Validators lack understanding of supply/demand impact to price. They are short term focused given we were in bear market’ survival mode’. Change in inflation for them is considered a haircut on their revenue. Which is true for some period of time. But if you take 1-3y, validators would win massively. But that’s still uncertain in their eyes, why change? Add AiB delegations and we have plenty of No votes.
Indeed a different perspective.
But please do not hesitate to name Stride (as a winner of the said situation. But, why does anybody want Stride to flourish with existing tech, where they are unable to delegate to the larger set of validators instead they chose 32 vals, Why we are making the already distributed VP concentrated in fewer hands? Why VP concentration does not matter here?
Why every time we want to get it going on expanse of everything?
Hey, sorry for the late reply, and, thank you for writing the response thoroughly.
Ideological impasse, so we should not continue the discussion on the current topic, I sincerely hope we meet on a different prop discussion to have another chat. Additionally, I am sorry if you felt attacked.
The forum i know has some norms and values where OP or colleagues usually respond to people and after getting all the data and answering all the concerns they go for an actual vote. In this prop, the OP is supposed to be one of the Cosmos leaders with multiple projects in the cosmos and personal interests in t the HUB, that person left the discussion without answering the questions. Yes, it is a community effort to make things bright for HUB but don’t the leaders have any responsibility? From my perspective they have, they can’t keep experimenting at retail’s expense.
But, thankyou anyways for the reply.
Can you just explain to me why this is the right time to make these changes? when everyone knows the result will come in ~ 3 years (if any).
I am unable to understand the timing.
ETF within few months with 90% odds. That brings a lot of liquidity to whole ecosystem. Validators’ revenues are driven not my inflation rate but market cycles. Plus attracting new atom holders/stakers. Reducing inflation focuses on new people via defi and in general atom.
If one assumes can time the market, he will learn soon he is failing continuously. Like starting gym, why in 3 years? Best time is now, because continous positive change compounds from day 1. The sooner one starts the better.
Also, ‘working’ system like atom is slow death as inflation at this level pushes price to 0 assuming infinite time. So it needs change either way. Even Jae agrees it is faulty re 20% and current ‘printing’ mechanism not tax efficient, which is not revenue but non staker tax.
Somehow seems there is big resistance to this proposal due to personal reasons that it came from Zaki. Proposal won’t do massive impact, won’t break atom, but more likely improve situation and could be catalyst that we need.
People look who wins more and assume it is bad and not fair. We need to look at net outcome. Is this positive for everyone? If yes, we vote yes. The problem is time preference. Most are short term orientied, while systems should outlive current people, so decisions needs to be at least few years ahead. I see most people can’t overcome this.
Hi there,
My name is Alex, cofounder of Cenit.Finance a company specialized in Tokenomics simulation. Recently, my team has been working on a simulation for the ATOM economy using agent-based methods that compares ATOM 1.0, ATOM 1.0 (10% max inflation) and ATOM 2.0 (rejected last year). Hopefully we can be of help on this matter.
- Simulation: Streamlit
- Blogpost: www.cenit.finance/blog/atom-tokenomics-a-dive-into-scalability-and-sustainability
We have been studying the effect of this proposal and we have seen that ATOM 1.0 with maximum inflation capped to 10% yearly generates a 10% improvement in the minimum token price and treasury health. The token price here reflects the organic token price, with no speculation taken into account. Given a simulation of a timeframe of 80 months, we obtain the following:
However, it is important to understand that a big part of the token utility depends on the token price because most of the staker profits come from the token-denominated incentive rewards. If the token price goes down, there could be a vicious cycle where fewer stakers are interested, the buying pressure decreases, prices go even lower, etc.
The tool is open for the whole COSMOS community here Streamlit so that the whole COSMOS community can make their own analysis and use the tool as a way of making quantified and informed decisions.
To test different scenarios, one can just change the values over the sliders and the new scenario with the different token design will be executed. It is this section of sliders that we can change between the configuration of ATOM 1.0 and ATOM 1.0 with lower inflation (Tokenomics model selector).
Hope you like it and let me know if you have any questions!
Additional information
Limitations of the analysis
The simulation, of course, presents some limitations:
- The model uses predefined growth hypotheses
- Lack of details regarding treasury operational costs leads to a big assumption, currently at $15 Million yearly. Any additional information from the Cosmos team to this regard could lead to a much more accurate model.
- The simulation assumes no new utilities to be added later on for the token that might lead to considerably increased token demand and buying pressure.
Modeling Data & assumptions
- Ecosystem size: currently ATOM has ~120,000 transactions/month
- Treasury data: the community pool currently holds 38M$ in ATOM
- Validators data:
- There are 180 nodes active
- 66.4% of tokens are currently staked.
- The inflation rate for staker incentives is currently at 14.15%
In addition to the ecosystem data, for our modeling we will use the following assumptions:
- Stakers, being the main demand drivers, aim for an Annual Percentage Yield (APY) of at least 10%, influencing their token purchase decisions.
- The treasury faces $15 million in yearly expenses, funded solely by tokens.
- Transaction volume is projected to grow steadily, reaching 240 million transactions per month in about 7 years.
- Holders are likely to sell only when their holdings triple in value compared to the Token Generation Event (TGE), setting at a token price of at least $15.
NOTE: Some of these assumptions are preliminary, and we are more than happy to update them based on your feedback!
About Cenit Finance
At Cenit, we specialize in tokenomics simulations to understand how robust is your token economy, helping teams and communities to make informed decisions over their designs. We have been working in web3 simulations for approximately 2 years and projects such as 1kx, Wirex, DiVa Staking, and Ethermail already trust in our simulations.
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I get that, the problem is most people see ATOM as “Money” like BTC but I believe that ATOM is a governance token. For money, even 10% inflation is too high but for a governance token, we need more bonded tokens for the security of the network and governance.
Think, Atom is money and Inflation is bad let’s do a param change and make the inflation to 0, What will happen? you will get the answer.
Now if it is about finding a sweet spot between security/bonded tokens/inflation and Atom price this means experimenting and no one actually knows the answer but just speculating.
point 1: atom will never be money. BTC is money. If you have illusion it can be, you have to rethink this part. Bonded rate vs inflation has no established relationship for now.
point 2: lets change inflation to 1,000,000% and see what happens, your answer there. Btw, current model is exactly it, just slower death. Systems do not operate in isolated environments. We have peers.
point 3: well pointed regarding experimentation to find equilibrium. We should have more trust in Hub’s robustness vs other systems. We need stability in price so validators can be ok, defi be ok, atom holders be ok, stakers be ok. Current rate is point 2.
‘You’ don’t know the answer. Please don’t project (or as the Russians say “mirror”) your lack of knowledge onto others.
BTW, I know this will sound like heresy to Jae, but if the unbonding period is lowered from 3 weeks to 2 weeks, the bonded ratio will increase. When you go to interview at a Wall Street firm, one of the questions you will get asked will be “Explain me why time is money”. Time is indeed money and the longer you lock up money, the more you have to compensate people for it. This is called a “term premium”. People want more liquid instruments, not less liquid ones. By increasing the lock up time, you have to increase the interest you pay them.
For that reason, Cardano with its zero lockup staking can get 70% bonded by paying only 3% in inflation. If for example, ATOM was to increase its unbonding time to 4 weeks, bonding ratio will fall to sub 60% as many investors will find even 20% not enough to compensate for the extra week of lockup. The issue here is the volatility of the ATOM token which is north of 100% per year. 20% doesn’t nearly compensate for that type of volatility. If you let the system run as is, inflation will be trending toward the 20% upper limit over the long run. The only way you stop this devaluation of unstaked ATOM is by either limiting the max inflation or reducing the unbonding time.
As is presently constructed, ATOM inflation has zero chance to go back to 7% if market forces are left on their own. Even 20% is not enough compensation to lock up a 100% HV token for 3 weeks.
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Nobody ever said unstaked ATOM should be money. That’s why there is this whole drive to create stATOM comes from. STAKED ATOM IS MONEY that can be used in DEFI, unlike unstaked ATOM.
Bonded rate does have a relationship with inflation, I put the formula in a prior post. The fact that some people don’t believe in gravity and refuse to acknowledge evidence, doesn’t mean it doesn’t exist and can’t be formulated.
By definition staked ATOM can’t be sold on exchanges, only unstaked ATOM can. The linkage to fiat (ie pricing in fiat) happens through unstaked ATOM. The total market cap of ATOM and validator earnings are calculated using the fiat prices of unstaked ATOM. For that reason, the fiat price of unstaked ATOM is critically important. The importance of the fiat pricing of unstaked ATOM on exchanges is spelled out in the Sunny Agarwal white paper that Jae shared in his post above. For some reason, a lot of people either don’t know about it or choose to ignore it.
point 1: stAtom is not money. You consider casino chips in casino as money. While it is money within that narrow ecosystem, it is not outside. BTC is outside money while stAtom is internal eco money. I remain with my position.
point 2: you described your confirmation bias. Statistically there is no relationship inflation vs bonding rate. But if there is one, it is more psychological and low sensitivity. What you spoke a lot about is duration risk. Locking period. That has a lot of senstivity to inflation rate, i believe that.
point 3: not sure what you mean.Price and liquidity is super important. Especially connection to CEXes and real world.
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If the Fed raises rates to 20% what happens? Everybody locks up their money in 1 month Treasury bills. The bonding rate of US dollars increases. So yes, there absolutely is relationship between inflation and bonding rate. Term, inflation, bonding rate are all part of the same formula. In ATOM’s case because it is not official money (ie legal tender), you need to add fiat price on exchanges. If you increase the term while keeping inflation constant, bonding rate goes down. If you increase inflation while keeping term constant, bonding rate increases (which is what Jae is trying to do). The problem is fiat price - fiat price goes down in this scenario. Just look at any bond pricing formula.
When I said that stAtom is money what I meant is that (if you assume Cosmos Hub network has constant market cap) it is a non-depreciating token that can be used for non-staking purposes in DeFi, for lending and other activities. Obviously it is not “money” like a US dollar or a Bitcoin. But it has stronger monetary properties as Jae and Sunny define them in their paper vs the unstaked ATOM which Jae specifically wants to rob of monetary properties (what he really means is eliminate its store-of-value property).
In any case, it is all working as Jae has designed it and wants it, the problem is in the real world validators can’t stay in business if the unstaked ATOM prices goes to zero in the long run. This proposal is simply a reality check on Jae’s monetary policy design - his theory is not working out in real life. Join the club (and it is a huge one).
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I agree on most points even if we could argue on nuances. Real world impacts atom a lot given peers act differently.
Very good point re atom price and inflation like a bond. For example, we could discount atom price by inflation. Atom price / (1+20%)^x. It clearly shows how inflation significantly impacts price. Easy to understand for non financial people. We should market this idea to public.
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Looks like gno is winning again…
First #82, now #848
Maybe 8 is an unlucky number for the anti-gno cartel?
It’s reason. Everybody who is voting yes on #848 is confused, and the reason is spelled out in this post.
You all can’t even calculate income correctly, and the AIB post describes how to fix it. The entire premise of your past research was destroyed by one post and you haven’t updated the past research analysis in respect to this revelation. Please read the whole post and grok it and update the research before claiming that you have done the research. The foundation of your research has been shrunk by a factor of 3.6.
I don’t need to participate in order to speak from first principles, and one of the first principles is that ATOM must not be money. That’s where I derive the rest from. So first refute me there.
The way Stride does it is an attack on hub governance because it creates a party hub with its own governance and its own mind for how to delegate. The reason it is an attack is because the same is not offered for the opposition party; and because Stride promotes itself as “liquid staking” when it doesn’t require the stakers to delegate. This collectivized form is closer to a party hub and so the name is a misnomer. Have they changed these issues? Does Stride run on ICS only? Is the same software made available to the opposition party? Then it’s safe. If not, it isn’t safe. And because it isn’t, and it isn’t safe, we are forced to respond with countermeasures until the situation is fixed to be safe for everyone.
Those ATOMs staked for the purpose of getting collective “liquid staking” tokens SHOULD NOT have the same governance rights as non collective “liquid staked” ATOMs that are just delegated to validators because there is the people who would hold these tokens are NOT EXPERTS IN STAKING, GAME THEORY, TOKENOMICS etc. Money token holders are NAIVE. You want to STRIP or CAP the voting power of these “liquid staking” token holders in order for the chain to survive. Otherwise we will get the industry and every mother fucker a monetary incentive to spread lies and confuse people to subvert the chain. It already is happening but at least we are more intelligent than the general community. It will incentivize degen behavior at the global scale. A more secure monetary token is one that is officially supported by ICS (if the partyhub isn’t strong enough to run its own validator set) and removes or restricts the voting power from these blocs. So you need this monetary “liquid staking” VOTELESS token by default. AND… when there is a need for parties, each of these partyhubs can offer monetary “liquid staking” VOTEFUL tokens that compete. You only want to enable this once > 1/3 are dissatisfied and want to form a party to potentially split off if need be, and there needs to be a n opposition party in the very least to counterbalance. But at first you want just a voteless staking token that is natively offered by the hub.
I voted NO against CosmWASM on the root shard. Yes, it doesn’t belong there, it belongs on a consumer chain or internal shard. What is the problem? There is none, this is the way it should be. If you haven’t noticed there were other chains that halted after because of CosmWASM usage. Even after you see the proof that the hub was saved, you blame me for saving it. But I’m not complaining, I’m leaving context for others who might be more open minded.
Every thing must be correct, otherwise the whole thing is pointless and only dangerous. We can just require CEXes to declare their affiliation and strip their voting power. This is what we should do. I think I’m the only person suggesting this because I dunno why.
I’m the guy who has been yelling about broken validator incentives and proposing solutions. I have been for a long time. Maybe more people should just listen to what I have to say and consider implementing them, and taking time to read what I write, I dunno. Also see github decentralists DAO governance suggestions. More coming soon.
This is just wrong. First, AIB was excluded from conversations like Atom2, and when we were invited to ICS conversations we made significant contributions. We are the ones making governance fix proposals like I just mentioned above, and we’re the ones educating you that we are all calculating income wrong, trying to address the massive ignorance and great chasm in understanding and culture, and we are the only ones besides Ethereum that really made our own VM (through NT,LLC) and we will dominate by virtue of its designs.
Every time we try to save the hub from itself we get flack like the above, and it’s getting pretty tiring. Don’t blame us for wanting to create a fork that excludes you all, this community has become toxic to truth, and something must be done about it. Everything I rant about is true, and if they are true it is worth ranting about. But you don’t want the truth, you just want us gone. So we will split, gladly, and even while doing so we will try to save the hub, because even though you don’t appreciate what we do despite all this, we don’t want to see anyone suffer from the collapse that will follow from ignoring our warnings.
It is clearly connected to other chains via IBC. And what the fuck are you doing trying to convert a hub into a non-hub, while ignoring our pleas to fix governance and validator incentives, and calling ICS broken because of said broken incentives that you won’t fix, and using this to convert the hub to what it shouldn’t be, and then simply ignoring the IBC tokens that are held in the hub? What sort of spirit possesses you to completely ignore the intent of my warnings and to brush off prior committed obligations with a statement like “isn’t that from 2019”? Jesus. This is why humanity can’t have nice things.
And if you don’t like that it’s a hub, why don’t you use the features it provides in order to launch a new zone that does what you want, instead of fucking over a thing that has already been working for years?
This is just malice disguised as ignorance, or, you are misled by those conducting it.
Ok kid, just keep overpaying on your taxes. Nobody is stopping you. Maybe this should be part of the negotiation with tax authorities, that we won’t stop idiots from overpaying their taxes and drying themselves out of the distribution.
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CONTEXT:
Reflecting on the recent on-chain vote for Proposal 848 on the Cosmos Hub, it’s evident that the proposition, aiming to set the max inflation parameter, has encountered significant challenges. The proposal is expected to be rejected by a closely contested vote. The tone of discussions in the forum has escalated, revealing a lack of preparation and a notable level of controversy.
ANALYSIS:
The post highlights a fundamental problem with Proposal 848, emphasizing that it was poorly crafted and should have been presented as a temperature check rather than a proposal. The level of animosity in the discussions reflects the inadequacy of the proposal’s preparation. Many comments in the forum lacked informed perspectives, and misleading statements further complicated the debate.
Acknowledging the minority who contributed meaningful data and information like @effortcapital @Alex_Cenit and @AiB @Sephiroth @jacksteroo and few others, this post recognizes their valuable input as a testament to the quality standard of hub governance. However, it underscores that these contributors were unfortunately in the minority, and the overall engagement lacked a broad-based consensus during the pre-governance stage.
CONCLUSION:
The conclusion drawn by Govmos is that the debate on inflation is more complex than the simplified version presented in the proposal. It calls for expertise in economics and financial modeling, a requirement met by a few contributors but not by the majority. Govmos encourages relevant parties to initiate a separate topic for a new pre-proposal, fostering due preparation and comprehensive debate. We also suggest that @effortcapital and BlockWorks should take the lead on this matter as they have been mandated by the AADAO for this very purpose. We advise them to emphasizes the importance of taking the necessary time before advancing on-chain, avoiding the controversy that arises when centralized proposals lack proper pre-governance consensusual debates. The message is clear: lessons should be learned to prevent recurring challenges with proposals in the future.
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hey @Govmos, thanks for your analysis.
why are you voting abstain (as CEXs do) on every single proposal?
I don’t understand this post. Just look at our votes. In connection to Proposal 848, we have opted for an ABSTAIN vote to uphold political neutrality on this intricate issue. This choice aligns with our commitment to delegators, pledging to abstain from politically motivated or contentious votes. Simultaneously, we actively inform our userbase, encouraging them to independently cast their votes after conducting thorough due diligence and research.