A Formal Proposal for Enhancing Cosmos Hub Interchain Security Mechanism Design

A Formal Proposal for Enhancing Cosmos Hub Interchain Security Mechanism Design Author : Pupmøs Abstract This paper presents a three-part proposal to enhance the Interchain Security (ICS) mechanism design for Cosmos Hub, ensuring the alignment of incentives between validators, delegators, and consumer chains, as well as maintaining the long-term sustainability of the security provided by the multi-billion dollar Proof of Stake (PoS) layer. I propose a chain-specific validator commission structure, a security deposit scheme, and a permanently capped budget of vested ATOM for the community pool. 1. Introduction The launch of Cosmos Hub Interchain Security (ICS) introduces challenges for validators, delegators, and consumer chains to navigate a tri-directional relationship. ICS1, replicated security, enables other blockchains to pay rent to Cosmos Hub in exchange for utilizing its validator set. The optimal mechanism design for replicated security should ensure that validators have sustainable income and are motivated to continue validating while minimizing the incentive to collude against the chains secured by their keys and infrastructure. In this context, we are faced…

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Queztion 1:

These are great ideas. Could you clarify the third point pls?

“single total amount of ATOM allocated and vested to the community pool over a designated period (10 years)”

Do I have this right: if the current community pool has 10M atoms then after this proposal, only 1M can be drawn from the pool each year?

Answer:

that would be a linear budget

but yesh basically set tax to zero and vest a set amount into the community pool

right now there iznt any financial forethought put into community spending becaz people think we can alwayz print more

(which iz something u are probably familiar with in good ole fazhioned government)

so if u cap the inflation allowed to enter the community pool it requirez gov to either:

A. budget wizely (never drink more than half of the water u have and u will alwayz have water)

or

B. generate itz own income (i.e. good faith depositz from ICS chainz)

Nice one, Puppers. Diggin’ this. Have long liked the thought of consumer chains having to pay for their security in ATOMs and then having those ATOMs burned. Creates demand for ATOM token + decreases inflationary pressure. But I don’t believe the hub is striving to be ETH. Nonetheless, this idea you are presenting creates some market demand for ATOMs from consumer chains. I like it. With all the legal drama recently, I’d be a little apprehensive about holding ATOMs as a “security deposit”. If the Hub chooses not to grant those back to a consumer chain (even if done via on-chain governance), I have a feeling consumer chains might say there was no definitive proof that they were economically diverging from the hub. Could get messy Maybe it would be better to combine 2.2 and 2.3 and just have consumer chains pay into the community pool while still keeping a cap or threshold of where staking taxes can return to 0%. I’ve long been fearful that the community pool tax will reach unnecessarily high levels (10% is already too high imo). Perhaps each consumer chain could have a simple contract that says they will pay X amount of ATOMs into community pool per year to retain their…

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Thanks for that proposal

I think the chain-specific commission is a good idea, although we’d need to work on making these commissions very transparent for users.

I’d also be in favour of the security deposit, but after the onboarding of 5-8 chains with high synergies (we need to kickstart the AEZ before making it harder to join)

The community pool cap may not be necessary with revised tokenomics and less inflation (which is something that should be proposed in the not-so-distant future)

Hey. I like the idea of different commission rates for different blockchains. I also like the idea of the deposit. Unsure about a limit on the amount of tokens that are given to the community pool over a certain period - seems to go against free market ideas. Regulating manually the market as consensus wants - yes. Though taking away possibilities imo (then again, the hub currently doesnt care that much bout those)

Thanks for this proposal @pupmos Besides an ATOM deposit, at the very least, I think consumer chains should actually pay a decently sized percentage of their initial token mint (i.e. 10-20%, depending on their inflation model) to some kind of treasury, so that the Hub itself becomes a significant stakeholder of the chain. Tooling could be built around this so that validators & delegators can vote on consumer chains with their native ATOM token. For example: if I have 1% of ATOM voting power, and Hub has a 10% share of consumer chains’ voting power, my vote would have 0,1% voting power on the consumer chain. These are some thoughts, part of a larger vision, myself & Binary Builders are hoping to share with the community soon. I believe the ATOM Accelerator DAO is close to announcing the grant recipients for the RFP. Binary Builders applied as well ( ). This would enable a few teams to flesh out some great ideas on token economics, ICS & other potential products on (or adjacent to) the Hub. Ideally, these teams would work together, in the open, transparently & with the rest of the community, to form a holistic vision that we can all finally agree on. I would love for some…

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This is an interesting proposal. Thanks @pupmos . Some questions / comments: Intro pupmos: The resulting yield difference for delegators is insufficient to provide proper incentive alignment between consumer chain developers and the ATOM token. @pupmos could you qualify “proper incentive alignment”? Solutions pupmos: 2.1 Chain-specific Validator Commission (Part 1) To address the already-evident discrepancy in revenues between the Cosmos Hub and consumer chains, I propose implementing a chain-specific validator commission structure. Validators would have the ability to set custom commissions for consumer chains, adapting to varying revenue and cost structures. I generally agree with Chain-specific valdiator commission, but I still hold the concern of it acting as a centralizing force (though a validator has agency over it, which is a step forward). pupmos: 2.2 Security Deposit (Part 2) I propose that each new consumer chain contributes a security deposit initially equivalent to 0.01% of total bonded ATOM, with a one-year unbonding period. At the time of writing, this amounts to approximately $200k—a very conservative…

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