Tokenomics Idea n°2

Native hATOM, Lock-Based Staking, Reduced Inflation (2–6%) 1. Summary This proposal introduces a new tokenomics design for the Cosmos Hub centered around hATOM, a native Liquid Staked ATOM that replaces traditional staking rewards paid in liquid ATOM. Instead of distributing inflation directly into users’ wallets, the Cosmos Hub would channel inflation into the value of hATOM itself, causing it to appreciate automatically through its exchange rate. This eliminates the continuous selling pressure created by liquid reward emissions and transitions the system toward a model that is simpler, more sustainable, and more aligned with long-term value. With this approach, hATOM becomes the only yield-bearing asset tied to ATOM staking. Users who want flexibility can hold liquid hATOM and earn the base yield embedded in its exchange rate. Users who want higher returns can lock their hATOM for a chosen duration, one, three, six or twelve months, to receive a boosted APR. The longer the commitment, the greater the reward. This lock mechanism ensures that additional yield flows only to those who contribute actual economic security to the network, not to traders or opportunistic…

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If I understand correctly, the idea is that every staked ATOM would mint hATOM, and all liquid staking rewards would be automatically restaked, increasing the value of hATOM.
This means all current stakers would receive hATOM, and every future staking action would trigger the minting of new hATOM.

In my view, a major component is missing and needs to be redefined: governance.
With this system, we effectively lose the native voting power, since only the hATOM module would remain as the actual staker.
The most intuitive solution would be to grant governance power to users who lock their hATOM.

You have also to keep in mind that If hATOM minting becomes mandatory for all staking, slashing risk is fully socialized.
Since all staked ATOM is pooled under a single hATOM delegator, any validator’s slashing event is absorbed by the entire hATOM supply. Users can no longer choose their own validators or control their individual risk exposure. What used to be validator-specific risk becomes a collective loss for everyone, turning staking into a shared-risk product rather than an individual security decision.

Slashing, Validator Accountability & Risk Management under hATOM In the hATOM model, slashing still applies strictly to the native ATOM staked on validators, not to hATOM itself. Users receive hATOM as a liquid representation of staked ATOM, but only the underlying ATOM is exposed to slashing risk. If a validator commits a slashable offense, the pool of staked ATOM is reduced accordingly, and this impact is reflected through a small decrease in the hATOM exchange rate. No hATOM is ever burned or removed from user wallets; instead, the backing value per hATOM adjusts, just as with established LSTs such as stETH. Because hATOM consolidates all staked ATOM into a unified pool, slashing risk becomes partially socialized across all hATOM holders. This is a natural property of any pooled liquid staking model. To prevent validator complacency and to maintain a high-quality validator set, the Cosmos Hub’s governance can introduce several mechanisms that reinforce accountability and decentralisation. • governance can establish curated validator-set criteria ( delegation program could help + set reduction ) defining the minimum standards for inclusion in the hATOM staking set, such…

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We agree that it’s not hATOM itself that gets slashed.
What I mean is that in a PoS system, when you delegate you choose a validator and you take on the slashing risk if that validator misbehaves.
With hATOM, you still choose a validator, but the slashing risk is actually shared by everyone. That’s fine for a typical LST, but hATOM is special because it represents all ATOM. That means no one really takes the slashing responsibility alone, and choosing a validator becomes less meaningful.
I don’t think hATOM should have preferred validators. All ATOM will be staked through hATOM, so you can’t pick a subset of validators — it would essentially kill all the others.
hATOM should remain as neutral as possible.

A common concern with native liquid staking designs, including hATOM, is the fear that “one address stakes for everyone,” that “everyone shares slashing losses,” or even that “nobody can vote anymore because the staking is pooled.” These concerns describe how a naïve, unmanaged liquid staking pool might behave, but they do not apply to the hATOM model proposed here. The Hub’s design introduces two essential elements: a curated and actively managed validator set behind hATOM, and a governance system rooted not in liquid, unstaked ATOM, but in hATOM, the asset that truly secures the network. When users stake ATOM, they receive hATOM, which represents their staked position. hATOM is liquid, but it always corresponds to ATOM that is actively securing validators. Because of this, hATOM becomes the natural basis for governance power. Holding hATOM reflects real participation in network security, and locking hATOM for longer periods represents a deeper commitment that can justifiably grant enhanced governance weight. In contrast, unstaked ATOM contributes nothing to the consensus and therefore should carry minimal or no governance power. This model preserves the fundamental principle…

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