[GasPrice] Do we want low gas price for the hub?

Miscellaneous
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Gas Price Discussion

“Transaction on the relay-chain will likely be priced higher than they will be on parachains. This is because most of the computational work is expected to be delegated to the parachains which have differing implementations and features.” — From Polkadot

When we switch relay-chain to “hub” and parachains to “zones”, it seems that the structure are similar for Cosmos and Polkadot.

I argue that, based on similarity of structure with Polkadot, Cosmos Hub also needs higher gas-price because of below logic.

  1. Cosmos Hub will not handle super massive number of txs because most txs will be handled in scalability focused zones internally.
  2. Value of atom is equal to the discounted sum of tx fees gathered from staked atom
  3. Low number of txs with lower gas-price result in low market cap of atoms
  4. Low market cap of atoms will lead to smaller collaterized security for the Cosmos Hub, therefore it breaks down the utility of interchain for the Hub.

Enforced High Gas Price

To have such high gas-price, the min-gas-price configure should not be freely compete. It will lead to the “race of bottom” of gas-price, which will ultimately result in break-down of value proposition(interchain utility) of atoms and Cosmos Network. So I argue that the minimum of min-gas-price should be fixed enoughly high in the protocol level.

Atoms Staked for Different Zones

Against these above arguements, @zaki argued that atoms can be staked for multiple zones including the Hub, so that atoms can gather tx fees not only from the hub but also from different zones. It means that atoms will be the native staking token for many zones in the Cosmos Network.

When I think of the current status of zones, none of them have will to provide zones without their own native staking token. They want to raise capital by ICO/IEO which is possible because the token can be the native staking token of the new network. @zaki’s argument denies these economical demands. How the projects can survive without ICO/IEO of their native staking tokens? Who will fund them? ICF provides maximum 200k funding, which will be used up in several months for most projects. Can ICF fund each of the projects millions of dollars? It is impossible from my viewpoint.

Even without the need of validator infrastructure, most ERC20 projects raised capital by ICO because they need money. In Cosmos Network, zones need more money than ERCO20 because they not only need to build their product, but also need to gather trustable validator infrastructure. They just simply cannot skip ICO. I think only projects on the main roadmap of Cosmos Netwokr, for example, BTC peg, DeX, Ethermint, can be operated without ICO.

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What I envision is ability for ATOM holders to stake their atoms on multiple chains among different buckets of tokens and claiming multiple of revenues from multiple chains at the same time. I guarantee that this will be a case as @zaki suggests (with a small modification that you can also stake other assets), because am aware of existing projects that are working to ensure exactly that.

Regarding incubation and funding we will see more and more projects doing multiple variations of “Virtual Mining” as it was successfully presented by the ChainX projects.

Ergo whether or not hub tx’es will be high or low will remain speculative.

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The economic model I see for Atoms is as follows.

  1. Users stake their Atoms to validators.

  2. Validators opt into running a Zone. The send a transactions on the Hub opting into running a CDP issuance zone. This CDP issuance zone will also have a set of slashing conditions on the HUB. Opting into the CDP issuance zones also mean the validator and their delegators are slashable for these additional slashing condition.

  3. The validators who opted in run the CDP issuance zone and distribute fees to their delegators back on the hub. The obvious way to do this is via IBC back to the F1 fee distribution pool for the validator. @sunnya97 and I have been trying to figure out a strategy to allow these fees to be paid in layer 2 to enable zones that don’t have any native notion of value transfer to easily use this mechanism.

There are many strands of work that will come together to enable this reality.

  1. The base layer IBC protocol needs to be implemented

  2. The evidence handler module needs to be implemented and then extended with some kind of programmability. WASM looks like a good fit.

  3. We need to specify an application layer protocol on top of IBC that provides specific messages that chains that can operate in this Interchain Staking mode need to support to operate in this economic system.

  4. Multi-chain layer 2 technologies need to be improved up via Interledger or something something similar for fees.

Economic Analysis:

In this economic model, ATOM holders and validators are bidding with other token holders to collateralize distributed secure computations.

Why would a user choose to work with ATOM collateralized zone vs a zone with it’s own sovereign token?

ATOM collateralized zones can be optimally collateralized. The total slashable amount be equal to 100% of bonded stake or greater than or the worst cases slashing can be greater than total amount delegated to the validator and users may chose to accept this. Each zone that requires it’s own native collateral pool will be less capital efficient.

How large can fee becomes in this model?

By delegating to validators that are participating in the Interchain Staking model, Atom holders are taking on new risks form consensus faults but also zone specific faults like for instance mis managing pegged assets in a tBTC style peg zone. For these new risks, additional fees will accrue to Atom holders who delegate to validators who wisely pick zones to run.

This creates a number of virtuous feedback cycles. Delegators will be gauging the risk reward choices of validators, increased fees will increase the value of ATOM collateral, and this will increase the market value of having computations collateralized in ATOMs.

Fees should be some rake on the margin earn by participating in the system rather than scarcity of transactions/block space. Effectively, there is infinite block space in this system.

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Have some questions:

  1. Funding - How can we fund such development?
  2. Governance - who will make the decision? Sometimes we need tokeneconomy and special token for it.
  3. Can you explain this model on real use case? For example - Kava?
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I want to point out the critical security weak point of interchain staking of Atoms.

  1. Native staking model is more responsible collaterization because if a staker wants to exit from the blockchain, he should not only unbond, but also “sell” the tokens in the liquid market. Especially for large stakers, selling huge amount of token is costing a lot of “market impact” loss. If a whale wants to sell 1m Atoms, it should be either taking months, or have to bare risk of massive Atom price drop. It makes larger staker stays collaterlized longer term and stay away from opportunistic short term moves.

  2. If atom is staked in a zone, it can be easily pulled out without “selling” burden.(because basically it is atom so the staker is not exposed to any volatility/liquidity risk of the native token. Also, because the staker does not hold any native token, their incentives do not align with the success of the zone, resulting in high probability of short term opportunistic behavior.) Massive amount of collateral in the zone can be removed at once without any pain. It will weaken the stability of the zone. Even though a zone is staked by 100m Atoms, I cannot see the zone as stable.

Can we think of any good protective mechanism for atom staked zone so that makes it difficult to be abandoned by atom whales?

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  1. For the the funding model, I’ve been thinking about a founders reward as a fraction of the tx fees on the zone to incentivize funders. There is ample room to reserve benefits

  2. Once this feature is enabled by governance, no additional governance is required for the creation of specific zones.

  3. Atoms’s will exist in tension with projects like Kava. Will a subcommittee of Atom holders better manage collateral than a new token distribution? It’s worth investigating.

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Interesting discussion. I just want to add some general thoughts. From my experience with Substrate (see my web3 post) the goal should be to make it as easy as possible to create parachains/zones. If I as a developer have a great idea for a blockchain application, I don’t want to come up with my own governance/token/security model (which is currently necessary if I want to do it in a salable/efficient way for example as zones/parachain). I simply have an interest to fully focus on the main goal of my zone/parachain. Therefore, I would be willing to give away almost all of the transaction fees of my project to something like the cosmos hub, if the hub takes care of this for me.

The issue with Polkadot is that it only takes care of the security, which leaves me with taking care of the governance/token model. However, if I implement the governance and token model anyway, I can also find some validators and just run my own independent zone (including an ico, etc.).

So, basically I want App Chains that are as easy to deploy as Dapps, to combine the best of both worlds (Application Chains vs. Dapps by Near).

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One thing also worth bringing up, is that over time, I think the Cosmos Hub should charge a percentage fee on assets it custodies, not only on the tx fees on the Hub. This way, the more assets custodied by the Hub, the more fees are earned.

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Do you mean we should change the commission protocol from reward base to asset size base?

Or you mean both base should co-exist?

Co-existence of commission base looks like a bad move with disagreement from delegators. Even though rate can be reorganized for more reasonable commission overall, it sounds too demanding to the delegators.

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I agree that there exist a big demand of VM, especially for smaller projects without big funding, who does not want to care about validator infrastructure and developing core modules including consensus.

We see that quite a lot of blockchains are already covering this market, including EOS, Solana, polkadot, and more.

Those infrastructure blockchains charge dapps by different mechanisms

  1. Fees for computation
  2. Fees for storage
  3. Deposit as a rent(polkadot)

3 is what interests me because it will ultimately incentivize dapps to raise ico by DOTs because they need quite a lot of DOT to lock in to get the parachain slot in polkadot. This economic design directly affect the demand of DOT token in the market when more dapps choose to build in a parachain.

I dont think it is the perfect model, but I think at least it deserves a review.

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No, not to do with commission of validators to delegators. I mean the Cosmos Hub should charge a tax on all assets that it secures. So if there are $100M of BTC custodied by the Hub, it should charge some percentage of that annually.

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Do you think btc stays in cosmos as a custody service? I think it is not reducing but enhancing risk, because btc staying in the main btc chain and put the cold wallet in safe box or coinbase is the most secure way to custody btc.

Putting btc in a very small blockchain with less than 1bllion marketcap is not a custody.

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Presumably, BTC would only stay in Cosmos because users want to either trade it quickly or lend/borrow BTC in a decentralized setting

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Yes. I agree. Btc staying in cosmos is for real utility. But the amount itself cannot grow more than certain level because of the size of security itself(marketcap of atom). So it will be rather small amount but with high velocity of turnover, in the best case scenario.

So, lending is imo not a good market we should target. It has better functionality in traditional industry within regulated framework. Defi service should focus on the user-convinience side.

For example, DeX cannot beat centralized exchanges by attracting investors and speculators. But DeX can win it’s own market by providing secure/convinient gateway for dapp consumers.

When we think of these targets for decentralized services, we can notice that the service will be characterized not by its size of pegged amount, but by its frequency.

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A first quick idea of a plug and play solution for developers: With IBC I can move my fee token F to the cosmos hub where it becomes F’. F’ has the advantage that it’s more secure compared to F (assuming F is a new chain). F’ also allows for the governance of the other chain on the cosmos hub with the cosmos governance model, which means it can basically control the chain F. This might be important if something bad happens. It makes also things a lot easier for the developers of F.
Validators on the cosmos hub can stake or get delegated F’ (if opt in). The validators with the highest amount of F’ have the right to validate the other chain and earn the fees F. The fees f are only shared on the cosmos hub as F’. The fees F’ minus the validator percentage must be shared between all delegated F’ AND delegated atoms. Thus increasing the value of atoms as well as the awareness of the new chain, similar to airdrops.

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In a rational market, there is a positive feedback loop between assets under management and the value of collateral tokens.

There isn’t any logical reason to treat AUM as constrained by collateral because collateral value should increase as AUM increases.

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  1. It is also can be tokenized
  2. I think CDP is very complicated product, and it need continuous development to make it in a right way, it is not just add module using governance.
  3. I think network like Kava, Regen, Iris and others is very important and if we find how to give them value and charge them for it, it will be a product market fit for Cosmos.

I think we need to split in Proof of Stake logic on Security and Governance. Than for example Kava can whitelist cosmos Validator set to secure Kava network and also use Kava token for it. But governance still will be made by Kava.

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