[Proposal ##][DRAFT] Acquisition and Merger of Osmosis into the Cosmos Hub aka COSMOSIS

[TRAVE]

I have been following this thread closely, and I see a lot of polarization on both sides. A move of this magnitude needs to be evaluated with a cool head and shouldn’t be taken lightly.

As other members have already pointed out, there are viable alternatives on the table that could satisfy a large majority. If these alternative options aren’t explored and taken seriously, we run the risk of the community feeling that something shady is going on—giving the impression that the debate ended before it even began, and that the decision was already made behind closed doors.

Furthermore, on a personal note, I believe the founders should take a step back and remember why Cosmos was built in the first place: what the original vision was, and how we intended to achieve it by always guaranteeing the community a real voice and vote. Let’s remember our roots. After so much evolution in our ecosystem, we cannot afford to take a step backward in our governance.

I am not looking to pick a side in this confrontation (I made my choice and my investment a long time ago), but I truly value this diversity of opinions. Often, it’s the friction between different ideas that creates the spark needed to ignite the best solutions.

To conclude: Cosmos has grown up. It is a mature ecosystem with years of history, and it should start moving forward with the confidence of an adult. We need contributions and debates that benefit everyone, putting aside egos and individual ambitions. Now more than ever, we are an interconnected ecosystem, and we need each other to work as a true team.

[darkyadoo]

That’s exactly the problem with the Hub. To change just three tiny parameters in the tokenomics, they demand a full study with a public tender and it takes over six months just to choose the firms that are going to do the work.

But when it comes to merging a DEX that’s going to cost an absolute fortune ($20 million) and could easily become a burden for the Hub, they just decided it on the fly with a rushed vote.
Beats me!

[FHZ]

@darkyadoo

decided it on the fly with a rushed vote.
Beats me!

let alone having changed the voting parameters to have similar cases further expedited, but I digress.

@sunnya97 Firstly, thank you for all you’ve done for the Cosmos, as a whole. Adjusting the proposal, by removing additional inflation, specifically, is extremely appreciated. However, to utilize the entire Cosmos Hub’s community pool +, for a merger, is not the answer, in my opinion.

I view the goal of joining forces between communities as being fully achievable, without a need to be “bought out.” Some, and certain individuals, may be enticed to do so, but I know the our ecosystem, as a whole, is different and built much better than that.

Fully support the effort of combining the Hub and Osmosis communities, but not through this merger. Keep the Hub as minimal as possible.

*Despite the proposal already being live, to add my own two cents, it would have been intriguing to see OSMO potentially serving as the fee token, preserving ATOM to serve with its original design as stake.

[Cosmic_Validator]

Voted NO for putting the proposal on-chain and voting YES with Sikka validator and Keplr which is cofounder of Osmosis that is a conflict of interest. Also by asking Aurel from Dokia, Cito and others to vote quickly yes just after proposal is on-chain to give false impression of general support of the proposal

[Positiva]

We vote No on this proposal.

Reason: this proposal is politically misaligned. The Cosmos slogan is “The Internet of Blockchains” and we fully support it. The Hub should remain the center of the ecosystem without absorbing services developed within it.

Even if Osmosis were sold to Cosmos for just $1, we would still oppose it. We believe this deal is incorrect specifically from a political standpoint within the ecosystem.

The ecosystem should grow through the creation of new services, not by absorbing existing ones.
Every action taken by the Hub sets a precedent, it becomes an example for the entire ecosystem. If the Hub starts acquiring services around it, this will shape a strategy for developers: build with the intention of selling to the Hub.
We are not saying this is necessarily bad, but it is not what the ecosystem was originally created for.

As for the Pool, these funds would be better spent on developing the Hub’s own ideas and initiatives (showing everybody how many good ideas are in Hub), rather than on acquiring projects within the ecosystem.

[stakinxexplorer]

Corrupt, lousy voting. The co-founders vote YES. Within minutes. Corrupt StakeSito, too. I hate corruption. And what’s happening here is simply the Osmosis founder leaving the ecosystem, eager to line his own pockets for new projects.

To the Osmosis founder: leaving? Go! Sell your coins at the market price! On Binance! You’re too smart, you want to leave and sell your coins at the expense of someone else’s liquidity.

[PaddyMc]

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Again posting here to give my thoughts on the most important things to consider for the merge, as one of the core devs for the past nearly 3 years, and nearly 6 in cosmos land.

COSMOSIS Acquires Real ATOM Sinks

One thing I want to highlight that I think is being underweighted in this discussion: this merger doesn’t just bring revenue to the Hub — it brings permanent supply sinks for ATOM and a taker fee revenue sharing model that can be pointed directly at institutional partners. That’s a fundamentally different economic primitive than what the Hub has today.

How ATOM Gets Taken Off the Market

The Osmosis fee infrastructure has three built-in sink mechanisms that would directly apply to ATOM post-merger:

1. Taker Fee Burns — Taker fees can be distributed to stakers and the community pool, or burned. Osmosis governance currently burns 70% of OSMO taker fees and 52.5% of non-OSMO taker fees by sending them to a null address, permanently removing them from supply. Applied to ATOM, every swap on the Hub DEX would permanently shrink ATOM’s circulating supply.

2. ProtoRev Burns — The ProtoRev module captures cyclic arbitrage (MEV that would otherwise leak to external searchers). Native token profits are burned. More volume = more arb opportunities = more ATOM destroyed.

3. Non-Native Fee Buyback-and-Burn — When taker fees are collected in non-ATOM denoms (USDC, ETH, etc.), the protocol can either distribute them or swap them to ATOM and burn them. The burn path creates constant buy pressure and removes the purchased ATOM from supply.

All of these parameters are governance-configurable — the Hub community decides the split. Protocol revenue can be used to stockpile ATOM in the community pool or burn it outright, as outlined in the numbers below.

Against ATOM’s current ~10% max inflation (~39M ATOM/year on ~390M supply), these sinks directly offset emissions. At sufficient volume, ATOM moves toward net-deflationary.

Taker Fee Revenue Sharing — The Institutional Flywheel

This is the piece I think deserves the most attention. Osmosis already has a production-ready mechanism called Taker Fee Share Agreements, built into the poolmanager module. Here’s how it works:

• • Any token issuer (institution, DAO, protocol) can enter a revenue sharing agreement with the chain.
• • They receive a configurable percentage of all taker fees generated from any swap route that touches their denomination.
• • Fees accumulate on-chain and are distributed automatically to the partner’s address at the end of each epoch.

This isn’t a grant. It’s not a one-time incentive. It’s perpetual, programmatic revenue sharing — as long as people trade the asset, the issuer earns. That’s a pitch you can bring to a TradFi desk: “List your tokenized asset on the Cosmos Hub DEX, and the protocol pays you a share of every trade, forever.”

The Hub is already pursuing institutional adoption through IBC v2, RWA infrastructure, and the Cosmos Stack licensing model. Taker fee rev share gives those conversations a concrete economic hook that doesn’t exist elsewhere.

One Institution, Concrete Numbers

Say the Hub onboards one institution that deploys $10M in liquidity for an RWA or stablecoin pair, and that pair does $1M in daily trading volume. At the current 0.1% taker fee with a 10% rev share agreement:

	Per Day	Per Year
Taker fees generated	$1,000	$365,000
Taker fee rev share to institution (10%)	$100	$36,500
Remaining for ATOM ecosystem	$900	$328,500
ATOM burned (52.5% burn rate)	$472	$172,463
Stakers + community pool	$428	$156,037

The institution earns a passive $36.5K/year — programmatically, no human in the loop — simply because their asset is being traded. The ATOM community gets the rest, and over half of that is permanently burned. (Note: native ATOM taker fees currently burn at 70% — the 52.5% figure above uses the non-native rate as a conservative baseline.)

Three Core Pools — What Even Modest Activity Looks Like

This point may be redundant but wanted to highlight as well. Consider just three pools — ATOM/USDC, BTC/USDC, ETH/USDC — each with $100K in liquidity and $1M in daily volume. At 0.1% taker fee:

Pool	Daily Volume	Daily Taker Fees	Annual Taker Fees
ATOM/USDC	$1M	$1,000	$365,000
BTC/USDC	$1M	$1,000	$365,000
ETH/USDC	$1M	$1,000	$365,000
Total	$3M	$3,000	$1,095,000

That’s $1.095M/year in taker fees from just $3M in daily volume across three pools — with only $300K in total liquidity. At the current 52.5% non-native burn rate, roughly $575K in ATOM gets permanently removed from supply per year. And this is a conservative baseline.

Now scale that:

Institutions Onboarded	Annual Taker Fees	Taker Fee Rev Share Paid Out	ATOM Burned/Year (52.5%)
10	$3.65M	$365K	$1.72M
30	$10.95M	$1.1M	$5.17M
50	$18.25M	$1.8M	$8.62M
100	$36.5M	$3.65M	$17.25M

At 30 institutions, you’re looking at over $5M in ATOM permanently removed from supply per year, while simultaneously paying out $1.1M in taker fee rev share to institutional partners — funded entirely by trading activity, not inflation. And that’s before ProtoRev burns are factored in — native ATOM fees burn at 70%, which would push these numbers even higher.

IBC Eureka + the DEX — Another Flywheel

Speaking from experience running Osmosis: one of the biggest ongoing headaches has been bridging. Managing multiple bridge providers, dealing with liquidity fragmentation where you end up with three different versions of the same asset (polygon.ETH.axl vs ETH.wh vs ETH.axl), building alloyed assets to paper over the differences — it’s a constant drain on engineering time and a source of UX friction. We’ve spent a lot of cycles on this problem.

IBC Eureka changes the equation entirely. With the Cosmos Hub acting as the central router — one connection to Ethereum, Solana, Base, and the rest of the Cosmos ecosystem — bridged assets flow through the Hub natively. That means assets land where the DEX lives. No extra hop, no third-party bridge to trust, no fragmented liquidity. A user bridging ETH from Ethereum through Eureka arrives on the Hub and can swap immediately.

This is another flywheel: Eureka brings assets in, the DEX generates volume and taker fees from those assets, taker fees burn ATOM and pay out rev share, and the institutional revenue sharing attracts more assets — which brings more volume through Eureka. The bridge feeds the DEX, the DEX feeds the sinks, and the sinks feed ATOM value accrual.

And from a development standpoint, this is a huge unlock. Instead of the Osmosis protocol team splitting its focus between being a DEX and bridge maintenance — while Eureka handles the cross-chain plumbing. The bridged assets take care of themselves through IBC and can transfer anywhere in the ecosystem from there.

On the Team

I want to close on something that I know matters to people evaluating this: continuity. Most of the core team will be moving on to other projects, but we’re not disappearing. We’ll be checking in on how things are progressing, and if we ever need to hop on a call to work through something — an upgrade, a design question, whatever it takes — we’ll do it. Open source is how we’ve always operated, and I think if any team in Cosmos has proved they can rally when it counts, it’s Osmosis. We’ve done it time and time again.

Beyond that, individual engineers can also discuss support contracts directly with OGP, so it’s not like the expertise vanishes. We’re people with lives, we chat often, and the door is always open.

I’m still going to support Osmosis whether the merge goes through or not — just wanted to shout into the ether before the vote is finalized. I genuinnally think that the Omsosis DEX protocol deployed on the HUB will be amazing for the community and the ATOM, that’s why I’ve taken the time to outline my thoughts on things that may have been missed in the discussion.
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[Trix]

A DEX with maintainers and liquidity migrating will also open up the DeFi eco on The Hub, making it a true port city as Eureka assets flow in, transact & trade, then flow out or set up their own merchant hubs.

For one, I’ll be launching Membrane v2 as soon as the migration is finanlized & the product is ready, giving The Hub a competitive lending product immediately. It’ll entice borrowers with structual differences that create lower overall costs, allow liquidation delays and segment lending risks to attract different profiles of capital.

This migration starts with Osmosis, but it’ll fertilize the space for all DeFi, including a decentralizied stablecoin ready to launch with no grants, no funding, pure passion. I’ve been building in Cosmwasm for 4 years now and I don’t plan on going anywhere.

The Hub’s DeFi will need competitive products to expand upon the IBC asset value prop & Membrane v2 fits into structural lending wedges that will eventually compete with the likes of Aave and Morpho.

[TRAVE]

I appreciate the detailed technical breakdown, but speaking from an investor’s perspective, there is a fundamental problem with this approach: we are justifying a multi-million dollar acquisition based on theoretical scenarios and highly optimistic projections, rather than looking at reality.

Assuming ratios where $100,000 in liquidity generates $1 million in constant daily volume is, frankly, dressing up the numbers to make the formula look like a guaranteed success. If we are throwing around utopian hypotheses, I could also claim that ATOM will easily return to €45, but serious financial decisions are not made on illusions or assumptions.

If we want to do things right, avoid being hypocritical, and not deceive the community with these figures, we must bring forward previous case studies of similar situations in the crypto space: both those that have worked and those that have failed. The decision must be based on the reality of ATOM today and its verifiable history, not on how we wish things were in a perfect scenario.

I keep insisting that we put concrete ideas and real numbers as of today on the table. I propose that we structure this sensibly: let’s set a specific timeframe to defend these metrics, a prudent reflection period for the community, and only then open the actual voting.

Let’s be honest, we all know how this works: in the end, those with the most invested capital are the ones who will win the vote. But since they hold that power, they should at least share their true ideas and strategies transparently so we can all benefit, even if this whole thing goes to shit in the end.

Finally, we must realize that this kind of craziness and internal drama does nothing but damage ATOM’s image and shoot ourselves in the foot. Let’s value the ecosystem we have built and show the outside world that we are a strong, mature entity. That cohesion is what will give ATOM the institutional credibility it needs to truly appreciate in value, rather than continuing the downward trend we are experiencing right now.

Smart contract math is exact, but if the data we feed into the equation is unrealistic from the start, the result is just smoke. I am simply asking for transparency, real historical data, fewer magical projections, and a stronger vision for our future as a united ecosystem.

[TRAVE]

I have been closely analyzing not only Proposal #1029 here on the Hub but also Proposal #1007 currently being voted on in Osmosis, and the disparity in the narratives is alarming.

It is very revealing to see how this merger is being sold depending on who the audience is. While here on the Cosmos Hub, Osmosis is presented as a ‘consolidated and revenue-generating’ infrastructure to justify spending 12 million ATOM, in their own Osmosis proposal, they admit that their token’s future is ‘increasingly uncertain’ due to ecosystem contraction and that they are seeking this merger as a ‘structured transition route.’

Are we looking at a strategic acquisition or a disguised financial bailout paid for by all ATOM holders?

We cannot be hypocritical or allow ourselves to be misled by doctored data. We are being presented with scenarios where $100,000 in liquidity generates $1 million in daily volume—something that, in today’s market reality, is simply a fantasy. If we base the future of our treasury on magical projections, I could also say that ATOM will return to €45 tomorrow, but that is not responsible management.

I demand that this debate be based on reality: let’s bring forward historical data, real success and failure stories, and stop using the community fund as an inexhaustible source for projects that, by their own admission on their forums, see their future as compromised. Before voting, we need a real period of reflection and verifiable data from the last six months, not utopian hypotheses.

This type of drama and lack of transparency only damages ATOM’s image before institutions and pushes us further into a downward trend. Let’s value what we have, be a strong and honest entity, and only then will ATOM regain its value. Math doesn’t lie, but if the input data is unrealistic, the result is just smoke.

[CosmicRomance]

It was a quick transition: from “strategic move” to “maybe next time.”

[AtlasStaking]

We run validators on both Cosmos Hub and Osmosis at Atlas Staking and we went into Proposal 1029 leaning NO. The “exit liquidity,” precedent, and risk concerns resonated with us and we were skeptical.

After digging into the revised terms and thinking harder about what failure actually looks like, we changed our minds and were in favor. Then after 2 days of reading responses back and forth from those for and against the prop, we changed our vote to NO.

We are all for the acquisition of Osmosis. What flopped our flip back to NO are the terms of the proposal.

The DEX will be abandoned by the team, foundation, and grants administration and left to the Hub to hold the bag, and the Hub has no plans for it all.

The payment needs to be scheduled out in traunches, and contingent on performance benchmarks, but the Osmosis team doesn’t appear to have any interest in sticking around.

Many people also make compelling cases for the continued decline of Osmosis’ value and the sale price being too high.

If the team comes back with a new proposal that addressed these concerns, we would most likely vote YES.

[Trix]

The disparity of narratives is not surprising and how communications work. Osmosis likely needs this merge more than The Hub but The Hub is also getting a suite of benefits for merging. The reasons being different is sensible.

The liquidity volume ratio was definitely hyperbolic but the argument is more around the value capture of volume with an onchain economy. The efficiency of the liquidity is always something that will be optimized.

[Cedrik_Levesque]

Osmosis has been one of the most important products in Cosmos, and many of us, myself included, have used it and benefited from it for years.

My concern here is strategic, not emotional.

Under Cosmos Labs’ leadership, the Hub seems to be moving toward a more institutional future. If that is the direction, I’m not convinced absorbing Osmosis is necessary for ATOM’s long-term success, even if it may look attractive in the short term while everyone is searching for a clearer path to value accrual.

To me, these are two very different paths:

1. The Hub tries to become the economic center of Cosmos by owning the main DEX.

2. The Hub becomes the neutral layer that major Cosmos chains, institutions, and governments use to verify cross-chain activity, coordinate between chains, and move large amounts of value across the ecosystem.

I think the second path may be more differentiated, more durable, and more aligned with where Cosmos is going.

Victor recently shared a very interesting proof of concept here:
https://forum.cosmos.network/t/interchain-events-cross-chain-state-verification-on-the-hub/16830

To me, it points toward a future where the Hub creates value by helping large chains coordinate and transact with each other, rather than by trying to own the main app layer itself. I also suspect there are people in this ecosystem who can think much more deeply than I can about how this kind of technical change could translate into real value accrual for ATOM.

That deserves much deeper attention.

My concern is that this proposal may be trying to solve ATOM’s value accrual problem through the most familiar path, not necessarily the best long-term one.

Osmosis may have been the clearest expression of a previous phase of Cosmos. That does not automatically make it the right foundation for the next phase, especially if that next phase is driven by institutions launching Cosmos SDK chains and using the Hub as neutral infrastructure between chains managing much larger pools of capital.

I also think the current price being asked is too high relative to the uncertainty around long-term revenue durability, liquidity retention, and how much value would actually survive a migration to the Hub.

And there is no reason to rush a decision of this size. If this is truly the right long-term move, it should still be the right move once we have more clarity, less NDA opacity, and a better understanding of what Cosmos Labs is building.

This is not a rejection of Osmosis as a product. It is a question of whether the Hub should spend this much treasury capital, governance attention, and strategic focus on owning a beloved app, instead of doubling down on the role that may give ATOM the most durable long-term value.

At this stage, caution feels like the better posture.

[Trix]

Why are these separate futures in your opinion? I see them coexisting.

I don’t think Labs is making deals with anyone that would find Osmosis a competitor. What we’ve seen in tweets so far have been about payment processing, bank governance & tokenized bank deposits. The one that seems most like a competitor, bank deposits, is a red herring. The banks are using the chains as infra, their users aren’t going to join the IBC system and start moving freely between banks.

https://x.com/cosmos/status/2033936648095076369?s=20

The interbank network mentioned here would actually be supported by a hub-like risk transfer system through trading of tokenized deposits. These trades would have to happen on The Hub as its the central service provider, unless we expect each chain to enable trading.

There is no future where 1) blockchain is valuable, 2) tokenization is valuable, 3) trading tokens isn’t. There will always be room to have a central venue to trade tokenized assets as just another service needed to be provided to these chains.

The best thing about a merge like this is that these two seemingly opposing vision not only mesh together for a better long term product offere\ing but they don’t negatively affect eachother at all as there are 2 different teams with 2 different funding structures leading each. The last thing we want is to have Labs do BD to partner with a bunch of chains to get them IBC-enabled and The Hub has no services to provide them because it hasn’t funded anything nor has created an environment for permissionless development/experimentation.

[zaki_iqlusion]

Ultimately Iqlusion votes yes on the merger.

We feel that both sides have flaws in their argument.

The main flaw in the against camp argument:

I don’t really think there are good opportunities that will have community support for the non-native assets in community pool. This merger augments the 1 million in USDC already in the pull with 5 million in non native assets from osmosis. This provides a lot of defi optionality that current community pool lacks.

The Osmosis team argues that the osmosis code base provides a value accrual mechanism aligned with the work Cosmos Labs is doing. I find this highly implausible. Old school AMM designs are foundational technology but are just not competitive in the modern defi landscape. If we successfully bring substantial assets into Cosmos, the main liquidity rails are not going to be Osmosis. Generally the Osmosis team made a lot of product decisions over the last two years that haven’t worked out and that’s largely how we got here. I don’t think the merger is going to change much.

To me the value in the merger comes down to

1. Karmic debt owed to osmosis for doing the IBC go to market, saving the network during Dragonberry, and providing foundational defi infrastructure to Cosmos.

2. Stability: AMM’s are not the winning dex design and they aren’t going to be a huge factor as trade and defi integrate more tightly. But AMMs are the first place new assets, new asset categories trade . Even if they might only be relevant for a few days. Starting from scratch with a new Cosmos AMM infrastructure is just going to be a disaster. It’s possible but the risks are high. Osmosis has a lot of integrators.

[Cosmic_Validator]

@zaki_iqlusion

This merger augments the 1 million in USDC already in the pull with 5 million in non native assets from osmosis. This provides a lot of defi optionality that current community pool lacks.

This argument is ridiculous. This is saying it is good for the Cosmos hub to exchange around $20M for around $5M. There are projects ongoing to professionally manage the treasury, we don’t need to exchange $20M in ATOM for $5M in other tokens for that. This is like someone who has $20M and someone says I give you CHF 5M which is better asset for your $20M.

@zaki_iqlusion

the main liquidity rails are not going to be Osmosis. Generally the Osmosis team made a lot of product decisions over the last two years that haven’t worked out and that’s largely how we got here. I don’t think the merger is going to change much.

@zaki_iqlusion

Ultimately Iqlusion votes yes on the merger.

You are saying that basically Osmosis failed and won’t bring any value to the Cosmos hub and yet you contradict yourself saying you vote yes

@zaki_iqlusion

Karmic debt owed to osmosis for doing the IBC go to market, saving the network during Dragonberry, and providing foundational defi infrastructure to Cosmos.

Actually it is osmosis who owes ‘karmic’ debt for failing to assess the risks of LUNA and UST and making many in the Cosmos ecosystem lose tons of money for offering such high incentives for LUNA and UST pools.

@zaki_iqlusion

Osmosis has a lot of integrators.

Osmosis can still keep running or they can find funding elsewhere. While before plenty of new cosmos projects were launching, recently there is almost no new good project launching so a native DEX is less relevant if it is going to be just mainly the Cosmos Hub and ATOM trades already in all top exchange with large volume

[Cedrik_Levesque]

Fair point! I actually agree these futures can coexist.

My concern is not that the Hub can never support both institutional interoperability and a central trading venue.

My concern is that coexistence does not automatically make this specific merger the right decision today, at this price, with this level of uncertainty.

This is not a small add-on. It is a major capital allocation and governance decision for the Hub.

I also agree that if tokenization grows, trading infrastructure will matter.

Where I disagree is on the jump from “trading will matter” to “therefore the Hub should acquire Osmosis now, at these terms.”

Right now, we still have limited clarity on what the Hub’s highest-value institutional role will actually be.

What Cosmos Labs has publicly shown so far points strongly toward interoperability, compliance, security, and production-grade cross-chain infrastructure for institutions.

I keep coming back to Victor’s POC and to the possibility unlocked if this Gaia change is discussed and accepted: https://github.com/cosmos/gaia/issues/4023

It points toward another potential valuable role for the Hub: helping chains verify events, coordinate with each other, and trigger cross-chain business logic without needing custom bilateral integrations every time.

So for me, this is not “DEX future vs institutional future.”
It is a question of sequencing, price, and prudence.

I would absolutely be open to a merger at some point.

I’m just not comfortable saying yes to this merger, at this price, while clarity is still limited, resources are finite, and a lot of the confidence seems to rely on historical Osmosis performance in a blockchain market that is still evolving.

If this is truly the right long-term move, it should still be the right move later, when we have more clarity and a stronger basis for pricing the deal.

[bpiv400]

Why I Believe Proposal 1029 Is Not Right for the Hub

I’m writing to share my perspective one more time on the Osmosis merger proposal and to explain why we believe it is not right for the Hub.

We’ve published a detailed response on the forums, and I wrote a follow-up response to that post. I’m writing again because this is a critical matter.

To be clear about something broader: We agree completely with the underlying logic. For ATOM to thrive, we need to bring new enterprise blockchains and financial institutions into Cosmos, but we also need the Hub to play a central role in servicing those users. Cosmos Labs and the community need to take more proactive steps to creating a strong Hub. We do believe this means introducing a DEX and incentivizing liquidity, continuing to expand IBC to public and private networks with routing through the Hub, potentially introducing an EVM, and partnering with more institutional-facing defi protocols. We’ve stated this in the past, and we are taking steps to obtain resources that will enable us to do that while continuing to advance our enterprise roadmap.

Unfortunately, the fact remains that I don’t personally view the proposal as right for the Hub for reasons related to the finances, incentives, and product.

Finances

Financially, what the ATOM community gains (or does not gain) under this proposal is substantially outweighed by what we lose and destroy. Specifically:

What the ATOM community gains

• Hard assets (roughly $4m in USDC, ETH, BTC), which will be placed under the control of the maintenance team at OGP and used to pay for their salaries and market-making operations. The composition of this team is not a part of the proposal, nor is a budget for their operations provided. The proposal positions these assets as Cosmos Hub treasury assets while simultaneously double-spending them on maintenance team salaries. As revenues continue to decline, these assets will be drained over time by operational costs, and Osmosis will eventually become a financial liability. All these assets do is delay that outcome.

What we lose

• The cost. At roughly 11 million ATOM, this would consume the entirety of the Community Pool’s ATOM. This is the largest single expenditure in the Hub’s history, for a declining asset with a limited team, no locked liquidity, no growth plan, and no downside protection. Under the most recent annualized revenue projections of $730,000 (see: Datalenses), the payback period is 20+ years before accounting for migration losses, maintenance costs, and continued decline.

What we destroy

• Liquidity. ATOM will own the venue where Osmosis liquidity lives, but we are fragmenting it between two separate venues: one on the Hub and one on Osmosis. Market makers, major LPs, and retail users all have to independently decide to migrate their capital to the Hub deployment. None of that is guaranteed or even incentivized in the proposal. Without spending more ATOM to incentivize the migration, the result is likely fragmented liquidity, meaning worse trade execution for users, lower profits for LPs and the Hub, and a worse overall trading experience than what Osmosis has today. In sum, we might actually accidentally destroy a lot of the value of the Osmosis DEX by acquiring it and trying to migrate the liquidity piecemeal.

What we can’t save

• Osmosis Revenues. We know from our own experience how hard it is to take an asset that is shrinking and turn it around. Osmosis usage, liquidity, and revenue have been declining consistently for a long time. Looking at the last 3 months, Osmosis’s annualized revenue is less than $730,000 (Source: Datalenses), and continues to decline month over month (Annualizing March revenue yields $500k). This proposal does not present a thesis for how the merger reverses that trend. It doesn’t even try. It just makes the decline the Hub’s problem and accelerates the decline by fragmenting liquidity across two chains.

Team and Incentives

Liquidation Risk. We expect a significant amount of ATOM to be immediately sold on the open market, given the lack of lockup or vest. Most of the team is moving on to new projects. They are not interested in continuing to work on Osmosis when they have higher ownership shares. Why would they hold their ATOM after their ownership in the DEX is significantly diluted? The same could be said for the other Osmosis token holders. The Hub would be funding its own sell pressure at a time when it can least afford it.

Limited human capital. The vast majority of the Osmosis team is leaving the project post-migration or has already left, including the founders. We are paying $15m+ dollars and getting very limited continuity from the team that made the product work. In particular, we’re only aware of 2 engineers and several community/ops team members who plan to stick around full or part-time. We will need to use the assets the community pool acquires to build a new team that can actually continue to innovate and expand the DEX.

Continuity risk. The team supposedly staying to help with the liquidity migration and ongoing maintenance has no financial incentive that we’re aware of to do so. Their new ATOM is liquid as soon as the technical migration is completed. This is extremely unusual in an acquisition. A portion of the proceeds is typically set aside to pay out retention over several years, rather than making it fully liquid on day 1. The result is that we are “hoping” that the team members Osmosis claims will be involved for the migration and beyond, actually will be, rather than having any kind of guarantee or incentive-aligned system.

Product

Tech debt. Osmosis is five years old. In the time since it launched, the DEX landscape has moved decisively toward orderbooks, intents and standardized EVM-based implementations. That is what institutional and enterprise counterparties expect to interact with, and what is required to be competitive over the next five years. Osmosis’s architecture does not meet those requirements, and modernizing it is a major undertaking that is not scoped, staffed, or funded in this proposal.

Growth and PMF. We don’t have a growth plan for the DEX that is compelling in the short-term (We wish we did but that’s the truth), and neither does the Osmosis team. ). That’s why many are leaving (I don’t criticize them for it, but that’s the truth).Osmosis in structural decline. How is moving to the Hub going to change Osmosis’s prospects for the better? Especially when you consider the team dissolution and liquidation fragmentation, it feels impossible to me. Even many of the people supporting the proposal admit that there isn’t a compelling path to value accrual at a scale that can payback the acquisition given the product.

The Best Reason to Vote Yes

I think the best reason to vote yes is that the Osmosis team has done incredible work for the Cosmos ecosystem over the years. At an emotional or “karmic” level, they are “owed” an outcome in some sense. Osmosis’s DEX was one of the single best cross-chain products built in Cosmos or with IBC. It is one of the only DEXes that consistently works well with Skip:Go, and we’re deeply dependent on it. More than that, Dev and the engineering team have contributed numerous critical technical upgrades to the Cosmos stack over the years, including ABCI++, tokenfactory, and various improvements to Tendermint performance. Sunny advocated for many builders to choose Cosmos, leading to Akash, Zenith (Urbit’s Cosmos chain), and Babylon.

Personally, I consider Sunny and Dev friends, and I have a deep respect for them as people and builders (efforts to frame this proposal as a personal referendum on Mag and me aside). They helped us ship ProtoRev to Osmosis when Skip was just getting started, and helped us level up on the core stack. They grew Osmosis and grew Cosmos too.

Without Sunny and Dev, there is no doubt that Cosmos would be smaller and less successful than it is today. I think that is the single best reason to vote for this proposal. This is why I actually feel physically uncomfortable opposing the proposal at some level. If anyone is “owed” something, it’s them and their community. (I would put Keplr and Mintscan in a similar bucket)

But, the reality is – and the reason I oppose it – is that that’s not a rational argument about ATOM and what’s best for ATOM tokenholders. It’s not a sensible use of the community pool, which is dedicated to supporting ATOM, not paying developers their “dues”. It’s an emotional argument about karma, and we have to go deeper and analyze from the perspective of ATOM tokenholders. When I do that personally, I don’t see that the deal makes sense in terms of finances, team/incentives, or product.

Conclusion

We will still be here, as we have been. The ICF has committed to not selling ATOM. We have concrete steps in motion to invest in the Hub and the ecosystem around it. Some of these involve commercial processes with other parties, and we have to be responsible about timing before sharing more. What we can say is that these are not ideas on a whiteboard. We are excited to share them and to collaborate with the community on building a Hub that is genuinely worth rallying around.

In the meantime, we urge you to vote no. The goal is right, but the deal is not.

Barry

[CrownPrinceMac]

Do you have any plans whatsoever on a dex in the immediate aftermath on this props rejection? Because telling us to wait at a time where things change quickly has not worked for us either (ie Gravity Dex, Emeris). There has not been any guarantee, or assurances that the Institutional pivot is winning any users or bringing any profit for regular $ATOM holders. All we see is project after project leaving the cosmos. Sure, maybe you dont like the current prop, but there has been no clear Alternatives given or working either.