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

Hub Proposals Community Spend
163

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

16 Likes
164

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.

165

I belive that is the only one right proposal for the long period of time

1 Like
166

This integration is the right path for the Cosmos Hub to take, and I’d like to address a few key concerns about finances, incentives, and product.

Finances

The claim is that ATOM is losing or destroying stable assets here to acquire a product that is only declining because those assets are not stable.

We agree that Cosmos Hub should have an onchain exchange; the issue is how that is achieved.

Osmosis as a financial liability

Under even the pessimistic revenue projections outlined, Osmosis remains profitable. Any alternative exchange acquired will almost certainly cost more per year and has no history of deployment on a Cosmos chain.

The question is then whether to acquire Osmosis vs tread another path, such as employing a new team to build a DEX from nothing - something that has been tried by other Cosmos-based teams multiple times before to little success, or launch EVM and rent a deployment.

The plan to launch Stride DEX was put on hold months ago and would likely incur higher ongoing costs even if eventually implemented without any of the established user base.

The Cost

Framing this as an immediate loss of capital is misleading. This is a token-based merger between two economic systems. The claim that all ATOM will be sold immediately is speculative and overstated. Most importantly, it ignores the scale of ATOM emissions.

  • ~4.6M ATOM has been minted in the last 34 days since this proposal was posted on the forums through staking rewards alone

  • Over a typical implementation period, emissions will exceed the cost of this integration.

If inflation-funded emissions are acceptable, it is inconsistent to treat a one-time conversion into productive infrastructure as uniquely harmful.

The Community Pool today holds largely non-productive capital. This proposal converts a portion of that into ownership of a revenue-generating system.

While that revenue is currently low, the expectation that it will remain so suggests a belief that transaction volumes within the Cosmos will never recover.

Liquidity Fragmentation

In practice, this will not exist at a noticeable level.

The majority of liquidity (~80%) is active and will either be encouraged to move through the migration wizard or to market makers; teams will be engaged to migrate. The Cosmos Hub will immediately gain routing advantage from initial liquidity movements by larger actors, and liquidity that does not migrate will be encouraged on a case-by-case basis through taker fee adjustments and discretionary incentives from the OGP.

Liquidity follows volume. Volume follows execution quality. Execution quality follows depth.

Even in the case where migration is gradual, this is not an economic loss:

  • Both deployments ultimately accrue value to ATOM

  • Legacy Osmosis revenue is redirected toward ATOM via buybacks during the transition

There is no long-term scenario where liquidity on the legacy chain competes with the Hub economically.

Osmosis Revenues

Revenue decline is not unique to Osmosis. It reflects reduced activity across the Cosmos ecosystem.

While we can attempt business development on Osmosis, the main liquidity sources that have been beneficial for Osmosis have been the launch of new tokenized assets, often with their own chains or on Osmosis itself. Working independently as an exchange, attracting new teams to do so is limited in its effectiveness.

Attracting customers to launch these is already the hub’s problem and the driving purpose of the Cosmos Ecosystem. And it becomes easier with the native DEX integration and launchpad.

Team and Incentives

It is correct that Osmosis is transitioning away from a founder-led model.

Osmosis is no longer an early-stage product; it is mature infrastructure that has operated reliably for several years and does not require a large team to work on.

The requirement is not founder-led innovation, but ongoing maintenance and incremental development. Both founders would be looking for new opportunities to connect work into Cosmos. Dev has already begun building a Cosmos SDK private token holder vote application.

Responsibility transfers to the Osmosis Grants Program (OGP) under Cosmos Hub governance, with dedicated funding and accountability.

The team that remains as custodians is composed of long-standing contributors to the Cosmos Ecosystem and is therefore very unlikely to move on. Four of the original team would remain, with an additional three being available for security incidents.

Product

The view that Osmosis is obsolete or misaligned with future market structure is not one I share. Osmosis already supports extensible pool models via CosmWasm, including orderbook-style implementations. Implementing Osmosis and implementing experimental liquidity systems are not mutually exclusive.

Osmosis has been working on being easily integratable with institutional-level counterparties for years. This is one of the hidden hard parts of building an exchange.

The following statements cannot all be true:

If not Osmosis, then what is the concrete alternative?

Growth and PMF

I agree that growth is not guaranteed as a direct result of this integration.

However, the proposal does not, and cannot, attempt to solve this directly.

Instead, it addresses a structural issue that Cosmos Labs agrees with: the Cosmos Hub needs a DEX to accrue value to ATOM when growth returns and service the interchain ecosystem.

Conclusion

Regardless of the outcome of this proposal, Osmosis will continue to operate at the primary exchange in the ecosystem and accrue value based on ecosystem activity.

The question is not whether Osmosis survives - the funding outlined will keep Osmosis running for years.

The question is whether the Cosmos Hub chooses to:

  • own and align the ecosystem’s primary liquidity venue

  • or continue operating without direct exposure to its core revenue layer

There is no alternative proposal currently presented that achieves this outcome, which is why I encourage a Yes vote.

1 Like
167

It does look like this proposal isn’t going to get enough votes to pass.

I think the proposal is far more justifiable at a lower price.

the real question is how do we discover what price might work.

168

This is interesting, when the proposal was almost passing you come here to try to suggest people vote yes and that iqlusion will vote yes. Then when you see the proposal not passing you say that actually it was a very bad deal and that it should have a lower price?

169

Snow-Fall.io — Position on Proposal 1029

With less than 24 hours before the end of the vote, it is becoming clear that positions have largely been formed.

Even if a few large validators have not yet voted — and could still shift the outcome — the direction of the debate is now well defined.

In that context, it is worth taking the time to read through the discussions here.
They reflect a level of depth and divergence that goes far beyond a simple yes/no vote.

Over the past few weeks, we have been consistent on one point:

ATOM needs to capture value.

On that, we remain fully aligned with the direction behind this proposal.
The idea of bringing a real liquidity engine closer to the Hub — and giving ATOM direct exposure to economic activity — is, in our view, a step in the right direction.

Yes, the Hub must capture more value, offer real services, and operate a meaningful liquidity layer.

But today, after following the discussions across both forums, one thing has become clearer:

This is no longer a debate about direction.
It is a debate about execution.

And on that front, we share the growing concerns expressed by many contributors.

We find ourselves aligned with what might be the most important takeaway in this entire discussion, as highlighted by Zaki Manian:

“The proposal is far more justifiable at a lower price.”

This sentence captures the current state of the debate better than any long argument.

From our perspective:

  • The strategic intent makes sense

  • The need for a DEX at the Hub level is real

  • The value accrual mechanisms are directionally correct

But the current deal does not meet the level of clarity, balance, and risk control required.

Not at this price.
Not with this level of uncertainty.
Not with the current guarantees around liquidity migration, team continuity, and long-term alignment.

So our position remains:

:backhand_index_pointing_right: Vote: NO

This is not a rejection of the vision.
It is a rejection of the current terms.

If a revised proposal emerges with:

  • a more balanced valuation

  • stronger alignment of incentives

  • clearer operational guarantees

  • and a structure that truly protects ATOM holders

then we are open to revisiting our position.

Because ultimately, this should not be about forcing a deal through.

It should be about building a real win-win outcome — one that strengthens both the Hub and the broader Cosmos ecosystem without introducing disproportionate risk.

Snow-Fall.io
Building quietly. Participating actively.

1 Like
170

I just want to note that if this fails Sunny and the osmosis team are done. He’s out, there is no revision, look at Cito’s interview. He is only offering help if it passes, there is no second chances with this.

171

He’ll come here again for liquidity. He needs to unload his bag to start a new AI startup. He can’t unload on Binance for obvious reasons; he needs a fixed rate. I think his next offer will be simply 80-90% of the community pool, without any additional emissions.

172

Osmosis tried hard until the last minute to make the proposal pass, even convincing Kiln to change their vote from NO to abstain in the last minute. If the gap of Yes to No votes was not as big, this last minute trick would have definitely made the proposal pass. Osmosis before called themselves the center of the Cosmos and bigger and better than the Cosmos hub and now they come to try to get the whole treasury of $20M just like that and leave the Cosmos hub community holding the bag. Moreover, Osmosis failed to properly assess the risk of LUNA and UST and via very high incentives led many cosmonauts to lose huge amounts of money in their UST and LUNA pools. So congrats to the Cosmos hub community because the Osmosis proposal is now officially rejected

1 Like
173

Typical corruption. His interview was full of references to validators, conversations with them, and so on. This whole corruption thing is just plain annoying. Why didn’t you, Vladimir Posthuman, create a poll in your DAO for such an important proposal, asking for a balanced vote instead of a YES? I’ll answer that. Because when it’s up to you PERSONALLY, you don’t care about delegators or all this show-off with a supposedly decentralized validator.

2 Likes
174

Everstake had the final say in this proposal. I can only imagine the negotiations that went on behind the scene…

1 Like
175

I have a job for you at Wendy’s so you can live in your van down by the river, Sunny.

1 Like
176

With the official rejection of the proposal, I would like to offer a final reflection. We know this is not over, but it is vital that moving forward, all proposed alternatives are evaluated with real and realistic numbers on the table.

Reducing this debate to a simple ‘YES’ or ‘NO’ ends up being, in my opinion, a somewhat despotic stance from both sides. I voted NO because I felt the figures were unrealistic and lacked solid information to build upon, but that doesn’t mean the dialogue should close. We now have the time to seek a solution that helps, rescues, and fosters both Osmosis and the Hub—and, most importantly, our community.

We gain nothing through insults or contempt for those who think differently; that only leads to even greater ignorance. Failing to put in the effort to understand the opposing view prevents us from seeing that every story has a ‘side B’ that deserves to be heard.

I ask for civility. There are real humans behind these projects who need our strategic support, not personal attacks. Now that we are at this point, let’s look for the most equitable solution for everyone. Thank you.

178

Following up on my previous reflection, I want to dive into a point that I believe is vital: Osmosis needs help, and it is our ethical and strategic duty to offer it.

Osmosis is part of our DNA in Cosmos. It is like a limb of our own body. When a part of your body gets sick, your first instinct shouldn’t be to amputate it or let it wither away; your duty is to find a cure, heal that part, and work to restore the strength of the entire organism.

We must offer them a real, sustainable path for assistance. If we cultivate this philosophy of mutual support and rebuilding, we might not be the number one network in market cap overnight, but we will undoubtedly be better, more resilient, and more united than any other ecosystem in this space. The tables can turn very quickly in this industry, and we must remain humble: tomorrow, it could be us in their position, facing difficulties and needing that exact same empathy.

We are all members of something much bigger than our own individual investments, and that ‘something’ needs to be named and honored. Call it a true community, call it real interoperability, but let’s prove with our actions that we are exactly that. It’s time to put egos aside, sit down to heal this part of ourselves, and emerge stronger together.

1 Like
179

This is how Cosmos Labs behaive! The brightest example - proposal about Hydro