there are many opportunities in the Cosmos and the status quo is promising - indeed, very exciting! The liquid staking rate for ATOM stands at a mere 1.5% and will no doubt rapidly increase over the coming year, while new liquid staked tokens such as TIA, DYDX, and NAM will diversify Stride’s TVL. Stride’s explosive growth over the past year shows no sign of slowing down, as Stride is well-positioned to capture the upside of DeFi growth in the whole Cosmos.

Moving forward

When the STRD to ATOM token conversion idea was floated at Cosmoverse, it was just an idea. And we as Stride core contributors repeatedly stressed that discussing and deciding the idea would be left to the Cosmos Hub and Stride communities.

While our perspective shared in this post may change the discussion, given the feedback we’ve received so far it appears additional time may be needed to build consensus around the token conversion idea - if sufficient consensus can be achieved at all.

If the token conversion idea introduced at Cosmoverse and its justification presented in this post really excites and intrigues some Cosmos Hub stakeholders, perhaps they will continue the conversation and eventually draft a formal proposal for the Stride community to consider.

Going forward, we plan to continue to do what we’ve been doing for the past year and a half - focusing relentlessly on unlocking liquidity for Cosmos DeFi through super secure liquid staking. As the conversion idea percolates over the next few months, maybe sufficient consensus will materialize. Maybe not.

But one thing is for sure: as Stride core contributors, we will never try to push or force a demonstrably unpopular idea, even if it’s an idea we strongly believe in. Because at the end of the day, the soul of crypto is consensus.

-Vishal, Riley, Aidan, John

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Great post, way more clear and purposeful than the previous one. I think this vision can make sense indeed

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Coommunity of Stride would like to thank you about this post.
We hope Stride will have long live and help us (Stride stakers) and Cosmos hub. I strongly hope that your desigion will calm down Cosmos community and prices.
It is possible that you should inform aboit it earlier. You need to know that sometimes such desigin can change lifes of people. Somtimes extrimely and tragegicaly … Yes a lot of here because of money but your fast desigion can destroys lives.
So, please, remember about it next time.
Big thanks again :slight_smile:

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Not sure I agree.

In the case of Neutron, a very large number of tokens were allocated to the airdrop and the community pool, and none were allocated to ongoing inflation. This leaves only the gas fees of a nascent smart contract platform, which look unimpressive. If you looked at the gas fees paid on Atom, Ethereum, and even Bitcoin, these would also be very surprisingly low in this bear market. But nobody notices because inflation smooths over the gap. In reality, Neutron has already made a very large pre-payment of its ICS fees. If they had configured things to pay these fees out with inflation instead of an airdrop, everyone would be celebrating Neutron’s performance.

In the case of Stride, you are paying out 15% of your total rewards to the Hub. Going off the $230k number above, the total is like $1.5m, correct? There is some discussion in the other thread about whether this level of revenue means that Stride is overvalued, but I think that it is actually a very solid performance in our violently cyclical industry, and a testament to the solid value provided by Stride.

What do you mean by “scaling to even five ICS chains would present serious economic challenges”? If there is a chain which is able to generate a profit for an independent validator set, why would it have a problem generating a profit for the Hub validator set? The only financial difference is that ICS fees are assumed to be a smallish percentage of the chain’s own inflation and fees, but this is not set in stone.

If there are 10 consumer chains which are profitable (able to pay for a validator set), then ICS will be profitable. If there are 100 consumer chains which are profitable, then ICS will be profitable. 100 profitable consumer chains is actually more profitable per chain than 10 equally profitable consumer chains, because the cost of capital gets amortized.

Connecting this to your merger proposal, if you are asserting that the revenue from Stride is not sufficient today, how would the merger change this? Is it just the fact that after the merger, 100% instead of 15% of Stride’s rewards would go to the Hub?

AEZ future

We’re working on Subset Security, which will allow a small subset of the Hub’s validator set to run a consumer chain’s physical nodes while still securing the chain with the full stake of the Hub. This will make consumer chains far cheaper to run, making the calculations above work for consumer chains that are even less profitable, allowing a larger number to be onboarded.

We’re also working on Atomic IBC which is a little bit of a longer-term project, but could allow the AEZ to transcend the simple selling of security and offer a set of integrated chains which can compose more seamlessly than possible between Eigen, Mesh, or rollup chains. It would also reduce per-consumer costs.

The vision of the AEZ is one of a super-app, consisting of chains that share financial and ideological alignment, as well as benefitting from a common pool of capital from a strong shared asset. I am interested in the Stride merger proposal because Stride is such a strong team, but I’m not sure that mergers of this type provide a blueprint that can be replicated at a large scale. How large can the AEZ really grow if every addition requires a large mint of ATOM to buy out every team that joins the platform? Would ATOM remain a strong reserve asset?

Also, isn’t there some benefit in teams have separate tokens? It gives them disproportionate upside if their little piece of the AEZ outperforms, resulting in more skin in the game. I agree that it would be great to increase ATOM alignment as well, which I think is what this merger is intended to do, but maybe there are more nuanced ways to do it than a whole-hog merger.

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If STRIDE wants to be part of ATOM since the beginning why then create their own appchain, but your post brings some light as why STRD was always rushing things, it explains why STRD never try to create Defi primitives, explain why the team was so eager to enter ICS, part of success for STRD is precisely for rush in to things as first mover but that doesn’t mean you have better solutions, for me is inevitably to think that you’re not colluded whit the cosmos cartel, the port idea is very sweet, but the reality is more sinister, the Hub doesn’t belong at a group of individuals, the objective isn’t make ATOM a superior coin, since COSMOS is an ecosystem it can’t be better than the addition of it’s parts, ATOM as a center needs to be neutral in the know that it could thrive as their appchains thrive, every team / appchain seeks the same, be successful and that’s why put efforts every day if STRD is in love with ATOM port idea you must donate your work instead of accept investors, and trade a token in markets, you should work in a module instead of an appchain, about LSM you should be developing smart contacts to connect this beautiful port to outside instead of be so worried about inter security, STRD is secure because ATOM is secure and you borrow that security from the HUB, that’s why you’re ahead of others LS providers because you already has a plan to be merged, I doubt you will iterate LSM and create more functionality, because there are teams more prepared and experienced than yours, good luck trying to convince ppl about your good intentions I’m out.

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On the Neutron part : I think the crucial part to economically scale ICS isn’t to make it attractive to delegators, but to validators. Yes, the Neutron airdrop has been good for both the delegators the community pool, but delegating from Keplr has no cost in itself. The most likely future is for validators to continuously subsidize Neutron, as getting 5% commission on 25% of gas fees will always be an abysmal number.

As you’ve pointed out, Stride is making better on that front and not because it has more gas fees, but application-related fees. With the proliferation of blockchains all around different ecosystems, I don’t expect generalized smart contract chains to be ‘‘profitable’’.

So yeah I’m looking forward the release of Subset Security and more application specific chains, which will lower total cost.

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The concerns regarding the economic difficulties faced by Cosmos Hub in terms of the income generated through interchain security are valid. It’s understandable that in the face of such challenges, finding a clear, sustainable path forward becomes crucial for both Stride and Cosmos Hub’s future viability and relevance within the ecosystem.

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The answer to this is the Cosmos Hub onboarding chains with proven revenues so that validators don’t have to subsidize them. Neutron is a unique case because there was big push for years to get WASM on the Hub and Neutron is the technical workaround (separate chain secured by the ATOM validators).

I don’t know who was pushing for WASM on the Hub, but clearly that “pushing” wasn’t based on economic reality. Going forward, the Hub should have onboarding standards that prevent the Neutron situation from happening.

Right now there is some EVM chain that wants to become consumer chain. Fine idea - what are the revenues? Chains should start out with their own validator set and prove their product-market fit (ie generation of revenues) before asking to be onboarded.

This is almost comical - people don’t really understand when and why they need to run their own chain. You run your own chain only if you have a good product market fit and you have scale. When running the app at scale, you want to minimize your rent and thus lower your application’s transaction costs below those of a monolithic chain. That’s the reason. DYDX has a good use case to switch to its own chain. This is an app with a $400 million TVL. Not you shlubarroo with zero traffic.

If you run your own chain for a network without any economic activity on it, somebody has to subsidize your computer uptime. Why should that be the Cosmos Hub?

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Exactly, really for those pushing for replicated security and the halving of inflation well done really. First you promise great revenues from consumer chains, the reality is 0 revenues and high growing consumer chain costs covered only and subsidized only by Cosmos hub validators, disproportionately affecting smaller validators where these costs are much larger compared to the negligable revenues. But this is not enough, then to make things even better you halve validator revenues for ‘sacrifice & change’ or hoping for a price ‘pump’. What’s next? You want validators to also pay your rent, your bills and your holidays?

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I think you are a little bit confused. ATOM is not money. ATOM is not legal tender. US dollars are legal tender. They are the ones that pay your bills. You can’t pay your bills by increasing ATOM inflation because ATOMs are not US dollar bills. The Cosmos Hub is not the Federal Reserve, ok. Also please don’t make comparison to Bitcoin either. Bitcoin is legal tender in some countries, ATOM is not. US dollar, Bitcoin and ATOM are all very different things, but most importantly ATOM is not money. Whoever told you that increasing ATOM inflation will pay your bills lied to you. And depending on how badly they lied, to how many people, they might go to jail for this type of crime.