A good hub isn’t a ruling dictator, but a servant leader. READ : (The Cosmos Hub is a Port City. A vision of what comes next for the… | by Interchain | Interchain Ecosystem Blog)
This is only my perspective. My observations. My conclusions. I’m better when I synthetize what I think in short bursts, so bear with me. Important points are numbered from 1 to 8.
Observation: As far as I know, IBC is the only token-less and permissionless communication protocol for blockchains today. It is vastly superior to multisig bridges. I see IBC being the de-facto in-between blockchains protocol. The Cosmos Hub can capture traffic from IBC, but will never capture all the traffic, as other chains offer services on their own.
My conclusion: IBC is not a revenue driver, but ATOM is the first ‘’IBC native’’ token. This lindy advantage gives it the possibility to be the interchain commodity-money (1), an alternative to custodied stablecoins eg:USDC.
Observation: Revenue and real yield have been powerful narratives in the last 18 months, after the speculative mania died. While various crypto projects have been able to reach that goal, they haven’t necessarily gained more traction after. We have on one side Bitcoin and Solana, which barely have any revenue compared to their block subsidy, while Ethereum has been a champion of revenue. Strangely enough, Bitcoin and Solana are the ones with the best momentum right now.
My conclusion: Revenue is important for the chain’s long term sustainability, but it doesn’t built usefulness or user experience on its own. The priority for the Hub should be to make sure its validator set can operate over stakers getting ‘’real yield’’(2), especially when onboarding new chains. Revenue from secured chains should be directed to validators, as they are the ones bearing the cost. The real treat for ATOM holders is when the token gets used in apps, whether on Neutron or Osmosis.(3)
Observation: The Hub can today provide replicated security, enabling deep alignment with a new chain. The economics today are a bit more expansive than running a sovereign chain, as validators’ commissions only apply to a portion of the revenue. This is getting fixed by Jehan in a later update to modulate commissions per chain.
My conclusion: Opt-in security and mesh security will be important to allow different ways to provide security and reduce burden on validators.(4) Mesh security would be easier to implement with permissioned CosmWasm on the Hub, and I believe the Hub is for due for another shot at integrating it.
Observation: Inflation is high, without much good justifications as to why.(5) It is said that the Hub is vulnerable if it doesn’t have a bonding ratio of at least 2/3. I disagree, I find it really unrealistic that an entity could willingly buy 100 million atoms and maliciously halt or control the chain afterwards. I’ve asked around for examples of this happening in PoS chains, and the only example is LUNA. But LUNA suffered from hyperinflation, and not a bad bonding ratio in itself.
Validators say that their revenue could be affected if inflation is lowered. I hear that concern. However, a perpetual 2-digit inflation on the token makes its supply grow at an exponential pace and seems like an overpowered solution for this problem. I believe validators can lean their operations if they decide to and alternative solutions are coming too.
My conclusion: I think a somewhat low and predictable inflation would do immense good for ATOM. Laugh all you want, in my view Dogecoin has better tokenomics than the Hub right now. I believe a low and predictable inflation rate makes ATOM a better defi token and a better partner for other appchains, without compromising much on security.(6) Ethereum is managing well with a staking rate that is less than half the Hub’s.
On Building an (alternative) economy and what it implies for ATOM
The premise is not to replace an already-existing economy, but to build a new and alternative one. The Cosmos Hub has the luck to count on a growing number of partners, and should seek to include itself in all individual economies, whether by providing security, liquidity, but more importantly having ATOM as a token of confidence flowing through the interchain.(7)
We have seen numerous times how governance can be messy, which leads me to conclude that it would be incredibly easier and create more value if ATOM was seen as interchain money. Governance doesn’t build apps, it protects and preserve what it controls.(8)
Once again, those are only my observations and conclusions, and I’m aware many important parts are missing from this (especially things about community pool and team funding, but I don’t think my opinion on those are good enough to be shared).