[PROPOSAL #82][VOTE ON-CHAIN] ATOM 2.0: A new vision for Cosmos Hub

Summary

We propose a new Cosmos Hub vision document, a counterpart to the 2017 paper which focused primarily on the network of IBC-connected chains. With the creation of the Cosmos Stack (Tendermint, IBC, and SDK) and the development of key technologies for secure economic scaling (Interchain Security and Liquid Staking), the original vision of the Hub has been fulfilled. This document marks the transition to the next phase of the Cosmos Hub as an infrastructure service platform, and a renewed role for ATOM as preferred collateral within the Cosmos Network. It describes two pieces of app-specific functionality, the Interchain Scheduler and Interchain Allocator, which together form a flywheel for accelerating interchain growth. The Interchain Scheduler is a cross-chain block space marketplace, which generates revenues from cross-chain MEV. These revenues are used by the Interchain Allocator to capitalize new Cosmos chains, foster interchain collaboration, and thereby expand the total addressable market of the Scheduler. This paper also describes a new issuance regime optimized for Liquid Staking, where after a 36 month transition period, exponential issuance is reduced to a constant amount of ATOM issued per month. To administer the proposed plan, the paper describes the formation of Cosmos Councils, domain-specialized entities that carry out development and operations. Cosmos Councils together form the Cosmos Assembly, a body that is accountable to ATOM holders, responsible for setting yearly goals, resourcing, and administering work undertaken on behalf of Cosmos Hub.

We have included the paper below in its entirety for the community’s consideration.

The Cosmos Hub v1.0
The Cosmos Hub v1.1
The Cosmos Hub v1.2

Authors

  • Sam Hart, Interchain GmbH
  • Zaki Manian, Iqlusion
  • Ethan Buchman, Informal Systems
  • Max Einhorn, Iqlusion
  • Jehan Tremback, Informal Systems
  • Youssef Amrani, Cosmos Contributor
  • David Feiock, Galileo
  • Jack Zampolin, Strangelove
  • Udit Vira, Hypha Worker Co-op
  • Sacha Saint-Leger, Hypha Worker Co-op
  • Kristi Poldsam, Iqlusion
  • Jelena Djuric, Informal Systems

Governance Votes

The following items summarize the voting options and what it means for this proposal:

  • YES - You approve of and wish to ratify the contents of the proposed paper
  • NO - You don’t approve of the contents of paper. Please indicate why on the Cosmos Hub forum.
  • NO WITH VETO - A ‘NoWithVeto’ vote indicates a proposal either (1) is deemed to be spam, i.e., irrelevant to Cosmos Hub, (2) disproportionately infringes on minority interests, or (3) violates or encourages violation of the rules of engagement as currently set out by Cosmos Hub governance. If the number of ‘NoWithVeto’ votes is greater than a third of total votes, the proposal is rejected and the deposits are burned.
  • ABSTAIN - You wish to contribute to quorum but you formally decline to vote either for or against the proposal.
46 Likes

This is exciting. Great Cosmoverse talk also btw

4 Likes

alt link if anyone has trouble with the IPFS host in the original v1.0 backup v1.1 backup v1.2 backup

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I think it’s a great idea and this has come a long way… it will take some time to implement but also give the believers the opportunity to accumulate…

Great job at the talk and announcement of this zaki’

I can’t wait to see how this is implemented exactly cause I will be worried when my rewards start Flying away…

I just thought it would be sooner but with all great things . It takes time to develop.

I’ve always awwwwed at atom and cosmos… I knew that cosmos would be something special one day… and here we are…

Thank you guys for everything you do and if there’s anything you need from me , I’ll always be here…

Truly yours… welding Aka weldingdotjuno

2 Likes

Good day/evening to all!

A first thought while reading the proposed White Paper is on the role of the Cosmos Hub Treasury.

According to the White Paper, Cosmos Hub Treasury, (is) a new capital pool managed by domain-specific councils to fund public goods and grow a resilient interchain.

1. Can someone expand on this, which can be sub-divided as follows:
1a. Who will control this Treasury?
1b. How will resources be allocated from the Treasury, what will the process be, any checks and balances and which are they?
1c. Will community vote on the allocation of resources?

2. Also
2a. what will the approximate amount of $ATOM allocated to the Cosmos Hub Treasury be, by the end of the 36 month period? Essentially how much voting power will that treasury gather?
2b. After the 36 months lapse what percentage of the 300k $ATOM per month will be issued to staked holders and what to the Treasury?

3. What will the total $ATOM supply be by the end of the 36 month period?

4. Will funding from the treasury be approved by virtue of proposals as happens with the community pool and who votes?

5. What is the vision for the role of the community pool (and the community in general) in the future?

6. As a final question, will the Treasury vote on Proposals?

These are important questions that need clarification ahead of the proposal being submitted. Thorough responses would be appreciated.

19 Likes

Thanks for the detailed roadmap, and all the new features we are looking toward with ATOM 2.0.

One of my concerns as a validator is the cosmos hub still has fewer spots than the majority of the interchain chains (there are security reasons to why which i will mention later in this post), but this basically disables many cross-chain validators from participating. I would love to see if we can address this.

For interchain to be successful the hub should be able to incorporate the majority of the service providers on side-chains. The limited seating on the hub I feel is a blocker.

Reasons I know (as i have through SS proposed the increase of validator spots):

  1. Reduced block time.
  2. Higher upkeep with all validators (in terms of coordinating upgrades)
  3. Higher risk (maybe?)

I think we should really think about increasing the cosmos hub validators to the initially proposed seating availability (of 300 in the original paper) and think about scaling this to 1000+(if not 10s of thousands) in the future from a technical perspective, so that more people can participate, which works towards decentralization.

One of the biggest arguments being that new validators should just validate on side chain deters the spirit of a decentral application.

6 Likes

While Tendermint, the ICF, and other entities have done an admirable job in pushing the Cosmos ecosystem forward, the ATOM 2.0 tokenomics model transition period is effectively a fundraising round for the Cosmos Hub that dilutes current ATOM tokenholders. If my back of the envelope math is correct, based on the formula presented in the whitepaper, if the proposal is passed, by the 36 month mark (and assuming the current ratio of staked ATOM remains constant), over 37 million ATOM tokens (current value of $525 million) will have been raised for the Cosmos Hub. While the funding may benefit the Cosmos Ecosystem at large, this level of funding seems excessive for a project that already allocated 20% of the genesis block to Tendermint Inc and the ICF, both of which should fund Cosmos Hub. The initial 10,000,000 per month token issuance is just too large, and before we move forward, a detailed explanation of how this money is going to be spent is required. As it stands, my vote for this proposal is a NO

13 Likes

Updates that change the monetary policy are evil. I have most of my portfolio in ATOM because I liked the project, the staking rewards, the unbounding period (which disincentivises undelegation and prevents violent price movement). All of this will be gone and ATOM to me will be just another coin whose staking is liquid and rewards are unattractive. Why don’t you update the interchain security, and scheduler/allocator shenanigans while keeping the issuance intact? Most of this jargon is not understood by the common person who just wants a monetary system with issuance they can easily understand and subscribe to.

7 Likes

Not sure if I understand this correctly:

  • one of the main services that the Cosmos Hub will provide is shared security
  • over the next 36 months security subsidies will go to 0
  • this is expected to be replaced by fees from interchain security, mev, and potentially treasury management
  • currently there are 0 interchain security consumers and the governance and mev coordination systems have not designed or deployed yet
  • ATOM inflation over the next 36 months will fund a treasury that can be deployed to drive demand for services related to the hub such as said interchain security and cross-chain mev
  • but managing and deploying that treasury will require active management of governance and business development
  • so a structure to enable that active management will be developed, that also needs to be implemented and tested
  • and even if that structure allows governance to coordinate successfully, the quality of the products and services created is unknown
  • and even if the products and services created are world class, demand for them in the near or long-term is unknown
  • but right now for those products and services there is not an engineering timeline or proof of concept, but there is a timeline on the token supply schedule
  • so there’s social risk in governance and technical risk in development and economic risk in the token model, and each part depends on the others to varying degrees
  • and we’re going to execute on all of that against the headwinds of a crypto bear market and a global recession

Is that correct? I feel like I must be missing something. Please let me know if I misunderstood what’s going on.

FWIW I’m all for opt-in shared security and transparent coordination of cross-chain MEV to fund public goods - but this all seems a bit ambitious. I’d be surprised if everything can be designed, developed, and deployed by the end of the three year window. If, however, there are already designs and proofs of concepts and it’s just a matter of taking them to market then please let me know as that would change things.

Overall as a game plan for the ATOM Hub this looks interesting, but I don’t see how we can commit to removing the security budget/subsidy before there’s product market fit for services, esp if one of the main products is inter-chain security. Could we explore a dynamic security budget that allows for the transition to happen organically rather than on a fixed timeline?

Also, is it just me or would this plan change the Cosmos Hub into a decentralized yet actively managed hedge fund with complicated governance? Seems like there’s a lot going on. Is there a simpler version of this plan that identifies the most important thing and just focuses on that?

11 Likes

My only concern is voting on the whole thing together rather than trying to understand the benefit of each of the proposed updates separately. The paper is good, just seems like its now a bit of a rush to do cramp everything into one vote now.

4 Likes

@johnniecosmos

  1. Ⓐ 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.

  2. Immediately following the transition phase (assuming no spending), the Treasury would have 55,198,375 ATOM 55,057,742 ATOM

  3. 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.

  4. 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.

  5. 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.

  6. 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.

@mohammedtaherpatla

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.

@cryptocat

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.

@diffract

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).

@2xx3hhokfg

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 [1] over-spending for security today, [2] 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.

9 Likes

Thank you for the response Sam, appreciated.

5 Likes

Obviously the proposal has involved a lot of thought, work, and time so very grateful. It is very conceptual, which has pluses in terms of conveying a long-term vision, but also makes it a bit hard to understand the impacts in a very concrete way. Curious on a number of points, but one particular question. On the Allocator accumulating Protocal Owned Value, why not devote some of that value to buying back some of the ATOM token, if not immediately (which defeats the logic of raising capital), then mentioning it as a possibility in several years, after further ecosystem maturity. In general, some further elaboration of how building the ecosystem helps bolster the token - though it might seem obvious - would be helpful. In any case, thanks for all the work on this!

1 Like

Hi @hxrts thanks for the reply. Can you share how you arrived at 55,198,375 ATOM tokens for the Treasury? Following the MonthlyIssuance and MonthlySecuritySubsidy formulas in the whitepaper, I arrived at a total of 37,427,073 tokens allocated to the Cosmos Hub Treasury over 36 months. Either way, this massive amount of ATOM issuance would bode poorly for the price of ATOM during this 36 month period. I understand the need for funding, but the magnitude here is just too much. The market isn’t stupid, if this is approved ATOM will inevitably dump, ushering yet another period of ATOM underperformance vs L1 competitors.

5 Likes

Hi,

i have to say that the new issuance is a very large amount and i wonder how it will help to gain value. As i heard about Atom 2.0 i thought the new token design would more related to the old mechanics.

What about a mechanic, which keeps the old 7-20% mechanic but the rewards coming firstly from ICS and the other sources and only if the ICS rewards are not enough to meet the actual inflation 7-20% it will filled up with new Atom. Further, if the rewards from ICS and other sources will be above the current chain inflation, the above values could be

  • looked for later rewards payout
  • be used in a community pool
  • used to buy back atom and burn or to use them for something else…

this is a bit more tricky to build as prices of the ICS token rewards are fluctuation but at the end the inflation will not increase with a massive token amount which could lead to a devaluation of the atom token.

i had translate into chinese with my friends.
https://icosmosdao.com/ATOM_V2ch.pdf

5 Likes

Helllooooo Cosmos fam!! This is your friendly neighborhood cryptoeconomist speaking. We’re beginning our descent to landing on a new issuance model so please ensure your seat backs and tray tables are in their full upright position.

But actually, I am one of the co-authors of the white paper (Max Einhorn). Community members have been asking some great questions about the mechanics of the proposed new issuance (shoutout to @cryptocat) so to help deepen everyone’s understanding, I’ve created the model below.

Note that I gave @hxrts the wrong figure earlier by reading off the wrong column. Rather than 55,198,375 ATOM in the Treasury Pool immediately following the transition phase, it is actually 55,057,742 ATOM.

9 Likes

Max thanks for sharing this model, I will take a look at and come back with some thoughts.

So Sam, after the 36 months’ lapse, how will the 300k $ATOM per month be distributed between Treasury, Community Pool and staked holders?

2 Likes

there must be some mistake there, as per your chart, only treasury seems to get the 300k $ATOM per month (aka the full capped inflationary rewards) after the 36 months.
Great info nonetheless.

2 Likes