[PROPOSAL #82][REJECTED] ATOM 2.0: A new vision for Cosmos Hub

Since the ATOM 2.0 WP was published a few days ago, we’ve seen, as expected (and desired), a large variety of questions and concerns. I am summarizing them below before answering to the best of my knowledge.

I’ve seen a lot of passion, engagement and willingness to contribute. This is healthy for the entire ATOM community and a sign that participative democracy is doing well on the Cosmos Hub.

Regarding the whitepaper itself, I’m glad to see there is a relative consensus regarding the overall vision. Solving the high inflation issue seems to please a large portion of ATOM holders and people are also excited about the newly suggested Allocator and Scheduler.

From what I have seen, the points that generate friction are the following:

  1. Treasury Pool and Protocol Owned Value:
    ATOM holders seem in favor and they recognize it will bring value in the long run but they fear centralization in the hands of a few, poor execution and capital misallocation. This is legitimate.

  2. Issuance:
    Many ATOM stakers expressed concern about being left out from the value generated by the Hub’s new Treasury Pool. They see it as a separate entity that is threatening their own holdings by taking a large portion of issuance that was previously theirs.
    Stakers also think the amount directed towards the Treasury Pool is too high and the pace of funding too fast. Again, legitimate concern.
    Finally, there is also a concern that ATOM stakers are taking all the risks.

  3. Governance: token holders voiced concerns about centralization of the Treasury Pool in favor of a few and also being excluded from that governance which they fear will not be representative enough of their own interests.

I will cover the newly suggested Treasury Pool in this post, then issuance and governance in subsequent posts.

The Treasury Pool is a tool in service to the ATOM community. Its has 2 purposes:

  1. Generate and manage revenues, mainly through the Allocator and the Interchain Scheduler. Note that ICS revenues would go solely to the distribution module and NOT to The Treasury Pool.
  2. Fund public goods necessary to scaling the Cosmos Hub but also the broader Interchain. IBC, Interchain Security or Interchain Accounts are examples of public goods.

Looking at point 1, the goal is to kick off a flywheel where the Interchain Scheduler and Allocator are mutually reinforcing systems. The WP calls this flywheel the Economic Engine. Now, in order for this to work, we need to fund the future Treasury Pool.

The Treasury Pool will not be one almighty, centralized entity that runs all the investments.
On the contrary, it will include many DAOs responsible for allocation through the Interchain Allocator. In this scenario, any group of ATOM holders can form an Allocation DAO by bonding their ATOM for a specific duration and receiving in exchange additional funding from the Treasury Pool to grow the ATOM economic zone.

Funding from the Treasury Pool is not automatic as projects need to be aligned with the long term vision and interests of the ATOM community. If there is such alignment, then the Cosmos Hub will grant those Allocator DAOs recurring funding and a performance-dependent bonus, which is paid to DAO participants in exchange for their service and for putting their capital at risk.
This has the potential to unlock the collective intelligence of the ATOM community and allow token holders to contribute in a meaningful way.

We know the newly formed Treasury Pool is not all powerful and that an entire ecosystem of Allocator DAOs gravitate around it but how can we be sure we avoid capital misallocation and poor execution? We’re gathering governance questions from the community and will post a draft before the on-chain vote so people can get answers and vote with an informed mind.
There are several ways to tackle this (non exhaustive list):

  1. Governance has a major role to play. The WP suggests the creation of multiple Cosmos Councils, one of them being the Community Council. The Community Council can be instrumental in enforcing oversight and accountability. Higher up in the gov stack, the WP suggests the creation of a Cosmos Assembly, composed of members from the various Cosmos Councils.
  2. We can envision governance mechanisms to direct some of the Treasury Pool assets directly to the Distribution module (delegators-validators-community pool)
  3. Zaki mentioned formally restricting (through the Hub charter) capital deployment to smaller amounts until we are sure the allocation process is fine tuned and works as intended. Moving slowly, learning and iterating before accelerating.

We hope to incorporate in the governance draft guarantees, checks and balances so that the community feels at ease with the proposed roadmap.