[Proposal ####] - Composable to join ATOM Economic Zone and Adopt Interchain Security

Change log

  • 2023-09-07 Created initial post
  • 2023-09-08 Removed section regarding POL; Add 6-second block time
  • 2023-09-14 Added Last call date
  • 2023-09-14 Removed Last Call to allow a longer discussion period

Summary


IBC. Everywhere.

Our vision is for the Composable ecosystem to become a transaction-processing locale for chain-agnostic transactions. To facilitate such transactions, we are deploying new features and connections on our Cosmos SDK Chain.

Thus, we present a signaling proposal for the Composable chain to become a member of the ATOM Economic Zone (AEZ) and integrate Interchain Security (ICS) from the Cosmos Hub. Resultantly, the Composable chain would share the Cosmos Hub’s economic security. In return, Composable would share revenue. If this proposal passes, Composable will share 20% of IBC Bridging fees across all ecosystems Composable connects to with the Cosmos Hub. We will also allocate 20% of inflationary staking rewards to the Hub. Additionally, Cosmos Hub validators will be able to operate relayer side cars in our ecosystem. Relayers will be able to capture MEV by sending order flow to order flow auctions like MEV-share.

If this proposal is ratified, additional benefits would be delivered to not only Composable’s ecosystem and users, but also to the Cosmos ecosystem and its validators, chains, users, token holders, and AEZ, as expounded upon below.

Composable’s vision for its consumer chain is:

  • Expanding IBC
  • Extending security and settlement
  • IBC as a mechanism for orderflow processing

Expanding IBC


Composable’s Cosmos SDK chain is at the core of our extension of the IBC protocol for trust-minimized cross-chain communication. The IBC protocol previously was limited to trust-minimized bridging and message passing between Cosmos SDK chains. We are the first to extend IBC to other ecosystems, with the Composable IBC connection between Polkadot and Cosmos going live on June 29, 2023. At present, Composable’s bridge connects Polkadot, Kusama, Cosmos, and Ethereum (the lattermost of which is in testnet). Moreover, we are dedicated to building more IBC solutions and exploring many other ecosystems.

Bringing IBC Routing Back to the Cosmos Hub

The Cosmos Hub has long envisioned bringing IBC routing back to the Hub. If this proposal is implemented, given that the Composable chain is the hub for connecting to other ecosystems, as a consumer chain of the Hub, the Hub becomes a router for IBC assets.

Exporting Atom Liquidity to Other Ecosystems

Via IBC expansion, ATOM will flow to Ethereum, Solana, the modular ecosystem, and more, resulting in increased ATOM users through new use cases including those in Ethereum. Additionally, using infrastructure built on Neutron and Ethereum, the Hub would be able to enter into agreements with other protocols. This will directly benefit Interchain protocols, as they can leverage this new reach of ATOM and can draw in new users from other ecosystems that have purchased ATOM to participate in this opportunity.

This is exemplified below with a comparison via Matic’s L2 launch (Jun '20) and the swift increase in unique Ethereum addresses that followed:

In addition, via our relayer liquidity module, users can pay IBC gas fees in ATOM.

Extending Security and Settlement

A Restaked Layer on the Cosmos Hub

Composable is creating a restaked validator layer on our chain to provide security for multiple use cases in the form of a Restaking Module deployed on Composable. Here, users and validators stake IBC-enabled liquid staking tokens (stKSM, stDOT, and stATOM). Staking use cases are endless, but the most exciting are:

  • Bootstrapping additional Cosmos chains, potentially using the alliance module
  • Proposer/builder/searcher commitments (more on this below)
  • Supporting bridging on chains that do not have state proofs through an emulated layer

EigenLayer Security

Change to Composable seeks to also gain security from EigenLayer (EL), an Ethereum protocol for restaking. On EL, ETH stakers restake their ETH or liquid staking token to extend the crypto-economic security from their initial staking to additional applications. Composable intends to register as an AVS, and pass slashing parameters over to EL over IBC.

Additionally, Composable intends to extend EL security to other Cosmos chains. Using the same restaking module previously mentioned, we will have a middleware registry component that allows various operators to register for EL security. They then would interact with us as the operator, and then we would pass these messages to EL contracts over IBC.

Thus, Composable can enable the use of security of both ecosystems (Ethereum and Cosmos). Projects registered as middleware, if they misbehaved, could be slashed in both locations. Both would be orchestrated by Composable.

Path to Launch

We will open restaking with the launch of stATOM as a restaked asset. Then, we will onboard various middleware operators and focus on partial block auctions, our emulated light client layer, optimistic bridging, etc. EL security will then be enabled whenever EL launches this feature.

Rollup Settlement

We can also explore enabling rollups to settle on the Cosmos Hub, which would be cheaper than settling on Ethereum. For this purpose, the state is sent to Composable’s chain and the Cosmos Hub for validation. This involves rollups on top of the EigenDA (or any DA):

IBC as a Mechanism for Orderflow Routing

One issue associated with user expression of problems/solutions is lack of a generalizable language for execution. We built the Composable Virtual Machine (VM) to interface with any execution framework, with messages routed over IBC. Users can submit their transaction intentions from any chain which interfaces with MANTIS (Multichain Agnostic Normalized Trust-minimized Intent Settlement). Solvers then generate a solution to fulfill these transactions, and are incentivized to do so. This process also involves decentralized block building for multiple domains, specifically focused on top-of-block (TOB) auctions.
Through this mechanism, Composable becomes a chain dedicated to orderflow processing and routing to different ecosystems.

Proposal

Ask from the Hub

Composable is asking to join the AEZ and benefit from the Hub’s security.

Cosmos Hub Validator/Staker Incentives

Bridging Fees

As Composable continues to expand its IBC connections, it is important for there to be a fee paid in notional amounts for cross-ecosystem IBC. If this proposal passes, Composable will share 20% of these IBC fees with the Cosmos Hub:

While Composable’s bridge and chain are relatively new, they are deployed and growing quickly. Revenues are predicted to continue to grow as well, particularly as new chains are connected. Moreover, if the present proposal is approved, it is likely that Composable’s revenue growth will accelerate, thanks to the benefits delivered by the ICS and AEZ.

Below are outlined possibilities of flat fee structures for transfers across Composable Chain:

Below are outlined possibilities of variable fee structures for transfers across Composable Chain:

Additionally, Cosmos Hub validators will be able to operate relayer side cars in our ecosystem. Relayers will be able to capture MEV by sending order flow to order flow auctions like MEV-share. Or, depending on the validity predicate encoded in a specific packet, they can send it back to the Composable chain where it can subsequently be passed to the Cosmos Hub. We are collaborating with the Ethereum Robust Incentives Group (RIG) to work on modeling this amount.

A Portion of Inflation Rewards

We will allocate 20% of PICA and LAYR staking rewards to the hub. See the tokeneconomics section below for details.

At the moment, Centauri Chain PICA validator rewards target a 10% APY based on the approx. 1B PICA staked to validators the chain. (note: 650m of the designated 1B are currently delegated to validators resulting in an increased reward rate of ~15.38%)

Similar to PICA rewards, LAYR rewards will target a 5% APY based on approx. 30m LAYR staked to validators securing the chain.

In return, Cosmos Hub would share its economic security with Composable

PICA and LAYR Tokenomics

The Composable ecosystem has two tokens: PICA (the native token of our Kusama parachain, Picasso, as well as our Cosmos SDK chain), and LAYR (the native token of our Polkadot parachain, Composable). PICA is live, with LAYR launching in the future; currently PICA is in production and being used to validate both the Picasso and Composable chains.

The PICA token is used for:

  • Liquid staking (future product)
  • Collator Staking on the Picasso parachain
  • Staking for bridging revenue
  • Governing the Composable chain
  • Apollo oracle staking

LAYR token use cases include:

  • Collator staking on the Composable parachain
  • Solver collateral
  • Intents
    • Tips for searchers - paid out in LAYR
    • Users % - paid out in LAYR
    • Protocols bidding - paid out in LAYR
  • Restaking fees

Composable Chain Transition to ICS

Similar to Stride, the transition will likely not create any difference for the average user of Composable. Composable’s chain currently has 100 validators, which would become “governors,” and retain their current PICA delegation - continuing to do their daily duties, but not validating transactions.

PICA delegators would be able to stake with a governor, resulting in PICA rewards/revenue share from bridging. PICA rewards would continue, but would be reduced subject to PICA governance to keep tokeneconomics sustainable.

Soft Opt-Out

Validators in the bottom 5% of vote power in the Cosmos Hub validator set could opt out from validating the Composable chain. This is roughly the bottom sixty-five validators.

Governance

To ensure this agreement is mutually beneficial to both the Cosmos Hub and Composable, we propose that this agreement be reviewed each year to determine if changes are necessary.

Vision

Composable is a staunch supporter of the Interchain. Our 35+ person team is dedicated to advancing interoperability in DeFi. For us, that means expanding the IBC everywhere. We are proud that we were the first team to enable IBC outside of Cosmos SDK chains. With this critical accomplishment achieved, we are continuing to advance interoperability driven by the Interchain. Given that the IBC is based on trust assumption of an honest majority validator set, it is paramount for us to seek the highest amount of security possible to be a hub for IBC traffic. Furthermore, having a particularly secure hub for cross-ecosystem IBC will also reduce fungibility issues - meaning, chains that want to utilize ETH only need to use ETH from the Composable chain, rather than there being hundreds of different directly bridged ETH.

With a more secure IBC hub, we believe there would be more IBC traffic and users both going into other ecosystems, and coming to Cosmos. The greatest value that can be provided to Cosmos now is liquidity, users of ATOM, and DeFi + NFT use cases. A cross-ecosystem hub to facilitate all of these would drive immense value towards the ATOM token and its holders.

Thus, Composable fulfills the Cosmos Hub’s original vision of becoming the hub for cross-ecosystem IBC.

Hub Requirements

Repositories

Chain Repository

Bridge Repository

Economic parameters:

  • Default fee token: PPICA. Bridged IBC ATOM will also be accepted.

  • Fee split between consumer and provider: 20% Hub / 80% Composable

Network parameters

  • Soft_opt_out_threshold: 0.05 (e.g. 5% of the voting power)

  • Commit_timeout: 1000ms (leads to ~2.5s blocktime on Pion-1)

  • Signed_blocks_window: 140,000 blocks (~4 days at 2.5s per block)

Software audit information

Ongoing involvement required from Hub validators (e.g., Governance structure, monitoring communication platforms, hardware requirements)

No required governance involvement.

Dedicated communications channels:

Discord: a dedicated channel: Discord has been created for Cosmos Hub validators.

Not required but recommended: Setup relayer between neutron and Cosmos Hub to relay voting power updates

Hardware requirements:

4 Cores

32 GB RAM

2x512 GB SSD

Useful Links/Socials

Governance votes

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

  • YES - You agree with the terms of the proposed security agreement and want this consumer chain to be secured by the entire Consmos Hub validator set using Replicated Security.
  • NO - You do not agree with the terms of the proposed security agreement and/or do not want this consumer chain to be secured by the Cosmos Hub validator set using Replicated Security.
  • 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.
10 Likes

Need some detail on how this 450K Atom will be used, or are these asked Atoms for liquidity only and will always belong to Cosmos Hub community pool?

4 Likes

Gig is up Brainjar. No more fraudsters & scammers we don’t want this BS here. Go find another chain to siphon. Truth always prevails.

Reference: https://x.com/zachxbt/status/1700010172351967391?s=46

To speak on this, the crypto related projects are not concrete, which is really not the area I care about. Charges by the SEC are serious especially in the business of handling peoples money. It’s like people praising Jordan Belfort, it’s all so tiresome…

1 Like

Fees need to be much higher. I don’t think this is sufficient, as bootstrapping Neutron and providing economic security to Stride has demonstrated.

It’s also not the AEZ’s obligation to commit ATOM to consumer chains in exchange for joining the AEZ.

We’ve set bad precedent and we need to rethink what it means to become a consumer chain and what it costs to join.

There are also no USD-equivalent values, only tokens balances included in these models. What is the PICA token worth today, what will it be worth tomorrow, and how does it accrue that value? Also, what is the minimum commission that validators will earn and what is the average amount (in tokens and USD equivalent) validators can expect to earn?

Also, is it accurate to say rollups will be settled on Cosmos Hub simply because Composable’s chain is leveraging economic security through Replicated Security? What is being submitted and settled on the Cosmos Hub?

If the bottom 65 validators opt-out, that leave 115 validators that are still opted in. Is it necessary for 115 validators to validate for these chains? Do you have any figures or calculations on what it will take for that many operators to be profitable, given the delegation distribution of ATOM across these validators? Why not allow the bottom 160 to soft opt out?

4 Likes

Personally I would like to see no opt out.

As for the rest of your questions, I’ll let the composable team address them.

Hi there Mike, that tweet seems oddly deleted.

foul language warning

Zach has a bit of a potty mouth

This is something that has already been addressed, and this is a proposal for Composable chain, not Brainjar.

We’ve removed the piece on POL as it isn’t necessary for the main prop here

I understand that but it’s not wrong for me to bring up my concerns when your in a business that deals with assets and the SEC charged a member of your team. That does speak on your reputation, whether you think it’s important or not. I’m an investor in Atom so I believe it should still be brought to light with my explanation which is unbiased.

Charge: SEC.gov | Unregistered Adviser Settles Hedge Fund Fraud Charges

Dealing with others money and becoming an ibc compatible consumer chain does require funds to be responsibly held and transporting money from chain x to y. I think it’s been very clear that he addressed the issue, but that doesn’t forgive him for misleading investors, and falsifying returns. If somebody shows you who they truly are, you believe them. Just because you guys are all friends doesn’t mean you have to do business. You have to separate the two if you want to be taken seriously, as of right now everyone is really underplaying how serious a Bar from the securities industry is but yet no one seems to care.

He deleted his tweets, no explanation which that what he is claiming now has less credibility. I can’t speak on that case, I’m specifically talking about SEC charges not allegations.

Btw you have every right to prove me wrong but the reward vs the risk especially if composable is subject to litigation and regulation because of securities laws in the US. I’m thinking long term big picture here and possible caveats

Personally very in favour of this.

I am far from a Cosmos maxi, and spend most of my time on chains that have much higher liquidity and adoption (e.g L2s). However, I have a strong appreciation for IBC, Cosmos, and other cross-chain goals.

I love using Osmosis and IBC, but the reality is there is not enough novel use-case being built in Cosmos to meaningfully draw users from EVM chains. Just look at somewhere like OP, ARB, or Polygon… a user has the deepest liquidity to swap, borrow, trade perps. Why would they want to come to Cosmos to do the same thing?

Cosmos, like other cross-chain ecosystems such as a Polkadot, needs to carve out its adoption sooner rather than later, whitepapers will not suffice.

All of this to say, that Composable were are actually the only team to get my attention into Cosmos lately. Whilst Polkadot has no users or real adoption, bringing IBC outside of Cosmos was an awaking moment for me. Using Centauri to bridge between Polkadot and Osmosis was the first time I felt like Cosmos was close to it’s ‘moment’. It made me understand the necessity to take IBC much further than its current bubble.

As far as I am aware, no one else is putting in the level of effort as Composable to try and make this vision a reality.

I want to see a world where EVM rollups are using IBC as the default trustless bridging protocol. It’s for this reason that I (as well as the large funds I manage) will be supporting this proposal.

Cosmos will not succeed because of a new DEX or perp protocol, no amount of app-chains can magically create user adoption… focusing in on IBC is the way that Cosmos not only survives, but becomes an integral part of the next evolution in crypto.

5 Likes

There are two main components outlined above for revenue generation to the Hub:
i) Bridging Fees - Outlined in $ estimates above
ii) Validator Staking Rewards - Outlined in tokens above


i) Bridging fees are dollarized and are laid out across two scenarios of fee structure — flat-fee (static $ amount per transfer) + variable fee (% of volume transferred).

ii) At the moment, validator staking rewards are paid out in PICA and will eventually be transitioned to LAYR upon TGE. The amount of PICA tokens being distributed to validators is outlined above as well, and currently stands at 8,333,333.33 PICA per month. This would break down to 1,666,666.67 being distributed amongst the split to Hub validators. At the moment, PICA is relatively nascent as it is only being used for collator and validator staking, but will be enabled to capture bridge revenue in the near future. It’s current DEX trading price stands at $0.00044.
Similarly, once the switch to LAYR in enacted, 125,000 LAYR will be distributed monthly with 25,000 of that LAYR being split to Hub validators.

The main goal here is to flow bridging revenue from all external ecosystems connected via IBC back to the Hub. We are currently connecting Kusama + Polkadot to the Cosmos via IBC and will be extending this to additional ecosystems in the near future. Ideally, the Hub then receives revenue for all IBC transfers anywhere that IBC is used via Composable.


Rollup Settlement

The goal is to provide an alternative settlement layer for rollups. This means being able to store the state transitions (block hashes, state roots, etc), and have the mechanism to prove that they were correctly generated (or not)

1 Like

We absolutely hear the concerns here, but the reality of the situation is that there are no funds being custodied or handled by any one person at Composable. We have a team of 30+ individuals that have put an enormous amount of time and effort into building and shipping these products to deliver IBC everywhere and that remains & continues to be our core goal. Becoming a consumer chain with the Hub allows us to increase the security of this platform and ultimately deliver value back to the Hub as we continue to expand IBC to an increasing number of ecosystems outside Cosmos.

3 Likes

From a pragmatic standpoint, the execution of getting IBC assets into Ethereum will be a net positive to the ecosystem, It may be starting off at the Hub level only with Atom but if Composable can get IBC assets (Osmo, Akash, Mars, Stride, etc) to Ethereum all the DeFi primitives could potentially adopt the tokens which will lead to value accrue.

In the Ethereum landscape, we can drive Atom usage into other DeFi solutions like lending protocols, DEXs, Yield Farming, and others. The EVM world is the deepest liquidity and defi user and allowing IBC assets to operate there is beneficial. To give a metaphor, it’d be like getting assets into the NYSE. This will be true interoperability and allow the IBC ecosystem to flourish as demand is not as fragmented.


Value accrual if Atom was usable in Curve

3 Likes

I appreciate the onus is not on Composable to do this but I think the Hub needs to come up with approximate values of revenue it would like to earn from ics chains. This might vary if a chain is considered to be strategically important beyond the fee it pays etc.

The calculations of all of these proposals will also be tricky as forecasting can never be as accurate as we would like.

I think that social consensus is that broadly Neutron and Stride deals were both on the cheap side (EDIT - I think both those chains are valuable partners and that governance was correct to onboard these). I suspect that the value of what is proposed here is actually even less while it is just an IBC connection to DOTSAMA.

This is not specific criticism of the proposal but a broader point about ICS revenue.

4 Likes

I understand, I don’t speak for the cosmos hub. I think looking out for future roadblocks. It’s just a cost benefit analysis, I think the risk outweighs the reward. Personal preference, open to be proven wrong.

So there are the broad points, but also there the specifics. I would love to have a call with you to try to make this thing ideal.

Lake many others, I’m not totally sure what idea looks like yet but taking the effort to make this work in an ideal fashion Will pay lasting dividends not only to the hub numerous pieces of the cryptocurrency ecosystem .

I look forward to seeing what @velvetmilkman has to say on the matter next week.

Big concern here. Why?

Composable win parachain auction 7 in polkadot (Jan 07, 2022). Reward pool was 16% (of total supply).

Nothing was given or unlock since they didn’t do TGE and they need to win next parachain in 2024 (4month from now). 16% of sell pressure (with vesting).

This next paracahin might need 0.5% of the supply to win (if we see what was need for EWT).

You only give AEZ, 20% of staking reward which is nothing.

If inflation is 5%, staking APR might be 10% then will be ONLY 2% for AEZ.

Neutron give a part ot their token supply and a % for token holder : 15%+

Asking 450k atom is a big thing.

I dont see Composable as a big gain for AEZ for atom holder, for tech is a big gain but does composable can put a out post (or hub) in Neutron?

Might be easier to do to gain traction and swith after to AEZ?

I am also have a concern if polymerdao want to join AEZ in the future.
Since i saw composable as a competitor for them.

3 Likes

Whats the volume and revenue generated from the DOT <> Cosmos IBC connection to date?

What will be the drivers to see this volume perform a 100x or more to ensure your chain is profitable for the hub?

3 Likes

i think my 3 years old nephew owns more on his savings plan