[PROPOSAL][DRAFT] In search of direction

Recent conversations have shown a desire from developers and community members for a community. This draft starts from what appear to be ideas with a low levels of contention. Please suggest changes that you would like. I want to try to keep this high level and non technical so please limit contributions to this.

Also let me know if there is appetite for this to go on chain. I can’t fund this prop myself and am unwilling to risk someone else’s ATOM being lost to veto if there is low chance of success.

Reason for proposal: In order for developers to have confidence that building or spending time scoping builds on Atom is of value.

Proposal: We the Atom community signal our desire for developers to work on, seeking funding where necessary, the following projects to bring utility to Atom, placing it at the centre of the eccomonic activity of the cosmos and bringing value to Atom stakers and holders.

  • Interchain security - the further development and bootstraping of consumer chains to bring value to Atom holders.

  • Liquid staking - a way to mitigate the risks of liquid staking both in terms of security and governance while boosting the utility Atom.

  • The Allocator - a way to decentralise the speedy deployment of Atom and ensure that projects that increase atom utility and value.

  • The Scheduler - a way to generate additional revenue via leveraging prioritising positions in cross chain block space.

While this proposal signals support for these elements all future proposals will be voted on in line with governance and on their own merits.

YES - You wish to signal your desire for developers to work on ideas including those listed above
NO - You don’t wish to signal your desire for developers to works on ideas including those listed above
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 the quorum but formally decline to vote either for or against the proposal.


This is a start, I think the community has to unite on a decision, one way or another. I think we need developers to start working on this, but they also have to be compensated. Starting somewheres is what matters.

This is a starting point regarding the allocator.

We need a signaling proposal for funding though.

5,000-10,000 atoms to start with.

Let’s try to attract some developers to make this happen.

We need to think of a new solution or bring atom 2.0 back … I don’t see anyone else with a solution, and we need to consider a constitution so that way everything goes according to plan, and if someone breaks the constitution, they are forever banished


Validator voting power needs to be addressed.

liquid staking when paired with incentives like those described in allocator + validators having aggregate voting power of their delegators seems very risky.

allocator incentivized LS leads to lower yield for delegators
→ leads to delegators unbonding native ATOM at much higher rate compared to LSDs because LS redemption always goes up and you have to pay more liquidity to print new LSDs so people wont redeem as much
→ because validators vote with aggregate of delegations and LSDs control oversized % of delegations (quickly if incentivized like described in 2.0, or more slowly if adoption is natural and based on LSD utility)
→ LSD providers soon control validators through “incentive alignment” (assuming there isnt some sudden change where all the delegators start overriding their validator)
→ given that many large validators also secure numerous LS chains high in their active sets, LSD providers would soon control gov of all chains sharing top validators with common LSD providers.

this scenario can be further exacerbated by validator cartels. if even a few validators conspire with LSD providers and begin “incentive aligning” each other through LSD delegations and/or awarding funds from the community pool or similar encouragement

not trying to suggest any malicious intent. its not required, just businesses acting in their own self interest gets you to LSD providers controlling governance of the entire cosmos.


Regarding voting power…

The community needs to persuade Keplr and Cosmostation to STOP presenting validators based on rank. It only exacerbates centralization. The wallets need to display the smallest validators up top, and/or allow people to filter validators based on stake, commission, performance, etc.

Not sure if the community can impose a proposal onto the wallets though.

Additionally, liquid staking needs to be written into the SDK as a natively deployed option, not contingent on 3rd party providers.


Proposal is in line with my suggested next steps here.

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Keep in mind that Jae says the voting is flawed. Abstain votes are counted as Yes. Not sure why he isn’t waving red flags to get this fixed first and foremost. That’s why he called for NWV on 82.

This is from the liquid staking risks document by Zaki.

"There are liquid staking protocols that could result in validators cartels that could take over governance with little at stake themselves. We are seeing a lot of innovation in how liquid stakers can participate in governance from protocols like Govmos. There is a strong chance that governance will become more active and informed and less power will sit with centralized exchanges as a result of liquid staking. But we do see risk and we designed the exempt delegation system and the exemption factor to mitigate this risk.

Each delegator has the option of exempting their delegation from the share tokenization system. This means that tokens are not part of the liquid staking system at all. These exempt shares behave like delegations before the liquid staking systems. The system keeps track of the total amount of exempt delegation to each validator.

The exemption factor is a chain wide parameter that sets the relationship between outstanding liquid staking shares and the total amount of exempt delegation for each validator. By setting the exemption factor to be a small value between 0.1 and 3.0, the chain creates an incentive for validators who want to participate heavily in liquid staking to increase their exempt delegations by owning more ATOMs for example.

This means that validators need more skin in the game themselves and closely aligned ATOM holders."

how will the exempt delegations do anything to mitigate risk? it seems like the exemption is closer to cutting off a poisoned hand before the plosion reaches the rest of your arm. why play with poison at all?

it also mentions that delegators will be able to opt out of comingling delegators funds with the outstanding Liquid Staking leverage. this should be an opt in only. it seems malicious and dishonest to expose delegators to increased risk without disclosing it to them before hand. shouldn’t this also require a warning prompt reguarding exemption before delegating with keplr and similar wallets?

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Use a community pool tax to compensate developers and new projects

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I see a move to Atom 2.0 as completely necessary. The inflationary module for paying rewards is problematic and non-viable for the long term for a number reasons. The most impactful reason for me, to move to a model that incentivises utility and a value add use case is, by inflating we are taking value from users that have not staked their assets and giving it to wallets with staked assets. This seems to me to be a Ponzi/Pyramid scheme, we should be syphoning value from TradFi, not from our own ecosystem and while we can justify it for the short term, we need to move away from the model as soon as possible. Atom 2.0 is the answer for what we can do… Also I noticed, “The Scheduler” has been left out of your proposal, was there a reason? I ask because it is a large part of Atom 2.0.

It is not flawed in the way you think. By abstaining you would have helped to reach Quorum and that would have cut off another path for Jae to get what he wanted. He wants to sink Atom 2.0 and punish the proposer of the prop. So he, “Misused”, NWV to have his way. He invalidated a prop with majority “YES” votes.

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Does keplr and Cosmostation agree with a plan to bring a whitelist of validators that are not exchanges/ neither top 20-50 but is constantly on GitHub contributing code into a whitelist that is recommend to new stakers or common users…
We seen how they advertised ICNS on keplr , I don’t understand why they can’t advertise something like redelegating VP to lower validators.

Those validators should be on a whitelist and that will
Help contribute the voting power. It will get distributed slowly but it can help… that way this issue is quickly cleaned up.

I mean, it won’t help over night but it will make things easier, and then we won’t have this issue and start working on the next one…

The best idea, creating a whitelist to fix this issue.

Which, it wasn’t right… we seen alot of fuckery happen. And nobody really called it out…

There’s a lot of dumb conspiracies that are hovering over atom 2.0 and it’s not fair but one thing that needs to be determined or established is that this DAO or whatever they want to call it

It’s not going to be a honey pot cause that’s what most conspiracy theorists believe…

There’s some risk with liquid staking that doesn’t bother me but I would like to know how much of a risk it would be.

How much of a risk is it ? Like percentage wise that this can happen?

  1. Right now LSD on validators are aggregated, the allocator doesn’t seem to make any difference to that.
  2. You have ignored the additional value/revenue brought in by the Scheduler and that would increase staking incentivisation and we have the tax apparatus that would help to do the same. Rewards should be more than enough to keep wallets incentivised to stake.

The only real problem I see here is bad actors buying up large amounts of LSD to influence a vote then liquidating immediately after they vote. That being said what we have now is wallets buying up assets, staking, voting and waiting then undelegating, waiting and offloading their assets. In which case, as long as atom retains it’s value for a couple days, they are walk away clean.

validating is a business, validators vote in the interest of that business. this is often not compatible with the interests of users/delegators.

devs that contribute and also run validators should be economically incentivized separately for each.

this requires validators signing txns and not governing with other peoples votes.

and for contributors to be compensated through ICF grants and earmarked community funds. you shouldn’t get special treatment as a validator just because you are also a contributor, but because you have high uptime and sign only good blocks.

whitelists, like you suggest, create vulnerabilities.

@Hush What is an off-chain validator?

the above scenario will happen if validators are allowed to keep voting with other peoples votes, its just a matter of it happening fast or slow. Fast if LSDs are incentivized at the scale and using the mechanisms described in 2.0

the current iterations of LS perpetually requires more liquidity sacrificed to mint new stAssets. put into LPs your native/stAsset ratio is designed to farm the native liquid assets and as pools rebalance toward less stAsset because the ratio to print new stAssets perpetually goes up. i dont understand the argument for LSDs being some useful or innovative product.

The LSM also seems dangerous and some of the ideas i have heard using the LSM (like comingling leveraged derivatives from a sovereign chain with native assets and/or separating voting rights from delegators and giving them to some council of dictators)

Thank you all for the discussion. I reluctant to cover governance reform or get too detailed on liquid staking. Both are areas that need work from my point of view but I don’t want this prop to go beyond being a signal by proposing specific solutions.

I have added the scheduler to prop. My description of it is basic and may not be entirely accurate so I would appreciate any feedback on this.

Have also added voting descriptions.

In this sense we have to question ourselves if we have the right set of validators if they are prone to forming cartels or to be swayed by other chain projects.

My opinion is that validators should assess a vote what it best for the project they are validating and vote accordingly. I sincerely hate political voting (and yes, I am aware that it is happening way too much), but the only way out is by selecting the right validators. Because this issue is not directly linked to LSDs, but exists nonetheless. Also without LSD we see it happening already, so please don’t blame it on LSDs…

I agree that LSDs are not the issue, but they are a symptom of the issue.

The issue being Validators holding aggregate voting rights over delegations without any stake themselves. this creates misaligned incentives between validators and the chains they govern without any skin in the game. it seems obvious that validator cartels (or if that word is to harsh, preferential treatment works) and have already formed just by looking at prop89. a single validator decided to pay a fellow validator with community funds despite community sentiment overwhelmingly opposing it.

The solution is to bring sovereignty to $ATOM by making validator voting power √delegations + self-stake. this change aligns incentives of all voters toward the good of the chain and its participants. It makes the cosmos investable to those that dont validate.

That is indeed a nice way to change how validators manage the delegated voting power.

There are 2 things to consider imo though;

  • not all validators have their self-stake from the validator address. The majority of my self-stake is located on another address than my validator address. I have on the chains where I validate enough skin in the game, but it does not show directly on explorers like mintscan.
  • a risk of influencing the way validators manage the voting power in governance might have the effect that not many proposals reach quorum. A sad thing to be noticed is that an enormous part of the delegated voting power simply does not care about governance or the effects it has on the future of a project, but simply want their APR and nothing more. So we might need to change something about how proposals reach quorum as well.
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