Proposal to Implement a Buyback and Burn Mechanism Utilizing Consumer Chain Fees

[GeneralCrypto]

1. Summary

This proposal aims to introduce a buyback and burn mechanism for ATOM utilizing consumer chain fees. Instead of dispersing consumer chain fees directly to staker wallets, the collected fees will be used to purchase ATOM tokens from the open market, which will then be permanently burned.

2. Motivation

The current model in which consumer chains fees are paid to the Cosmos Hub and dispersed to staker wallets, while effective, could be enhanced to create more value for ATOM holders and create renewed faith in the Hub’s chosen path forward.

3. Proposed Change

This proposal suggests that instead of distributing consumer chain fees to staker wallets, these fees will be used to purchase ATOM on the open market, which will then be permanently burned.

Key Elements of the Proposed Model:

Consumer Chain Fees Collection: Consumer chains will continue paying fees to the Cosmos Hub as they currently do. The more consumer chains there are, the greater the fees collected by the Cosmos Hub.

ATOM Buyback: An automated conversion process will be put in place to convert these fees into ATOM using a decentralized exchange (DEX). This ensures the continuous purchase of ATOM from the open market.

Burn Mechanism: Once ATOM is purchased, it will be sent to a burn address, permanently removing it from circulation.

Transparency: The burn address will be publicly shared and there will be a dedicated real-time burn tracker display on a commonly visited web page. Not sure where to host this display. Any ideas?

4. Benefits of the Buyback and Burn Model:

Market Demand: It will encourage individuals and projects to accumulate, hold, and stake ATOM because the supply will steadily go down as consumer chains are onboarded.

Supply Reduction: Every burn reduces the total supply of ATOM, increasing scarcity and potentially driving the token price upward.

Community Support: This initiative will encourage community buy-in and support for the consumer chain model. The consumer chain model doesn’t currently have widespread appeal. This initiative will generate interest and renewed support for this chosen direction for the Cosmos Hub.

Stability and Value Growth: This model promotes a sustainable value growth approach by balancing market participation and supply control.

Enhanced Security through Value: A more valuable ATOM token increases the incentives to accumulate and stake ATOM, which in turn enhances the security of the Cosmos Hub.

Strengthening the Consumer Chain Model: Consumer chains may find the new model attractive as it aligns their fees with increasing the overall value of the Cosmos Hub’s native token, creating a stronger symbiotic relationship between consumer chains and the Hub.

5. Conclusion
   I urge the community to assist me with finishing this draft proposal. I think this course of action could dramatically shift community opinions and drive greater value of ATOM.

Next Steps:
Community Discussion: Engage in open discussions to gather feedback and refine the proposal.
Governance Proposal Submission: Once finalized, submit this proposal for governance voting.

[Tagu]

The infinite supply is an issue for long therm prosperity. I will support a burn mechanism.

[Victor118]

I like the idea
But ATM I see a problem
With PSS, validators wont validate all consumer chains
This means that as a delegator you choose validators based on their consumer chain thinking that the rewards will be better than with other validators
What I mean is that if you burn all the fees (rewards) you will increase the value for all Atom holders and not specifically for those who delegated to the validators who earn those rewards
This doesn’t seem fair especially as choosing a validator with a lot of consumer chains represent more slashing risk than choosing a validator with few consumer chains

[Guinch_Roze]

Cela ne semble pas juste mais cela eviterait une certaine centralisation du stake sur les validateurs qui securisent les consumer chains.

Il faudrait trouver un mecanisme hybride dans l’ideal qui permettrait de remunerer le stakers et de bruler de l’Atom, peut etre un deal a faire des lentree dans le PSS.

[GeneralCrypto]

I honestly don’t think the community cares to receive rewards that are split between so many wallets. I’m confident the majority would prefer a burn proposal that will increase the value of ATOM and bring in more investors. You do bring up a good question of whether we should burn only the delegator portion of the fees or all of the fees though (including those that go to paying the validators). I’d like to hear some validators weigh-in. The fact is, the greater the burn, the more the hype, more new investors, and greater support we’ll get from the community.

[FHZ]

Hello, GeneralCrypto.

@GeneralCrypto

instead of distributing consumer chain fees to staker wallets, these fees will be used to purchase ATOM on the open market

Who would be responsible for developing this automated conversion process? I would politely suggest another approach, perhaps utilizing a newly proposed pool from the likeminded “majority’s” funds to donate his/her/their own ATOM towards this burn mechanism, and stand clear from altering existing/working staking incentives.

@GeneralCrypto

could be enhanced to create more value for ATOM holders

Cosmonauts, collectively, should not support any effort that aims to bring value to idle “Holders,” and fully reward delegators/“Stakers” for respectfully helping ensure Cosmos Hub security.

[Victor118]

I think it’s a very good idea to add a burn mechanism

Having an unlimited supply without burn is dangerous
Having a burn mechanism would imply that the supply could decrease if the protocol makes enough profits
Ethereum might be an example to be followed

@Guinch_Roze

This does not seem fair but it would avoid a certain centralization of the stake on the validators who secure the consumer chains.

Ideally, we would need to find a hybrid mechanism that would allow stakers to be remunerated and Atom to be burned, perhaps a deal to be made for entry into the PSS.

(C’est vrai )

Yes PSS could result to a concentrated staking into top validators, may be a tax like it was proposed by @effortcapital can be used and burnt ?

CHIPs signaling phase: Vote Power Tax

This signaling proposal and the research prior to it were funded by the AADAO. The initial post outlining the concept and purpose of a “Vote Power tax” can be found here . In the initial post, we also propose a dynamic community pool tax, which is outside of the scope of this signaling proposal. Author: EffortCapital | Blockworks Research Summary The Vote Power Tax is an economic solution to multiple issues the Cosmos Hub is currently facing: Concerns around validator economics as it relate…

Like ethereum the hub can burn a part of fees !?

ATM cosmos hub has not a lot activity but with IBC routing it can change !?

[Shi_yi]

2 questions

1. Inflation needs to be reduced by half, otherwise burning will not have much effect

2. Burning atoms also creates selling pressure on other consumer chains.