Author: An Individual ATOM Investor & Believer
Status: Discussion / Signaling
0. The Manifesto: Why We Must Build a “Token Factory Ecosystem”
I am writing this proposal as an individual investor who has witnessed the potential of the Interchain, but also its critical economic flaw. We have successfully launched the Token Factory module, allowing anyone to issue tokens on the Hub. However, we have failed to build a cohesive “Token Factory Ecosystem.”
Currently, the relationship between the Hub and its builders is transactional: Landlord and Tenant.
Projects pay fees to exist, and stakers provide security. This creates friction. Fees are seen as a “Tax,” driving developers to cheaper chains like Solana or L2s. Stakers, meanwhile, see ecosystem growth but fail to see it reflected in ATOM’s price.
My proposal aims to fundamentally shift this paradigm to: Partnership and Shareholders.
We must build a Token Factory Ecosystem where:
Symbiosis: Every fee paid creates immediate value for ATOM holders.
Convergence: The more a project contributes to the ecosystem, the more their operational costs mathematically converge to ZERO.
This is not a fee discount. It is a structural revolution to make the Cosmos Hub the most cost-efficient, value-aligned platform on Earth.
1. The Mechanism: “Pay-Swap-Distribute”
To ignite this ecosystem, we replace the “Burn-only” or “Community Pool” models with a Performance-Based Reinvestment Cycle.
This mechanism transforms fees from a “Sunk Cost” into “Regenerative Fuel.”
Phase 1: Collection & The Liquidity Filter
Fees for Token Factory operations (issuance, minting, transfers) are collected in the ecosystem project’s Native Token.
The Reality Check: The Hub protocol captures these tokens. (Implementation details regarding swaps/auctions are addressed in Section 4-D).
Crucial Logic: We only deal in Realized Value. If a project pays in a “junk token” with no liquidity against ATOM, the captured value is effectively zero, and no grant is generated. The Hub never takes on bad debt; it only redistributes value it has successfully realized.
Phase 2: The Buyback Pressure
Every fee collected results in an immediate Acquisition of ATOM (via market buy or auction settlement).
This ensures that Activity in the Token Factory Ecosystem = Constant Buy Pressure on ATOM.
As the ecosystem grows, this buy pressure compounds, raising the price floor for everyone holding ATOM.
Phase 3: The Distribution
The acquired ATOM is strictly divided into two allocations:
The Deflation Pool (Burn): Permanently removed from supply.
The Growth Pool (Reinvestment Grant): Returned to the project’s treasury to fund development.
2. The Incentive Structure: Skin in the Game
Why should a builder stake ATOM? Currently, there is no strong reason.
We introduce a dynamic tier system where “The more you secure the Hub (Staking), the more the Hub invests back in you.”
(Note: The ratios and thresholds below are conceptual examples. The specific parameters should be determined by the Tokenomics Committee and Governance to ensure optimal flexibility.)
Tier 1: The Visitor (Low / No Staking)
Concept: High Burn Ratio / Low Grant Ratio
Philosophy: If you utilize the Hub’s security without contributing to it, you pay a premium. That premium is burned to reward the stakers who protect you.
Tier 2: The Contributor (Medium Staking)
Concept: Balanced Ratio (e.g., 50/50)
Philosophy: You are contributing to the security set. We meet you halfway, sharing the captured value equally.
Tier 3: The Strategic Partner (High Staking)
Concept: Low Burn Ratio / High Grant Ratio
Philosophy: You are a core part of the Token Factory Ecosystem. You hold the collateral (ATOM) that secures the network. Therefore, we return the vast majority of your fees back to you as ATOM grants. You are not a customer; you are a partner.
3. The Killer Feature: Converging to Zero Cost
This is the heart of the proposal. It explains how the Cosmos Hub becomes cheaper than any competitor not by artificially lowering fees, but through Economic Convergence.
Critics ask: “Why build here when other chains are cheaper?”
I answer: “Because here, your success eliminates your cost.”
Consider a Tier 3 Partner who holds and stakes ATOM. Their economic reality is defined by this equation:
Net Effective Cost = (Fees Paid) - (Reinvestment Grant + Staking Rewards + Ecosystem-Driven Appreciation)
Let’s break down the “Zero-Cost” Roadmap:
Immediate Rebate: They receive a significant portion of their fees back as ATOM.
Staking Yield: Their locked ATOM earns consistent yield.
The Multiplier Effect (Appreciation):
Because the Token Factory Ecosystem is growing, millions of dollars in fees are being used to Buy and Burn ATOM.
This drives the price of ATOM up.
Therefore, the value of the Staked ATOM held by the partner increases.
Simultaneously, the value of the ATOM Grants they receive increases.
The Result:
Eventually, the value gained from (Grant + Rewards + Appreciation) exceeds the remaining fees paid.
At that point, the effective fee is ZERO or NEGATIVE (Profit).
This creates an unbeatable “Lock-in” effect. The longer you stay and the more you stake, the more profitable it becomes to operate on the Hub.
4. Risk Analysis & Robustness
I want to address technical and economic concerns directly to prove this system is unbreakable.
A. The “Immediate Dump” Defense (Net Positive)
Concern: “What if a project receives the grant and dumps it immediately?”
Logic: It does not matter. The system is mathematically Net Positive. Even if the project sells their grant, the market impact is still positive because the “Burn Portion” has already removed supply. Therefore, no vesting period is strictly needed.
B. The “Junk Token” Defense (Realized Value)
Concern: “Can they game the system with worthless tokens?”
Logic: No. The grant is proportional to the Realized Value. If a token cannot be converted to ATOM due to lack of liquidity, the grant is Zero. The system self-corrects.
C. The Dilution Defense
Concern: “What about market manipulation?”
Logic: As the Token Factory Ecosystem scales, the volume of legitimate assets (USDC, BTC, LSTs) will vastly outweigh any edge-case attempts to game the system.
D. Note on Technical Implementation (Auctions vs. Swaps)
While I described an “Immediate Swap” for conceptual clarity, I recognize the technical constraints of the Hub. Therefore, the actual implementation could utilize a Fee Auction Mechanism (bidder pays ATOM to buy accumulated fee tokens) or Epoch-based Batching. The goal remains the same: Capture Value → Convert to ATOM → Distribute.
E. Anti-Gaming Protection (Flash Loan Defense)
Concern: “Can someone borrow ATOM for one block to claim Tier 3 benefits?”
Logic: To prevent this, Tier eligibility should not be based on an instantaneous snapshot. Instead, it should utilize a Time-Weighted Average Stake (TWAP).
F. The Circuit Breaker (Safety Valve)
Concern: “What if there is a bug or economic exploit?”
Logic: The module must include a Governance-controlled Circuit Breaker to pause distribution automatically if parameters deviate from safety norms.
G. The “Wash Trading” Defense (Mathematical Loss)
Concern: “Can a project spam transactions to farm grants?”
Logic: No. It creates an immediate loss for the attacker. Since a portion of the fee is always burned, the attacker always gets back less than they put in. Wash trading generates a guaranteed loss for the spammer.
H. Operational Efficiency (Dust Thresholds)
Concern: “Will gas fees for swaps exceed the value of small collected fees?”
Logic: To prevent inefficiency, the protocol should enforce a Minimum Value Threshold before triggering any swap or auction.
5. Strategic Advantage vs. Competitors
Vs. Solana/L2s: They compete on “low fees” (Race to the Bottom). We compete on “Value Alignment” (Race to the Top). They treat developers as revenue sources; we treat them as equity holders.
Moat: Other chains cannot copy this easily without destroying their own tokenomics. Our high staking yield and inflation model uniquely allow us to subsidize loyal partners through this mechanism.
6. Conclusion
We have the technology (Token Factory). Now we need the economy.
To the ATOM Holder: This proposal guarantees that every successful project contributes to deflation and buy pressure.
To the Developer: This proposal offers you a path to zero-cost operations and sustainable funding.
To the Community: This proposal aligns our destiny.
A Personal Note:
I am an individual investor currently holding 77,500 ATOM.
I am not a core developer, nor a politician. I am simply a believer who trusts the technical innovation of this Hub, and I listen to the voices of the builders and trusted veterans who know more than I do.
My role ends here—at the vision.
I deliberately leave the specific parameters (Ratios, Thresholds) to the experts. If this proposal holds merit, I humbly ask the validators, developers, and the Tokenomics Committee: Please take this framework, calibrate the numbers with your expertise, and forge it into a systemic reality.
I request feedback from the community on this structure.
1 Like
Theory is good, but the practice won’t look like that i guess…
A simple Token representation ain’t enough, if the entrance barrier of lacking UI infrastructure is a bottleneck. As Tokenfactory generated Tokens have no direct distribution mechanism through staking (which turned out the achilles verse of cosmos architecture imho), it needs a new way of “value accrual” for these Assets.
As i’m also pretty disappointed in general infrastructure development in this space, i spent some time in setting up some basic web3 functions into a permissionless UI Layer on https://cosmowarp.vercel.app/ to make functions accessible by everyone, not relying on github approvals and intern relationships….
Lets hope for the best, as long as stakers confidence in this stack won’t come back, there will be no bottom in sight, unfortunately.