This post is an attempt to summarize and formalize what I believe to be the most adequate priorities for the Cosmos Hub to grow and succeed.
As a consumer chain contributor, I work very closely to the Cosmos Hub’s daily operations and products, and am also strongly incentivized to ensure the Hub succeeds long-term : the more successful the Cosmos Hub’s security offering and Interchain Money thesis are, the better for Neutron. And, given the Hub’s outsized NTRN holdings, if Neutron wins, Cosmos Hub wins.
(A quick throwback to Cosmoverse 22)
Through this post, I hope to elicit community discussions that would ideally lead to the adoption of a clearly defined Purpose, Mission and Vision for Cosmos Hub, complete with one and three years objectives to assist the Hub’s governance in shepherding Cosmos Hub towards the most successful path.
Before we dive into the strategic considerations of what and how the Hub’s community should be focusing on for the coming years, I believe it’s crucial to ensure we understand the “why” of Cosmos Hub, beyond “making money”. In other words, its purpose, mission and vision. Below is an attempt at defining them:
Purpose: Lead the growth of the Internet of Blockchains to make applications more sovereign, interoperable and scalable.
Mission: Make launching applications on the Internet of Blockchains easy, secure and advantageous.
Vision: A world in which the Cosmos Hub and ATOM are the centerpiece of an ecosystem of thousands of successful, sovereign, interoperable applications.
The point of formalizing these is to clarify the Hub’s role in the ecosystem and how it relates to the Hub’s strategy and products.
The role of the Hub has been to shepherd the ecosystem’s adoption:
- The Cosmos Hub and ATOM are the first and overwhelmingly largest source of funding for the development of IBC, the Cosmos SDK, CometBFT and the rest of the Cosmos stack.
- The Cosmos Hub’s security offerings (replicated security, and soon to be mesh and partial set security) make it possible to launch a Cosmos chain in a more secure and capital efficient way.
- ATOM is the most liquid crypto currency throughout the Interchain, and one of the most traded assets in the ecosystem.
The Hub benefits from the overall adoption of the ecosystem, and by far the most from the adoption of the cluster of chains that it secures through Replicated Security (RS) today, but also Partial Set Security (PSS) and Mesh in the future.
Cosmos Hub is well-established. It ranks 22nd by market capitalization and second by Inter-Blockchain Communication (IBC) volume. The Hub is recognized and supported by major tier 1 and tier 2 centralized exchanges (CEXs) and custodians.
Cosmos Hub has achieved industry-wide name and brand recognition, but not without challenges: negative connotations around price actions, misconceptions about the Cosmos stack and ecosystem structure, recent fud regarding scalability, etc.
The governance structure of Cosmos Hub is active and diverse, with a strong user and voter base. Valuable contributions have been made to structure the governance process, such as the recent introduction of the CHIPs process, the restructuring of the forum, etc. However, it faces the challenge of highly concentrated stakes and voting power, a common issue in Proof of Stake (PoS) chains. Cosmos is also known for having a high “Drama per second” (DPS) rate, which I attribute to a combination of passionate contributors and a lack of established processes and policies for reliable decision making. Nevertheless, Cosmos Hub governance is one of the few institutions that have grown independent enough from OG contributors to have voted against landmark proposals such as ATOM 2.0, Prop 69 and others, which could be seen as a strong sign of distribution and independent thinking.
Cosmos Hub has a first-mover advantage in restaking, offering differentiated security agreements which feature a mutual alignment between the provider and consumer. Complementary solutions including Partial Set Security and Mesh Security are expected to become available within the next few years. Nevertheless, the Hub’s security product involves tremendous overhead, and its security agreements lack structure and standardization. Upcoming competitors such as Eigenlayer and other forms of restaking and rollup initiatives are credible threats to the Hub’s position, and addressing high overhead, lack of structure, and scalability will be crucial for the Hub to maintain its edge.
Areas of improvement for Cosmos Hub include:
Refining the Security Offering: Introducing and fine-tuning Partial Set Security (PSS) and Mesh Security ; structuring the consumer chain onboarding, relationship management, and offboarding processes ; and, addressing incentive misalignments would significantly reduce platform risk, lower the barrier to adoption and enhance the overall position of the Hub.
Furthering the adoption of Liquid Staking: Liquid Staking has been a big part of the community discourse over the past years because it can help address the hurdle rate and the stake concentration of PoS systems. Now that liquid staking and the LSM is in production, the Cosmos Hub should be proactive in driving adoption.
Monetary Policy and Budget : The Cosmos Hub should set policies for how to systematically and efficiently use its community pool. Currently liquidity is allocated in a first-come-first-serve fashion which can lead to short-sighted allocations. While parties will often coordinate their asks with other recipients (e.g., Hypha and Informal teaming up), more global policies for allocations such as budgeting will help prevent misallocation. Additionally a transition to metric based allocation can help reduce the burden on governance to make ad hoc decisions for development costs and portfolio allocations (e.g., using revenue, # of adopting chains, etc.)
Although the Cosmos Hub has been the centerpiece of the Cosmos Ecosystem for some time now, it’s struggled at times to find its primary mission. This has created frustration and led some community members to wish the Cosmos Hub had developed its own DEX, DeFi ecosystem or such. But doing so would contradict the Hub’s existing products (Money, Security, Governance) and prevent it from leveraging its core strengths: decentralization, security, reliability.
The Cosmos Hub’s existing position and products are opinionated: governance-based decision making is at odds with a fully automated and ossified monetary policy such as Bitcoin’s. Current consumer chain onboarding processes currently require the consent of governance, which is granted based on tailor made proposals, rather than formal economic systems like parachain auctions.
While opinionated decision making is often avoided at all costs in crypto, the Cosmos Hub has displayed a desire and ability to do so in high-stakes situations. As a result, the Cosmos Hub is in a differentiated position in what it can and can’t do compared to the rest of the market. The last mile is to hone in its differentiated offerings by applying extreme focus on growing its excellence in decision-making. Perfecting governance is required to unlock growth for its offerings and stakeholders.
New features should directly and significantly contribute to:
- The Hub’s ability to make and enforce excellent decisions in a decentralized, efficient and reliable way,
- Provide direct, desirable, significant benefits to ‘customers’ of the Cosmos Hub’s services
- Strengthen the network effects of ATOM and the Cosmos Hub
Some of the projects being considered for the Cosmos Hub include Mesh Security, Atomic IBC, Atom Wars, and the implementation of more sophisticated governance infrastructure.
To properly evaluate the strategic value of these initiatives, Cosmos Hub should first establish its fundamental objectives, then carefully review each of these items through the lens of its strategic goals. In my view, the hub should only undertake projects that significantly advance its core objectives, otherwise it risks falling prey to diluted focus, and therefore lose out to other projects competing for Lindy around moneyness and security.
Formalizing objectives and key results serves multiple purposes: in a decentralized context, it helps coordinate the work of the various core teams to ensure that their efforts are contributing to the same direction. It also provides a yardstick through which the DAO can gauge whether or not it is progressing, and when to take action to speed things up or address gaps.
Below, I propose a simple set of three-year goals for Cosmos Hub to help kickstart the conversation.
The Hub cannot succeed and grow if it doesn’t know where it’s going. Therefore, the first step should be to ensure that there are clear, well established goals for the network that the vast majority of stakeholders are rallied around.
Once the goals have been defined, the Cosmos Hub should develop policies and procedures for how it is going to reach these goals. This serves a few objectives : it empowers contributors to collectively push for shared objectives, and it makes the Cosmos Hub’s governance more reliable and predictable from the outside, lowering platform risk.
Once these policies have been adopted, they need to be enforced efficiently. Tasks that do not require human interpretation or involvement should be gradually automated, and committees formed to handle those that do should be both empowered to conduct their tasks effectively but also subject to clear accountability mechanisms.
Finally, the Cosmos Hub should take active measures to curb voting power concentration, as it endangers both the chain’s liveness and the decentralization of its decision making power.
For the sake of illustration, we can look at the Gini coefficient, which measures disparities in distributions and goes from 0 (perfectly equal distribution) to 1 (one entry has all the power/wealth). At the time of writing, the ATOM stake Gini coefficient is 0.7, which is fairly terrible, whereas the Gini coefficients for Osmosis and Terra are much lower, respectively 0.54 and 0.34.
I won’t go into too much detail in this article because this has already been the subject of fairly extensive writing, including in this piece by Elijah : The road for ATOM as Money on Neutron.
But to extend on these thoughts, Cosmos Hub monetary policy should focus on creating or displacing volume to ATOM, and towards Cosmos Hub, and to incentivize the formation of ATOM denominated debt.
Two major factors for this are ensuring ATOMs liquidity and strengthening its desirability as a collateral asset. Liquid Staking plays a natural role in this by enabling ATOM to be used as a reward-bearing form of collateral with significantly reduced opportunity cost and while contributing to the security and distribution of stake on the network.
Lastly, since its desirability as collateral is massively affected by its stability, increasing governance’s reliability, prioritizing sustainable cash flows and proper risk management are incredibly important.
Cosmos Hub has pushed for quality over quantity in the adoption of security offerings, by taking a governance “curated” approach to consumer chain onboarding to RS and PSS. The careful selection of projects has worked well so far, and led to the adoption of Replicated Security by two promising platforms - Stride and Neutron. This selective approach optimizes for protocol-wide alignment, which is well differentiated from the unilateral alignment required by other shared security mechanisms. The Cosmos Hub should ideally seek to identify synergies between consumer chains, and be proactive in their bootstrapping and development to foster a vibrant AEZ.
It also makes sense for the Cosmos Hub to open up permissionless avenues for security adoption. While permissionless deployments carry additional risk, they should also increase the speed of adoption and innovation within the ATOM Economic Zone. Chains which enter into agreements with validators permissionlessly via Opt-in or Mesh can also always transition into more formal relationships with governance if it proves valuable to both parties.
The purpose of this document is to work towards formalizing a set of strategic goals and priorities that form the basis of the Cosmos Hub’s roadmap and decision making. While incomplete, I hope to continue the exploration of these topics through discussions on the forums and elsewhere. Overtime I hope that the clarity from these discussions allows the various stakeholders across the Cosmos Hub to clearly define and execute on a promising path forward.
Over the next few years, I hope to contribute to fueling the Cosmos Hub’s collective mind and re-ignite confidence in the network’s power and position. Assuming we are able to organize and rally around well defined objectives and priorities, I am confident that the Cosmos Hub can tremendously further its standing and impact industry wide.
- Research hypotheses on how the security market will play out
- Research on monetary policy / liquidity / POL frameworking
- Research on governance structuration and segmentation,
- Research on legal considerations/structuring to maximize decentralization, accountability to the CH while protecting/rewarding contributors etc
This post was almost templated over Hasu’s great response to Lido’s GOOSE goal-setting initiative because I found his thoughts and formatting particularly appropriate for the exercise. It draws ideas and inspiration from great writings and conversations from/with contributors such as Elijah, Sam Hart, Zaki Manian, Sunny Aggarwal and many others across the ecosystem.