[PROPOSAL ###] [DRAFT] Add Elys Network Consumer Chain

Elys Network Consumer Chain Proposal

This is a proposal to launch Elys Network as an opt-in consumer chain. Opt-in consumer chains are intended to be launched permissionlessly, but in this version of ICS, a permissionless launch is not yet possible for technical reasons involving the chain_id. If you are interested, read more here.

This proposal is NOT intended to judge whether the chain is worthwhile to use or validate. Since it is an opt-in consumer chain, no validator is obligated to run it, and any validator can opt in or out its validator set at any time. Validators who do not feel that the chain is worthwhile are encouraged simply not to run it.

  • Vote YES if you believe that this consumer chain is being started by Elys Network’s real development team, is not squatting on a chain_id commonly recognized as belonging to another chain, and is not launching a large number of consumer chain proposals to spam governance.
  • Voting NO has no purpose. Voters who feel that this chain is impersonating another chain or that this proposal is part of a spam attack should vote NO WITH VETO
  • Vote NO WITH VETO if this consumer chain is impersonating another chain, is “squatting” on an existing chain’s chain_id, or is part of a spam attack.
  • Vote ABSTAIN if you are not sure. However, the criteria above are quite clear, and in most cases it should be easy to decide whether to veto a consumer chain launch because of impersonation or spam.

About Elys Network

Elys Network is Cosmos Hub’s all-in-one DeFi Layer-1 appchain, the first of its kind to be backed by the Atom Economic Zone (AEZ).

  • Seamless trading experience rivaling top-tier CEXs while users enjoy all the benefits of DeFi. Trade assets across different blockchains without hassle thanks to chain abstraction and Unified liquidity
  • Defragmenting Web3 with Universal Liquidity: By unifying liquidity and simplifying UX, Elys Network transforms the fragmented Web3 landscape into a cohesive and efficient ecosystem. Bitcoin, Solana, Avalanche, EVM chains everything is at your fingertips
  • World-class UX for easy onboarding and asset onramps to bridge the Web2-Web3 gap
  • Universal & Seamless DeFi for Everyone, Everywhere: Our platform offers a truly unified liquidity solution: regardless of your ecosystem or wallet, the world of DeFi opens up to you
  • One-click Cosmos liquid staking for end users to easily bring Proof-of-Stake assets and earn passive rewards

Proposed Chain Parameters

  • Type: Opt-in
  • AllowList: Not needed for Elys Network
  • DenyList: Exchange validators
  • NumberCap: 45 validators
  • PowerCap: 15% voting power

Elys Network Incentive Structure:

  • 30% airdrop increase for validators and their stakers who opt in for 1 year
  • 25% of staking rewards to Cosmos Hub opt-in validators and their stakers. For the first year, that equates to 2 million ELYS
  • 15% of protocol-retained revenue (revenue remaining after distributions to liquidity providers and stakers) paid out to Cosmos Hub opt-in validators and their stakers in USDC
26 Likes

What a first post!

I look forward to seeing how the validator community receives Elys Network as a consumer chain. Working alongside the team has been great, and I can absolutely vouch for your team’s professionalism.

4 Likes

Praying my validators choose to opt-in.

Is there more info somewhere for validators who do want to opt-in? A discord they should join, a Github to watch for the binary, etc etc?

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What if there are more than 45 validators who choose to opt in?

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only top 45 validators who opt-in will be in the active set

1 Like

I assume the Vote Power Cap of 15% will prevent larger Hub validators from running Elys, if they are more smaller validators?

An extreme example would be in the bottom 44 of the Hub vals run Elys, and then SG1 decides to run it toom SG-1 will end up with having more than 15% of the VP on Elys, and that would disqualify them? [SG-1 is just an example]

Or is the 15% cap = “15% VP on the Hub”?

2 Likes

We will be happy to support the chain and cast a YES. But we would definitely invite you to consider using the VotePowerCap at a much lower setting than the proposed 15% which will basically have absolutely no effect, as presented in the chart below:


Note that the presented situation corresponds to the most favorable condition in which all the top validators (excluding exchanges) would decide to opt-in.


A more effective approach would be to set the cap somewhere around 3-4%. These are the relative effect it would have on the distribution:

More information about the VotePowerCap here: ICS 2.0 Economics : Partial Set Security (PSS) Financial Model


Thanks for reading, and on behalf of the PRO Delegator’s validator, we welcome you to the Atom Economic Zone!
Govmos
pro-delegators-sign

7 Likes

Finally! :grin:

Regarding the 15% power cap part: I gather that it refers to the VP on Elys and not on Cosmos (as it wouldn’t concern anyone if so, as pointed out above).

2 Likes

Thank you for more information

Elys team is very impressive every time I hear them. Looking forward to this.

About Elys incentives: how would you manage inactive validators? I’m asking because, if for example 90 validators will opt in, only 45 will be active, and if inactive validator delegators would not get the airdrop boost (for example) the drawback is to increase the centralization over the validators with more VP that’s active on Elys

Yes. Let’s do this thing.

Curious what happens if validators opt-in, do all the work to support the chain, and then are outside of the 45? We would like to support, but the lack of guaranteed resources and potential of time spent for nothing is a definite hurdle. Time is super valuable for us right now supporting many networks as a small team.

I support the 15% power cap (although I could be persuaded otherwise).

The reason is that the power cap is intended as a safeguard against a validator having way too much power, not to accomplish political goals of equalizing the validator set. I’m not necessarily opposed to that but I think it’s best to start slow with less drastic settings at first. It can be moved down to 10% or lower have a more pronounced effect in the future.

2 Likes

Alright, let us try to convince you otherwise with rational arguments!

Using the VP tax at an effective level, which we define as the minimum level that puts it into effect with the select set of validators, we demonstrated that it affects the revenue distribution scheme. As the model’s calculations describe (you can crunch the model yourself if you want to verify), the capped vote power of certain validators is redistributed to the remaining validators. The effective algorithm then iterates through the active set and consequently redistributes all excess cap amounts. The result is that it not only reduces the excess vote power of the affected operators above the cap but also raises the amount of VP that is inherited by the lower-ranked validators in the set.

Therefore, the statement “the power cap is intended as a safeguard against a validator having way too much power” is incomplete, assuming that we demonstrated it has more profound effects than this one alone. The further the reduction, the more sensitive the effect. That’s what you see with the dashed red line on our VP charts shared in the original post here. This effect isn’t politically motivated; it simply produces measurable effects on the reward distribution, which can be adjusted to be mild or more pronounced as the VP cap is lowered further from the effective level.

As we highlighted in our PSS analysis, this further incentivizes delegators to redistribute stake to lower validators, as capped ones would offer diminished rewards proportional to the cap amount they are affected by. This creates a natural decentralization force. In our economic projection of the model, we forecasted that opt-in chains would potentially use this parameter close to the effective level, therefore explaining our recommendation to set it around 4% without exceeding 3%. On the contrary, we propose to enforce stronger effects for Top-N chains whose direct alignment with the Hub would make a good use case to enact that decentralization force.

Favoring stake distribution among lower validators isn’t a political gesture; we firmly believe it is an essential component of a healthy blockchain ecosystem. Having the ability to create natural forces like that should be cherished, not assimilated to political maneuvering. We hope this explanation convinced you!
Regarding Elys’ actual case, being a PSS candidate for Opt-in, we simply shared a recommendation. It is up to them to decide whether or not they want to introduce that decentralization effect into their PSS agreement parameters. Ultimately, this is what this parameter is really all about—not just protecting against high VP concentration of top validators.

4 Likes

Looking forward to Elys as a consumer chain. Its a Yes for me

According to the @Govmos ICS 2.0 Economics : Partial Set Security (PSS) Financial Model:

I’ve 2 questions :

  1. What are the estimated monthly revenues you aim to achieve?

  2. Why have you set a limit of 45 validators? Could you explain the reasoning behind this specific number?

Additionally, have you considered using the “Validators/Chain Revenue Ratio” to determine an optimal number of validators and adjust accordingly?

5 Likes

simple question really. what are the projected returns for a validator? Here is my reasoning:

  • So far ics has been a huge cost
  • We are a bare metal val (not dc) with a complex setup - it needs to eat
  • We also provide endpoints, which increases the costs of the setups

All of these + some other points not mentioned here, lead to high costs and so far ics only covers costs indirectly (i.e stride lsm). What is the plan here?

Govmos : great discussion with jtremback regarding power cap. We discussed this for quite some time, and we could look at reducing it to between 5 and 10% but we want to make sure we get input from more of the community on this. Since this is a governance parameter, it can be adjusted at any time via on-chain governance but we do want to make sure we launch with a number that the community is comfortable with.

manueldb, Brendan-Whispernode, JulienViolet: We set the validator max number at 45, which seems like a low number, but is actually probably higher than we need at the start to accomodate demand from the community. With Partial Set Security, the idea is that chains can “right size” their economic security needs to the valuation of their chain. In this instance, we estimate that 45 validators is sufficient to represent the ATOM economic security for our initial valuation that we can then evaluate as we grow. As our TVL and valuation grow, we would indeed require more economic security, and can use governance to increase the validator set as needed to reflect that. To your point JulienViolet, the revenue of the chain would drive our valuation and impact this number going forward.

I should note that the reason ICS V2.0 was created was in part due to concerns that validators did not want to run every ICS chain, and wanted the ability to decide on their own. In early discussions with the community, it was anticipated that many opt-in chains would likely want to launch with much smaller sets (5-10 validators) so we are actually one of the larger opt-in chains from what we’ve seen so far in preliminary discussions.

Rewards estimation:

2 Million ELYS tokens will be distributed to the Opt in validators and their stakers in the first year from staking inflation.

Revenue estimation:

Revenue retained by the protocol (after system revenue is shared to liquidity providers and native Elys chain stakers) is distributed to opt-in validators and their stakers in USDC. Here are some examples:

Annual Protocol Retained Revenue (PRR)of $1 million would result in $150,000 distributed

$2 million PRR would result $300,000 annually
$5 million PRR would result in $750,000 annually
$10 millon PRR would result in $1.5M annually
and so on…

ELYS inflationary rewards are in place for the bootstrapping period to help validators cover infrastructure costs and reward ATOM stakers with those validators while Elys builds TVL and volume to generate higher revenues to sustain the ecosystem. As inflation winds down by the 4th year to a max supply of 200M ELYS tokens, the goal is that system revenue alone would be a strong value proposition for validators be opt-in to the active set early in our growth phase.

Final Thoughts:

We understand that validators make significant investments of time and financial resources to partake in the launch and maintenance of a chain, expressing an optimistic view that a chain can successfully contribute to the AEZ while balancing the challenges that come with market dynamics and the time needed for many chains to grow large enough to become self-sustaining. That effort is extremely valuable to what the AEZ does and we are grateful for those who elect to do so, knowing that this is by no means an easy task. We’re all here in this community not because this is supposed to be easy, but because we want to build a system out there thats suits the needs of users out there in every sector, whether thats DeFi, DePin, gaming, etc.

Thank you all for choosing to be a part of that movement, you inspire me to always think about the impact our team wants to make on this space, which can only be possible based on direction you as a community give us and the amazing work that you continually put in to making the Cosmos ecosystem a better place. Build on :pray:

Hesham

10 Likes

You don’t have to opt in to validate any opt-in consumer chain if you don’t want. If the rewards Elys is offering aren’t worth the infrastructure costs, then don’t run it

2 Likes