Long-term strategy for Cosmos Hub

Introduction

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.

Cosmos and the Hub

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 Today

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.)

How to think about growth for ATOM / Cosmos Hub?

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.

How to think about new features for Cosmos Hub?

New features should directly and significantly contribute to:

  1. The Hub’s ability to make and enforce excellent decisions in a decentralized, efficient and reliable way,
  2. Provide direct, desirable, significant benefits to ‘customers’ of the Cosmos Hub’s services
  3. 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.

Proposed 3 Year Objectives and Key Results for Cosmos Hub

Goal #1: Cosmos Hub governance is effective, decentralized and reliable

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.

Goal #2: ATOM is the most money-like token in the Cosmos ecosystem

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.

Goal #3: Cosmos Hub’s security offering attracts the best blockchain applications in the market

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.

Conclusion

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.

Further contributions / research

  • 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
  • Etc.

Credits and sources

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.

31 Likes

This is great. Very thoughtfully put together.

I’d personally like to hear ideas for improving the Gini coefficient for better stake distribution, and how governance can be improved overall, whether it’s tooling or endeavors like education, maybe even incentivization. Blockworks mentioned some ideas, but i’m curious what everyone thinks can be done to improve this.

4 Likes

Thank you for the contribution.
I would like to add a bit of focus on tools that may be needed or at least facilitate those to-be-built apps, e.g. CosmWasm extensions & dev tools for business logic; easy integrations for off-chain components (frontend, storage, indexing, middleware) with different frameworks, etc…
Even if they are crucial aspects, it’s not all about money, governance and security!

2 Likes

Another thing i’m thinking about is how we achieve some buy-in on the “Atom is money” efforts from outside ICS/AEZ chains. Atom wars is in the early stages, so from a protocol standpoint, that has potential. The question in my mind is how you truly get the alignment and buy-in from all (most) of “Cosmos” that Atom can serve their needs without it feeling forced?

Don’t even think about parachain auctions. That was a massive failure at Polkadot. I am perfectly fine with various chains making proposals and then validators evaluating them on a case by case basis. We don’t need to central plan computing power usage.

What happened at Polkadot - people central planned for 2 years ahead via auctions a WASM and EVM chains and both of them got killed by Solana and Avalanche. I am not sure why you are so infatuated with central planning even if a market mechanism like an auction is included. Central planning is a bad fit for a brand new and quickly growing industry like crypto.

Central planning doesn’t work in the Wild West.

1 Like

Nice writing. Would like to see how it goes and will gladly follow and join the discussion.

Thank you for sharing this vision. It aligns with insights from other well-informed contributors who’ve shared their perspectives on the hub. We recommend readers explore the post introduced by @Thyborg here: The ATOM Wars: a new governance platform for liquidity injections. We’ve also engaged in the hub’s vision debate as part of our global report on the entire Cosmos Ecosystem: A permissionless B2B2C network.

Returning to your thesis, we want to highlight a few points we align with:

This is something we have greatly emphasized as well and is already well underway.

Back in December 2022, before LSM’s release, we shared our vision in IDEATION: Governance Councils & Treasury Modules, foreseeing its central role in general capital allocation. We also explored the governance decentralization power LSTs would bring. There’s so much more to explore on this frontier today…

Regarding this particular point we have advised multiple time that a dedicated Financial Committee should be, among other general risk management tasks, in charge of receiving and dealing with PoL requests. Gathering minimum data and formatting the proposal following a clear guidance.

We harbor total alignment with this statement and are currently in the process of building a governance model based on @Stride 's governors architecture to boostrap a class of high profile individuals specifically tasked to participate in governance forums with quality contributions. Using the delegation system of STRD tokens to these governors, we could create an economically viable solution for these people to find revenue sources compensating the time they spend (which is currently a volunteer job).

Feedback on the proposed Goals:

Goal #1:

Creating dedicated committees for high-importance tasks is a top priority. We believe the most pressing issues concern PoL allocation. We hope to collaborate with @Thyborg as his proposal offers elegant solutions that could address some of the issues in a decentralized way.

Goal #2:

Regarding LSM capabilities, we tend to agree that they are currently widely underused. We firmly believe that a Financial Committee is absolutely necessary to succeed in assessing global financial risks inherent in re-hypothecation. At Govmos, we offer our services for this task, with our co-founder Phil_RX, who has more than 13 years of experience in financial markets.

Goal #3:

Concerning the immense risk vector that a permission-less security model would induce, we sincerely recommend isolating it in a separate sub-hub model. We have an entire model yet to be released on that particular topic. It involves creating dedicated LST on the hub and moving it to this “permission-less sub-hub” where users can decide whether or not they want to venture into this world. Having separate sovereign governance is also absolutely required to quickly mitigate potential risks as they emerge. Before its public release here on the forum, we will be happy to discuss our modeling with anyone interested in this particular topic.

Conclusion:

Overall, we sincerely thank you for the effort to craft and share the vision you have for the Hub. Neutron is an incredibly valuable project, and we can hardly express how grateful we are to have you as one of the first partners in the AEZ. Surely, everyone involved in the Hub’s governance will say that we lack a collective vision, creating unnecessary slowdowns and hiccups. On the contrary, we think this is the key condition for a resilient and neutral public common infrastructure. Each individual vision should emerge as a proposal, gathering multiple divergent feedback before reaching a long, and sometimes painful, consensus.


Thank you for reading!
Govmos (the governance arm of the PRO Delegators’ Validator)
pro-delegators-sign

6 Likes

Not sure anyone wants parachain auctions around here… Also, there’s a difference between “central planning” and the definition of a “purpose/mission/vision” described in this post.

I believe it is useful to (try to) define a common vision for the Hub because :

  1. the lack of common ground has been one of the criticism around the ATOM community, at least since ATOM 2.0
  2. having such a framework - if successful - will be a sign of achieving a higher level of maturity, collectively
  3. it can be actually useful when analyzing gov props or CHIPS

OKRs have proven to be useful in organizations large and small when properly implemented, but I’ve never seen in the context of a decentralized organization. So maybe we’ll need adapt or be creative with the framework.

2 Likes

Thank you for taking the time to push this forward.

I completely agree with the urgent need for the development of, and agreement on, clear 3-5 year goals that serve as the North Star for the hub. Without these goals the current situation of haphazard initiatives put to vote (most of which well meaning) will keep the hub perpetually in limbo.

1 Like

An unpopular opinion: lack of common grounds is a different take on a phrase with the same meaning: diverse and healthy communication, leading to everyone expressing their opinions

Very good write up! I do believe though that there is a need for the Hub to bring in “income” or “money”
in other forms than its main selling point: The main ICS provider, for multiple reasons:

  1. It is not definite that the positioning of the Hub will remain the same in the next 2 to 3 years as the most decentralized blockchain in the Hub, therefore possibly leading other chains to take the position of the main ICS provider.
  1. Due to funding such large projects and development without any (direct) return, there needs to be a source of income (other than inflation) that is able to cover these on the long run.

Over time, the Hub is losing more of its relevance as the center of the Cosmos or its real use case and this is getting more true every day.

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Thank you for this Spaydh, a much needed conversation we as a community need to double down on. I think most of us can agree that, as you highlight, one of the core strengths of the Cosmos community is its willingness to engage in deliberation around major strategic proposals and in times of diverging opinions. On the other hand, this relative decentralisation has also, imo, left more to be desired in terms of a clear direction and structure. Coming into the ecosystem, it is hard to tell who’s working on what etc, and viewing the Hub as an organisation it is rather loosely scattered across a few teams. I believe this has altogether hurt the Hub’s strategic performance and left somewhat of a question mark hanging over its value proposition and purpose. It is also the case that governance is often technically complex and time-consuming. So the lure of free-riding can be tempting when there’s no direct reward, but perhaps even worse, also half-arsed participation; as voters are put off by the demands of active governance but remain indirectly incentivised to maintain good participation numbers, logically leading to less informed decision-making. Given what I perceive as a growing interest around the idea of subDAOs, greater recognition of DAO DAO and the possible introduction of CosmWasm on the Hub, not to mention the seemingly successful use of subDAO in Neutron governance, I will here visit the idea of why subDAOs could prove useful on the Cosmos Hub.

Strategic vs. Operational Governance

There is research, for example by Zhao et al. (2022), that suggests that it could be performatively beneficial for DAOs to make a distinction and divide responsibilities between “strategic” and “operational” governance. Said study looked at how voting task division, task allocation, reward distribution, and information provision affect platform performance in the context of MakerDAO (where strategic tasks mainly included collateral onboarding, system upgrades, and personnel changes; and operational as including adjustments of various parameters in the business process) and found that “strategic decisions arrived at through voting have a positive impact on platform operational performance … whereas operational decisions resulting from [universal] voting have a negative impact.” Put differently, when the wider community was involved in strategic decisions and operational tasks were handled by a smaller group of experts, Maker performed better. Clearly, educational information plays an important role in strategic voting and helping voters make better decisions, which can then positively feed into operational performance; while higher levels of voter-task matching can alleviate the negative effect of operational voting tasks on product quality, as there is, rather unsurprisingly, a correlation between subject specialisation and improved decision-making. Interestingly, the share of large shareholders among total voters worsened the negative impact of operational voting tasks on product quality (in this context, DAI deviation), which the authors argue may be the result of whales choosing short-term profitability over long-term sustainability. Perhaps subDAOs could serve to address this as well to some degree.

Similarly, a study by Chen, Richter and Patel (2021) found that decentralisation (the extent to which power and control in governance structures and decisions are allocated to developers and community members) has an inverted U-shaped relationship with protocols’ market capitalization, developer attention, development activity, and social media followers; concluding that “the midrange of decentralization is more likely to be associated with higher levels of market performance”. Though this might appear quite logical, as strategic governance tends to evolve slowly, whereas operations move quickly to adapt to changes in the environment. But it is also the case that operations without clear structure usually become implicit and informal with accountability suffering as a result, while governance without operations (as a looser form of social group) tends to struggle with goal setting and achievement (related to why excessive degrees of decentralisation can become slow(er) and counterproductive). Work on digital platforms shows that those who successfully apply semi-decentralised governance structures tend to (see e.g. Kyprianou, 2018; Reischauer & Mair, 2018):

  • involve community members in goal-setting and decision-making.
  • leverage creativity and diversity within the community to strengthen governance and performance.
  • have key organisations/individuals supporting and guiding governance (deliberation) for unity and broader consensus-making.
  • can achieve a relative balance of power and maintain effective value creation and fair value distribution.

Similar results are found in other studies on centralisation vs decentralisation in various governance contexts (e.g. Arcuri, & Dari-Mattiacci, 2010; Dougherty et al., 2022). Many in the crypto community will shun the idea of clustering expertise into groups like these and are, in all fairness, right to do so given how entrusted power has time and again been abused throughout history to expand arbitrary powers. To this point, it should be stated clearly that any future subDAOs on the Hub should serve as an extension of token holder governance, with the purpose of directly working towards the goals that have been set by the wider community. Focusing on broad community goals as the raison d’être moves us away from decentralisation for the sake of decentralisation, and instead towards a framework of adaptable, resilient and sustainable continuation. Blockchains are fluid and polycentric with multiple overlapping powers, very much experimental and constantly evolving. So a governance system should try to accommodate this while providing some structure which appears beneficial. The idea of depending on token holders to vote on all matters of governance is asking a lot, and its effectiveness continues to be questioned.

The Possible Advantages of subDAOs in Governance

In contrast to real-life politics, we have on-chain transparency and decentralised control over both funds (community pool) as well as subDAO membership and power distributions to apply in our favour. Obviously, some of the operational components related to the overarching strategic goals set by the community will lend themselves more naturally to a subDAO—in my mind including marketing and business dev, perhaps SDK/tech maintenance, consumer chain onboarding and support—while others won’t. Indeed, subDAOs exist for different reasons, some more obvious than others: speeding up governance, addressing voter apathy and leveraging specialist knowledge. Where decisions are highly technical and niched knowledge-wise, for instance, it theoretically makes more sense to have a smaller and tighter subgroup rather than a broad community making (less informed) decisions.

Again, it should also be stated clearly as a reminder that we’re here (in part) because we’re trying to build something different, something that is fundamentally decentralised. So one cannot overstate the importance of sticking to this goal. Having internal structure and core teams clearly play an important role from a performance perspective, but so does wider community collaboration and participation, not least ideologically. The broader aim here would be to gradually work towards a semi-autonomous core of subDAOs under the control of ATOM holders that maintains the decentralised, innovative ethos of permissionless open-source, yet provides structure and (administrative) organisation that seeks to apply “extreme focus on growing its excellence in decision-making” and make “the Cosmos Hub’s governance more reliable and predictable from the outside, lowering platform risk.”

In many ways, this would resemble a network organisation. Interestingly, the literature on network organisations has highlighted their positive performance in contexts where efficiency and flexibility are central to the overall process (e.g. van Alstyne, 2009)—which one could argue fits the fast-paced innovative and experimental environment of blockchains pretty well. The same literature also emphasises transparent information sharing and leveraging expertise (for educational deliberation and organisational tasks) as key assets in network organisations: combining knowledge while enhancing the links between information flows to better manage governance complexities. Using subDAOs on-chain as a more formalised organisational structure could possibly facilitate the former while assisting the latter, and thus strengthen the alignment between contributor skills/knowledge and the needs/goals of the community. Theoretically, if subDAOs can be used to channel expertise with greater efficiency and operational quality through streamlined processes and more informed decision-making, while allowing the community to focus on oversight and directional strategy to greater effect (as more time and effort can be dedicated to this due to the alleviation of operational day-to-day burdens), that could set the stage for “desirable benefits to ‘customers’ of the Cosmos Hub’s services”.

Still, given that there already are a number of core teams working on different aspects of the Hub, one might conclude that we’re already operating some kind of informal subDAO structure. While somewhat true, if one takes an external view of the Cosmos Hub community as an organisation, these pieces have to more or less be sporadically put together as best one can, as most core work is scattered across a few entities here and there. Formalising an actual subDAO organisation on-chain could bring much-needed structure, greater clarity regarding roles, responsibilities, and work opportunities (perhaps encouraging talent retention), and most importantly, arguably better tools for the community to actually manage such delegated work—altogether contributing to “the Hub’s ability to make and enforce excellent decisions in a decentralized, efficient and reliable way”. Over time, if deemed desirable, the subDAOs could be used to decentralise operations even further, from core team to core subDAOs (though such coordination is another challenge), and in so doing allow other teams and skilled community members to contribute to the core roadmap work.

In contrast to ATOM 2.0, I am unsure about the idea of handing over strategic decision-making to an Assembly or any other concentrated group, and think it’s probably an even worse idea to have such an Assembly be made up of delegated members from each subDAO (Councils in ATOM 2.0). You want to separate different powers, not encourage their consolidation. As I’ve said, I think groups/subDAOs should be used to carry out the strategic work and direction agreed on by the community.

As I see it, the key to using subDAOs (beyond the key back office procedures) is to allow for autonomy, establish transparent communication procedures, and retain ultimate power in the hands of token holders; including veto optionalities and control over subDAO memberships. It’s about leveraging the specialised expertise that exists within the community while keeping the keys in the collective hands of token holders, so to speak, to preserve fundamental decentralisation and the reins over delegated centralisation, where autonomy and control co-exist to achieve better results. On this question of decentralisation vs centralisation, it really isn’t about choosing between the two, but rather seeking to balance the two together in an effective, and democratic, manner.

One idea I find interesting is the use of optimistic governance to manage the Hub - subDAO relations, which seeks to significantly lower the number of proposals token holders have to vote on while instead focusing more on active oversight. Optimistic governance essentially maintains veto rights for token holders by allowing subDAOs to pass proposals unless the community decides to interfere during a set contestation period by voting above a set rejection threshold, reasonably lower than the current approval quorum. Such a system would rely on consistent downstream deliberation (i.e., justify how and why changes are implemented and efforts carried out).

In addition, having an on-chain subDAO structure in place with systematic policies and effective administrative practices (such as clear recruitment and onboarding procedures) to support it, that remains clearly visible to the community (via a dashboard or likewise), could not only improve oversight and accountability but also go some way towards improving the budgeting and talent retention aspects as well, and with some flexibility at that. Whether a subDAO is of a more permanent or ad hoc nature, budgets could be set yearly, seasonally or in other types of sprints, paid (in part) retroactively, and/or tied to measurable goals and objectives; ideally set by the community in one way or another. Lido and Gitcoin are good examples to learn from.

Regardless of the internal talent and expertise that exists across the community, it may not be effectively utilised if not organisationally channelled. Sometimes there seems to be this assumption that networks are self-organising and autonomous, but in many cases, they must be created and fostered. SubDAOs could provide those clear working groups to channel knowledgeable community members, particularly those that do not belong to one of the core teams (and in so doing, decentralising).

Closing Thoughts

In closing, subDAOs or no subDAOs, the aim should be to do something different that keeps with the core ethos of decentralisation, autonomy, and so on, in a way that promotes high-quality decision-making, while being wary of replicating old legacy hierarchies and related inequalities. Obviously, these are more or less some thoughts written down, but if there’s interest, I with the help of my colleagues at Simply Staking would be happy to write up and/or collaborate on a more detailed plan for what an initial subDAO structure might look like.

Mentioned references

Arcuri, A., & Dari-Mattiacci, G. (2010). Centralization versus Decentralization as a Risk‐Return Trade‐Off. The Journal of Law & Economics, 53(2), 359-378.

Chen, Y., Richter, J. I., & Patel, P. C. (2021). Decentralized Governance of Digital Platforms. Journal of Management, 47(5), 1305-1337. https://doi.org/10.1177/0149206320916755

Dougherty S, Lorenzoni L, Marino A, Murtin F. The impact of decentralisation on the performance of health care systems: a non-linear relationship. Eur J Health Econ. 2022 Jun;23(4):705-715. doi: 10.1007/s10198-021-01390-1. Epub 2021 Oct 17. PMID: 34657202; PMCID: PMC8520686.

Kyprianou, C. 2018. Creating value from the outside in or the inside out: How nascent intermediaries build peer-topeer marketplaces. Academy of Management Discoveries, 4: 336-370.

Reischauer, G., & Mair, J. 2018. How organizations strategically govern online communities: Lessons from the sharing economy. Academy of Management Discoveries, 4: 220-247.

Van Alstyne, Marshall W., The State of Network Organization: A Survey in Three Frameworks (March 26, 2009). Journal of Organizational Computing, Vol. 7, No. 3, 1997, Available at SSRN: https://ssrn.com/abstract=1368930

Zhao, X., Ai, P., Lai, F., Luo, X., & Benitez, J. (2022). Task management in decentralized autonomous organization. Journal of Operations Management, 68(6-7), 649-674.

1 Like

Good :+1: thanks for cosmos hub

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