ATOM needs to capture more ecosystem value
Hey guys, I think we are all here for the same reason. We love and want to support Cosmos. But lately I have been more and more fed up with the fact that even though Comsos is a great place to build and run applications, it is very bad at actually capturing the value that is created.
Here are some reasons:
- The SDK is used by numerus big chains(like BSC) but the ecosystem doesn’t profit
- Inflation sometimes seems uncontrolled
- IBC is a great tech but also pushes ecosystem growth apart due to different gas on every chain(There needs to be a solution for a more corelated growth. At least for the ATOM Token itself.)
- As an Interoperable ecosyststem not enough ressources are dedicated to smaller ecosystem chains(maybe in a future iteration of ICS)
What do you guys think? Please correct me if I’m wrong and let me know if you have some arguments or interesting updates. Let’s keep hodling!
Why were the Allocator and the Scheduler proposed in ATOM 2.0?
The reason the allocator was proposed is that liquidity is much stickier than security and holding a significant fraction of ecosystem tokens in the Atom community pool would align incentives better.
The scheduler was intended to capture cross chain order flow in a way that has instead become something largely owned by Skip.
Security is not really a sticky property. Security is not a user facing property of a system and the devs can swap security providers without users noticing.
So what ever atom does, it needs to focus on features of the system that are user facing.
To share some context to the readers, the “allocator” has now been revamped to the Atom Alignment Treasury (AAT) built buy Binary Builders. On the other hand the “scheduler” is in the roadmap and corresponds to the Informal research on megablocks (or Atomic IBC capability). To share some more context, here is a quote from the Informal/Hypha 2024 roadmap that we have funded via [Proposal #839] : • Research and development to expand the market for existing features and bring new features to the Cosmos Hub • Research Partial Set Security to reduce costs on the validator set, and allow a greater number of consumer chains to join. • Research Atomic IBC to bring lower cost operation and atomic composability to Cosmos Hub consumer chains. • Assistance on Mesh Security development, deployment on the Hub, go to market, and research on complementary features to give the Hub a new way to share its security and even consume security. • Go to market and deployment for ICS33 IBC routing to allow Cosmos chains to route IBC packets transparently over the Hub to reduce IBC costs throughout the ecosystem. Source: [Proposal #839][ACCEPTED] Fund 2024 Hub development by Informal…
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Simple solution: hardcode into IBC that 5% of the fees will be distributed to ATOM stakers. If we are confident that IBC will be the dominant interchain connection protocol then with this the future of ATOM will be solid.
Govmos:in the short term is not to capture more ecosystem value
I think it is short sighted and a mistake to ignore this. Both need to be done at the same time or ATOM will miss the boat (is in real danger of doing that already) and then we dont have a viable ATOM left to “assess the real underlying problem we face at this crucial moment”.
Govmos:Firstly, acknowledging the erosion of confidence due to low relative performance. Secondly, recognizing the need for better communication with the community to restore legitimate investor confidence.
These are directly linked with a solid case of capturing ecosystem value. Not acting upon this, also in short term, will ensure ATOMs erosion of confidence which you say we have to assess as a priority.
Pookybear: Simple solution: hardcode into IBC that 5% of the fees will be distributed to ATOM stakers This isn’t possible. You seem to forget that IBC (and the cosmos SDK by extension) is an open-source protocol. There is no way to impose such a tax on others. This is the reason why Cosmos will succeed where any other Ecosystem failed so far. You can’t capture value in the web3 without bringing utility. Additionally, to secure enduring revenues, a project must be “unforkable,” meaning it must have a significant headstart against any potential competitor that could fork the code and deploy it in parallel. The primary path to become unforkable is to be the most decentralized (fully diluted supply with a variety of competing actors participating) and deliver real value (bringing utility requires constant work to remain competitive). Combining these two factors leaves potential competitors with too high a hurdle to try and compete. Essentially, they will start to cooperate instead of attempting to recreate everything from the ground up. However, if you try to extract too much revenue from the value you deliver, they can start to compete on the margins. The only way to remain…
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Interesting idea! I think the comment from Govmos actually points out the main concern with this pretty well. But i still think that a tax like that would be pretty logical(if not the only way) considering the Architecture of Cosmos(acting like a L0 compared to other L1s) and IBC. I don’t think a fork is to big of a threat atm… Please correct me if I’m wrong.
IBC is a public good that no one can own, making this interoperability proposal the best because it involves no third-party risk or value extraction. But how does Atom position itself in this transparently built ecosystem? The answer is simple: the only way to survive is by collaborating and offering the best value proposition possible. For the Cosmos Hub, this clearly means promoting its validator set through ICS no need to look further. This makes Atom unforkable, a five-year-old infrastructure with governance that has stood the test of time. Thus, the Hub must COLLABORATE with the chains emerging around it, not merely to generate revenue but to offer a functional ecosystem at a lower cost. In my study , I refer to this concept as ‘State.’ Do you think a State makes immense profits? No, and yet they are the most crucial infrastructure in our modern society. The consumer chains of ICS v1 are already specializing in this spirit of collaboration; Stride is already extracting value from the entire Cosmos with its liquid staking, and Neutron will likely offer services that extend beyond retail use, featuring products marked by Atom’s security. I could even go further by…
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@Quentin , I think you have some points not correct here. • When Atom is not a yield asset that can keep up with the other tokens in Cosmos then the validator set in short time will be woth nothing including the ICS/security derived from it. ATOM only providing security to other tokens wont keep it alive. • I agree completely that ATOM should function in cosmos as a state => a state asks among other things taxes to be able to do two specific things: security (ICS) and keeping the infrastructure (IBC) running. So, I want to thank you for your support to tax IBC. Does ATOM need to become a high yield asset? no Does ATOM need to survive and thrive in cosmos and play a meaningfull role? Yes, also for the succes for Cosmos as a system. For this more ecosystem value capture is vital. With other Cosmos tokens having more marketcap and with the marketcaps of coins connected through IBC ATOM I think will miss the boat big time with only having Security (ICS/Mesh etc) to offer. This effect we are seeing already taking shape. See: Bitcoin security to Cosmos with Babilon post I thought that a couple of months ago we got rid of this small thinking: “ATOM needs to be as small…
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I agree with taxing IBC like the comos sdk should be taxed since atom has served and still serves as a technology and testing incubator and pays for the broader development of the interchain. The cosmos hub has a role of prior order in maintaining the cosmos technical stack and to remain so must create income.
@Govmos @Youssef need opinions. thx
True, there is so much dev activity in Cosmos whith the SDK but once the chains are deployed there is no value for the ecosystem anymore.
@Guinch_Roze @Mojo Indeed. I see ATOM as the development and maintenance hub for all system wide functions in Cosmos. This is the role it has had in the past for Cosmos and this is the role ATOM needs to fulfill in the future. This is ICS , IBC etc. Govmos: You can’t capture value in the web3 without bringing utility. @Govmos => IBC/SDK and ICS etc ARE the utility that ATOM brings. To function properly and to keep funtioning and developing in the decades to come Cosmos needs ATOM to fulfill this role. IRL the develpoment and maintenance of infrastructure like roads, train tracks, electricity, water, sewersystem and services like hospitals, fire department, police, army etc are commisioned and paid for by the hub/“state” @Quentin . It can only do that because the users of those facilities and services pay for it in the form of taxes. The future of Cosmos system as a whole is as strong or as weak as the Cosmos system is at sustaining ATOM. At the moment Cosmos is failing to sustain ATOM. This is weakening Cosmos as a functioning and developing system. This is a problem for the whole of Cosmos. The connected chains/tokens can focus on their projects…
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micro tax from the cosmos hub on the cosmos large technical stack, AND free use of the cosmos stack if the chains are part of ICS.
huge
a tax on open source software? what are y’all smoking?
I understand the desire to be compensated for the infrastructure that has been built. However, the code is now open source, and anyone can use the Cosmos SDK and IBC to communicate with any blockchain in the Cosmos. These tools are already public goods. Indeed, there is a maintenance cost, but it’s challenging to charge users due to the open-source nature of this technology. We might consider airdrop mechanisms as a token of appreciation for the products built. Returning to the importance of not imposing these general-interest mechanisms indirectly financed by Atom, why do you think a chain like dydx chose Cosmos over Polkadot or Avalanche for building its L1? It’s because it owes nothing to anyone and comes to do its business like everyone else in this FREE marketplace that is Cosmos technology and that is clearly not the case of Avalanche an Polkadot.
would dydx go the other way if it wasn’t free? In addition we see avalanche and polkadot clearly outperforming the hub. In the case of megablock, the txs and ibc will go through atom only?
the less constraint there is in launching and maintaining a cosmos chain… the less useful the hub is in the end. cosmos may be too open and fair for the hub to survive. Giving without return is always unpleasant for investors, and airdrops are too random to be satisfied with a “return” for the hub. New cosmos chains does not have to airdrop Atom hodler.
If you’re looking to capitalize on value extraction, Atom may not be suitable for you for several reasons. Firstly, Atom is decentralized, inherently slow, and politically complex. Additionally, the tools built here are open source, meaning anyone can replicate and potentially capitalize on your expected gains. Thus, with its transparency and decentralization, Atom can be incredibly tedious and frustrating, especially without VC funding to propel it to greater heights. In essence, Atom embodies the purest sense of a blockchain. While some claim to be blockchains, they operate centrally with VC money, making them even more centralized. As regulations evolve and reclassify many entities as securities, true blockchains that have always worked for the common good will stand out. Meanwhile, about 90% of what we call crypto are actually businesses. Atom aims to differentiate itself by creating its own system that promotes collaboration. If it’s not Atom, then another entity will take up this role and I will be there as an actor of this. If it’s a pseudo-blockchain that is actually a centralized business, then I have no interest in investing in an entity that plays the same monopoly…
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Yes, indeed we are building something different with Atom/Cosmos. Unfortunately, without the users contributing to the work ATOM does the equation gets very one sided and the building of something different will stop…
Then everybody will lose. That is the opposite of building something different.
Both need to be done.
Strongly agree with Ethan here
I’m actually a very firm believer in finding ways to charge money for open source software. Revenue is completely essential to continued development and code quality
I am not talking about max value extraction or high yield. I am talking about sustaining ATOM to be able to do its job. This, although many i see have aversion to that, one way or the other does involve generating value for ATOM from the products/servises/utility it provides to its users.
This is in no way contradictory to Building Something Different.
it would in fact be enough to create a signaling proposal on each of the cosmos chain for the micro taxes on their technical stack to allow the maintenance of cosmos infrastructure by the hub. in this case, yes any request for financing would logically be allowed to be requested on the hub forum.
I understand this point very well and am also aware that there is 100s of alternatives in crypto where you could invest and “capture more value” but at the end of the day ATOM is the major driver for the ecosystem. Not only governance but also incentivizing builders(trough accelerators programs or even companies like Confio). You can’t expect the ecosystem to accelerate its growth when the ressources stay constant or even drop due to loss of confidence in ATOM itself. If the Cosmos Hub dies, the ecosystem dies. But if the Cosmos Hub gets more ressources to reinvest into growth we will all be happy.
I do not think that these proposals would be accepted, and in addition to that, I’m not really sure that they would be appropriate.
I think that the chains that you are thinking about charging taxes, would want assurances that the hub simply is not able to deliver.
Just kind of throwing this out here, skip tends to deliver.
Mojo:If the Cosmos Hub dies, the ecosystem
Just to clarify a little bit, the IBC network is actually carefully designed to avoid a hard dependency on any single chain as you describe here.
Because of that, the cosmos hub could die and everything else would be totally fine.
Well yes, but if the Cosmos Hub dies this would hinder the number one goal. Creating a rich tech stack/platform for builders.
the tax would be so minimal and insignificant that it would remain almost transparent both for the chain in question and for the consumers themselves. I think that the cosmos philosophy lives in everyone in the IBC and cosmos stack ecosystem, since a large part of these people are also and above all atom hodlers. A thoughtful and well detailed proposal which stipulates that any funding request is made on the hub in exchange for a micro tax on IBC for example, I am convinced that this would pass if the emphasis is placed on the maintenance of the cosmos tech stack. Personally I don’t care about paying 0.00000001 atom extra in fees for a swap
Without steb: I have no clue how this will capture value for ATOM guys. Please do not confuse network effects with earning from licensing
The problem is validators tax delegators which introduces unnecessary politics.
$ATOM validators take and pool 10% of delegator’s staking rewards through taxes.
The taxes for securing the network and risking your capital with a 21 day lock up were increased 5x from 2% to 10% in prop88.
Often validators develop chains and tooling that is useful or profitable for themselves & other validators, then award themselves whatever validators think its worth from the CP because validators control aggrigate voting power of their delegators. Rarely are pooled delegator funds spent on things useful or profitable for users/delegators. so delegators are stuck paying for validator tooling and Validator’s dev salaries that lower validator cost but has no benefit to users.
If validators didnt tax and pool delegator funds to pay themselves, no politics would be necessary.
to clarify: i say validators, because validators control the vote. i dont mean to imply validators are acting maliciously. I am simply pointing out the effects of misaligned incentives within $ATOMs economic system as percieved by a delegator.
For those who are still wondering where ATOM could derive value from its utility, look no further than the existing investment banking related services. A topic that we have covered quite a number of times in this forum. An high-level overview is shared in this post: ATOM Accelerator DAO Transparency Report 6 AADAO It’s encouraging to witness an increasing number of financial related operations in the Hub’s vicinity, a trend we predicted approximately a year ago. The Hub, a decentralized banking infrastructure built around atom’s unit of account, holds a first-mover advantage in its sphere of influence. Indeed, while not in direct competition with EigenLayer, which serves as a secure vault, the Hub aims to replicate traditional investment banking services in a decentralized manner. This creates business o… For a deeper dive in this investment banking thesis for the Hub, we would recommend reading our full report on the Cosmos Ecosystem as a decentralized B2B2C network (business to business to customer): Cosmos Ecosystem : A permissionless B2B2C network Essays Below is a text transcript summarizing our report, which outlines our…
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