CONTEXT:
The post is a draft of research stemming from Neta DAO’s living public research seminar on the current focus on economy and money. It engages with ongoing discussions about the nature of ATOM, exploring whether it should be considered money, commodity, or security. The author references various sources and ideological backgrounds, aiming to navigate the complexities surrounding ATOM’s identity and purpose within the Cosmos ecosystem.
ANALYSIS:
In order to provide some valuable feedback, we first want to aligns with the initiative to bring more nuances to the debate around the aspect of money in the Cosmos ecosystem. We emphasize the misalignment of current measurements of “moneyness” and recognize the paradigm shift introduced by Web3 in the overall value system design. Our approach to defining a good money primitive for such new infrastructure organization requires a rethinking out of traditional frameworks (taking inspiration from it in its existing forms and improve).
To this purpose, we created a simplified system built to explain levels of primitives:
It categorize ATOM as a “money multiplier”, the equivalent of our existing investment banks in the traditional financial system. This involves possessing certain characteristics, including reliance on a rehypothecation system where the yield correlates with default risk. Multiple money multipliers operates in parallel within an extensive network, interacting with each other via clearing houses. As we can see, ATOM and its Liquid Staked Tokens (LSTs) derivatives would definitely fall into this category.
In this framework, optimal “money” is determined by three key factors: its rapid mobilization (liquidity), swift exchangeability with other ecosystem assets (high liquidity and value), and the ability to circulate rapidly to designated areas. All these attributes contribute to the concept of “monetary velocity.” However, as rightly pointed out in the original post, effective money must be neutral, free from interference, and devoid of counterparty risks. Hence, the significance of the governance aspect of ATOM cannot be understated.
CONCLUSION:
At Govmos (the governance initiative of the PRO Delegators’ validator, we also think that both “ATOM as money” and “ATOM as governance” are valid, yet simultaneously flawed. The proposed primitives by the “money group” seem to lack adequate focus on the velocity aspect, overly concentrating on reducing asset issuance, which could potentially hinder velocity if employed excessively. Regarding governance we contend that this crucial aspect should be directly integrated with the monetary asset to avoid introducing counterparty risks. In the event of a separated governance chain, liveness issues (considered the primary risk in pBFT-type consensus) could pose existential threats, therefore significantly undermining the quality of the monetary asset itself.
Thank you for the quality of your original post, we look forward to further debate these complex topics and we are very happy to see more people joining this space.
