Ⓐ The Cosmos Assembly (Composed of all Cosmos Councils) would control the Treasury. Groups make a proposal to ATOM governance including the items described in the Governance Stack to become a council. While it makes sense for engineering teams to form a Council, there is also a Community Council described in the paper. Ⓑ If this proposal passes, then one of the first steps would be the formation of a Cosmos Hub Charter, which would entail a public process to figure out these details together. Ⓒ ATOM holders would have a veto on proposals made by the Cosmos Assembly. The Community Council would also have direct representation in the budgeting process.
Immediately following the transition phase (assuming no spending), the Treasury would have
55,198,375 ATOM 55,057,742 ATOM
The total ATOM supply after 36 months would depend on when the transition phase started. If it were to start today then the total supply would be something on the order of 390,000,000 (probably only accurate to the nearest 1M). However, the change in issuance would only happen after Interchain Security is live and Liquid Staking has gotten some traction, my best guess would be late next year.
The Council would collectively propose a (likely yearly) budget based on the criteria set out in the charter. ATOM holders could veto based on virtue.
The Community Pool will still exist and get 5% (this is a gov-controlled param) of Interchain Security revenues, so no changes there. The Community Pool is a great way for anyone to access resources and would complement to the Treasury.
ATOM holders have veto power over all Treasury proposals, so while it might be technically possible for the Treasury to make a proposal to vote with its ATOMs on another proposal (depending on the implementation), this could be veto’ed by ATOM holders, so in practice the Treasury would not act as a voting bloc.
While I think this is a valid discussion, I think it can be treated separately from the contents of the paper. There’s a similar conversation happening here that might be more appropriate.
Though tokens would technically be be issued, I invite you to read Hasu’s essay on how to conceptualise tokens held in Treasuries, which is a little more subtle than giving tokens to a 3rd party. You are correct that this is a substantial issuance event, however after ~21 months total issuance would be at parity, and then subsequently reduced vs if issuance model were to remain unchanged. The newly proposed infrastructure is extremely ambitious, so a portion would likely be used for development of the components described in the paper, however this expense would only constitute a fraction of the Treasury. The primary reason why the Treasury must be funded to this magnitude is to capitalize the Allocator, which would be used to expand ATOM markets and deploy into new Cosmos projects, accumulating protocol-owned value for the Hub. This is the key driver for ATOM becoming the preferred Interchain reserve asset. I’ll note that ATOM holders always have the final word on the Treasury budget, so this is just the start of a long process of a long process for determining how best to deploy ATOM. There will be ample time until the issuance and Treasury changes are implemented and put up as an upgrade proposal for the community to start laying out specifics together.
As mentioned in the paper, it’s not really possible to prevent liquid staking. Liquid staking does not eliminate the unbonding period (those tokens are still accountable for slashing), but allows entities to freely trade vouchers for staked ATOMs. There is a paper forthcoming about the security model under liquid staking and the cost of security (which is where staking rewards come from).
As I noted above, the change to issuance wouldn’t happen tomorrow. Ideally Interchain Security would be deployed, liquid staking solutions would start to come online, the staking ratio would start going up as more liquid stake ATOM is issued, and then at a point the community would have enough information and confidence in the system to move into the new issuance regime with an upgrade. Initial formation of the various governing constituencies is definitely going to be a long road, but nothing in this paper is going to happen overnight, it would be incrementally developed, refined, and rolled out in stages over the coming months and years.
I’ve been working with folks at Informal Systems on a second paper that gives a more formal treatment of the security model and relative costs today vs after liquid staking, which we’ll be publishing soon. Couple takeaways are  over-spending for security today,  the opportunity cost of exogenous ATOM opportunities is the number one cost, which is removed by liquid staking, so the cost of security is significantly reduced. I believe it’s quite achievable to build enough recurring revenue from Interchain Security over the course of 3 years to cover these costs, and if there is a problem where revenues are insufficient to keep 2/3 ATOM staked then the last resort is that issuance automatically falls back to the current model, in which issuance incrementally increases until the stake ratio is brought back to normal levels.
Also, I found one typo in the paper. When converting to LaTeX the ⅔ symbol did not render (comes up a couple times in the issuance/fee sections). I’ll make a light edit to correct this before the paper goes up, but if anyone else sees a typo let me know so I can incorporate that correction as well.