Deploy community pool ATOM into Hydro’s Inflow vault

Note: The Hydro team has been working on this draft for the past 4 months and already processed extensive feedback. We’re aiming to post it on-chain before mid-January so that, if approved, work on the new items may begin before the month of February. Summary We propose depositing 7M ATOM from the Cosmos Hub community pool into Hydro’s Inflow ATOM vault, where it will be deployed into low-risk DeFi strategies to earn yield. A portion of the yield will fund development of a zero-fee, Hub-native ATOM LST focused on institutional users, its integration into Hydro’s ATOM Inflow vault and the ongoing expansion of the vault’s strategies, as well as the migration of Hydro’s existing contracts to the Hub. The excess yield will initially be directed toward ATOM burns, with the option to reallocate later if a higher‑impact mechanism is proposed by the tokenomics research firm hired by Cosmos Labs. The proposal puts a large portion of the idle community pool funds to work. The ATOM “principal” will not be sold and the initial deposit can be reduced through total or partial clawbacks if better uses for the capital are identified. Hub governance retains the ability to independently…

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Hydro is the main cosmos hubs product right now. The team is strong, the roadmap is clear, Hydro will allow defi on the hub, capabilities are multiple, thus huge YES from me.

Good job !

It’s encouraging to see a use of the community pool that aims to generate non-inflationary returns while keeping the principal fully under governance control. The focus on a zero-fee, Hub-native LST designed with institutional users in mind feels especially relevant in the current context.

The burn mechanism and the ability to claw back funds are also reassuring elements. As always, execution and risk management will be critical, but the approach outlined here clearly moves in the direction of better alignment between the Hub, ATOM, and the teams building on it.

Looking forward to seeing how this model evolves and how it can integrate with the upcoming work on ATOM tokenomics.

Hey all! Just wanted to hop in here to give some clarity on my involvement on the Hydro committee as it pertains to this proposal.

My involvement on the Hydro committee predates my employment with Cosmos Labs, and should not be construed to be an endorsement / non-endorsement of this proposal by Cosmos Labs. I gave feedback on the proposal at various stages of its development, and this should also not be seen as an endorsement / non-endorsement of the proposal by Cosmos Labs.

While I’ve enjoyed my time on the Hydro committee, due to the conflict of interest associated with my involvement on both the committee and with Cosmos Labs, I plan to abstain from participating in this discussion. Others from the Cosmos Labs team may choose to chime in with more targeted feedback on this proposal as needed.

Great use of CP funds, we are in favor of this proposal

Hello! Thanks for sharing such great idea - we fully support it - we need to use the CP funds in the right way, hope to see it onchain as soon as possible!

Very exciting project, with a legitimate use of the CP. You have our unwavering support.

Note @Thyborg: access to the projection document is restricted it appears, maybe you can make it world readable?

Great idea! I’m all for it.

Sorry about that, the projection document is publicly viewable now

Disclosure and Context As a preliminary disclosure, one member of Govmos is currently serving on the Hydro Risk Committee. While this individual’s feedback is referenced below, our position is not driven by committee affiliation, but by an independent assessment of the proposal’s overall viability and its implications for the Cosmos Hub, particularly given the significant share of the community pool involved. Capital Efficiency and Strategic Rationale We have previously expressed, in this forum, concerns regarding the inefficiency of leaving funds idle within a large community pool. Our earlier position advocated for a community staking program as a minimum step to ensure those funds contributed to network security while generating yield, thereby compensating CP dilution. The proposal put forward by Hydro goes meaningfully further. By using the LST as a baseline for the protocol deposits, it not only preserves the staking dimension, but also introduces additional yield generation mechanisms. From a capital allocation standpoint, this represents a strictly superior use of dormant resources, provided risks are properly assessed and contained. Risk Assessment and Track…

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This is a well planned proposal, and I support the Hydro team in moving forward with this.

On behalf of the Elys Network (migrating to Ryze Protocol) team, I want to express my support and gratitude for what Hydro does for ATOM holders and stakers. We were fortunate to have worked with Hydro on multiple yield opportunities with Elys for Hydro users, and we look forward to continuing that relationship when we launch on Base Network, accessing additional external reward opportunities for the Hydro community.

The due diligence process with Hydro is meticulous, with risk mitigation at the forefront to protect user exposure. For me, this is why I have been a vocal supporter of Hydro, they always evaluate risks and simply will not take on a yield opportunity if it does not satisfy various protectionary measures. As an example, when Hydro deployed liquidity on Elys, we agreed to protect user funds by guaranteeing a loss reimbursement if the pools were exploited or otherwise compromised. This is an extraordinary measure that Hydro takes to protect users, and one we were happy to partner with them on.

Keep up the great work team!

Sincerely,
Hesham Aly
Elys Network / Ryze Protocol

As a user of hydro from the beggining, i have to mention the great contribution as a product and values of the cosmos community. It would be necessary to built a zero fee lsd, to strengthen the cosmos defi and make a product to be appeal to institutional demand and move on to expand the use of hydro.

Appreciate the depth of work and iteration that’s gone into this proposal over the past few months, it’s clear the Hydro team has incorporated substantial feedback to refine it. Deploying 7M idle community pool ATOM into a clawbackable, governance-controlled vault with a conservative, phased rollout strikes me as a smart approach to boosting capital efficiency while tightly bounding downside risks for the community. The emphasis on delta-neutral and low-volatility strategies, backed by robust operational safeguards and monitoring, feels particularly well-suited for this scale of deployment. The zero-fee, Hub-native LST stands out to me as a strong primitive too, with thoughtful design choices like peg defense mechanisms (e.g., mint caps linked to liquidity buffers), LSM-enabled direct redemptions, and DeFi-compatible governance voting that tackle common pitfalls in existing LSTs. Integrating it as a gateway into the Inflow vault could meaningfully expand ATOM’s utility for both retail and institutional users, especially alongside additional efforts like fiat on-ramps. Overall, this proposal seems to me like a balanced, forward-looking effort to align yield generation on…

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Folks, 7M ATOM is 71% of the community pool

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Do you suggest another solution to make CP work and generate profit for everyone? The proposal added a clawback, governed by the Hub.

7M is a lot, but I remember that some KOLs and CL were asking to burn 100% of it. I personally prefer to use 70% of it to generate yield.

Unless the plan is to acquire a protocol, an app, or a team in that case, yes, 7M is a lot.

Guinch_Roze: The proposal added a clawback, governed by the Hub. Clawbacks are appealing in principle because they gesture accountability however, in practice they’re extremely difficult to execute once funds are deployed. On-chain governance can express intent or send a strong signal through proposals, but it has no ability to compel or enforce action. Actual enforcement depends entirely on the continued cooperation and availability of signers, which is an assumption that degrades over time. Unfortunately, we have a very poor record of msig signer cooperation on the Hub. In reality, team-controlled msigs consist of contributors that disengage, change roles, or leave the eco altogether. And msigs don’t get updated. When this happens, wallets become partially or fully inoperable, and even well-intentioned attempts to return funds can stall indefinitely. I’ve been dealing with this firsthand for the past seven months in coordination with Cosmos Labs leadership. Proposal 800 authorized AADAO to “steward” 450,000 ATOM POL on Stride and Neutron, and unwinding those positions has proven far more complex – at times, impossible. Had Labs and I not actively intervened,…

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Govmos staking proposal is frozen due to ICF delegation program + waiting for AAA to be funded. If I remember well, that was an answer from CL to wait untill those above

Would be very usefull if ICF + CL involve on the forum.

Thanks for putting this together. I’m generally in favor of the initiative. Even though the ask is about 70% of the community pool, I’d much rather see that capital working than just sitting in the CP. The Hydro team has a solid track record. I think adding a real-time dashboard for visibility on those positions would be a nice next step for transparency, just to give everyone visibility into exactly where the funds are deployed

Contrary to AADAO, Hydro has a built-in way for Hub Governance to claw back the funds,
without needing to purely rely on text props and the signers of a multisig adhering to those text props.

This DAODAO instance controlled by Hub governance via Interchain Accounts has admin rights on Hydros DAOs, enabling things like:

• (partial) clawbacks
• updates of the DAO members/multisig signers
• migrating the funds to a different DAOs custody

See the governance proposal on Hydros governance that explains this and set this process up here: DAO DAO .

The concern is addressed in the Custody section. Clawbacks do not rely on the cooperation of the Hydro committee or any other party (they are enforced programmatically). I’ve updated the summary at the top of the proposal to make the point more explicit.

According to Hydro’s metrics, the project has earned $29k over its lifetime, with an average APR of ~15%. Simply staking 7 million Atoms would yield an annual income of 1.15 million Atoms. At a price of $2 per ATOM, that’s $2.3 million. This is ~80 times more than the Hydro project has earned over its entire lifespan (15 rounds).

It’s clear that Hydro’s project, compared to other Defi projects from other ecosystems, is showing paltry financial results. They came for a subsidy because they themselves are incapable of attracting clients.

Even though the ask is for more than 2/3 of the CP, I think the capital is better working than sitting idle, so I am generally FOR this proposal.

The DAODAO setup of Cosmos Hub gov having an ICA that can claw back the funds automatically is reassuring, but ofc I’m assuming a real clawback proposal will actually work (have had issues with ICA on DAODAO previously )

I don’t know if the math is mathing - will leave that to the collective analysis of Hub gov.

And just to note, I work at Range (range.org), which has a small contract with Hydro (for real-time monitoring and alerts). I am ofc commenting here only as an ATOM bag holder, and in no way representing my employer.

Note that the metrics page you’re referring to is showing the voter rewards, not the total yield generated by Hydro’s liquidity deployments. They are the incentives paid by DeFi protocols when they place a “bid” on Hydro in order to attract votes. The 15% APR reflects the return users earned from these tributes relative to the amount of ATOM they locked to obtain voting power. This was in addition to the ATOM staking rewards they earned, since Hydro uses LSTs, so total average APR was ~32%. Hydro’s main source of revenue has not been the tributes, but the yield generated by deploying ATOM into DeFi protocols. To date, these deployments have generated about 72,000 ATOM (with some deployments still active and pending rewards claiming). As we explained in the proposal, the auction model has proven effective at deploying ATOM liquidity into Cosmos DeFi, but it is not optimal from a yield perspective, as Hydro has only been able to deploy into protocols that proactively come to Hydro to submit bids. Some ATOM is often left undeployed as a buffer for future deployment rounds, so the model isn’t as capital efficient as it could be. Following the cancellation of the Hub EVM and the…

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Regarding profitability. Risk-free income comes from pools like stATOM/ATOM, dATOM/ATOM. The reward is for providing liquidity. The key here is that you provide liquidity, and in return, you receive income. This proposal is about transferring all remaining liquidity to a project, that cannot attract liquidity itself. Because, according to SimilarWeb, the HYDRO HAS NO USERS AT ALL.

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Patrick:

Note that the metrics page you’re referring to is showing the voter rewards, not the total yield generated by Hydro’s liquidity deployments.

I’d love to analyze your financials on defillama. I personally don’t enjoy browsing a site that looks like it’s 2010 (no wonder you have no users). But the problem is, you’re not on defillama.

As an ATOM holder who has been staking since 2019, I approach this proposal with a long-term perspective on the Hub’s governance and treasury decisions. I want to begin by acknowledging two points clearly. First, the Hydro team has demonstrated competence and seriousness, and there is no reason to question their intent. Second, it is fair to recognize that the Cosmos Hub has, in the past, funded initiatives with meaningful uncertainty without requiring institutional-grade validation upfront. Even fully accepting both of those realities, I still believe this proposal should not move forward. The reason is not that the risk is unusually high, but that the type of responsibility it introduces is fundamentally different from how the community pool has historically been used. Most prior community pool allocations—whether they ultimately succeeded or failed—were budgetary in nature. Funds were granted, scope was defined, and the risk was finite and explicit. Governance made a judgment once, and the outcome resolved over time without requiring continuous intervention. This proposal represents a meaningful departure from that model. It does not simply spend community funds;…

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Thanks for putting this proposal together, it’s encouraging to see concrete, well-articulated efforts to explore new ways of putting ATOM to work in a transparent and accountable manner. We think initiatives like this are valuable precisely because they move the conversation from abstract narratives to measurable mechanisms, assumptions, and trade-offs. Hydro’s approach around inflow vaults and yield-burning is an interesting direction, and it’s good to see it discussed openly with clear parameters. In that spirit, we recently published a public https://atom.silknodes.io/ that models directional effects of different tokenomic levers, including Hydro-style deployments, starting from live on-chain supply and under explicit assumptions. The tool isn’t meant to predict outcomes or advocate for any single path, but to help the community reason more clearly about how different designs might interact with supply dynamics, burns, and the security budget over time. We believe tools and proposals like this, taken together, can help raise the quality of tokenomics discussions and decision-making across the Hub. Looking forward to continued dialogue and iteration as this proposal…

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As a general principle, I am in favour of making use of community pool funds rather than letting them sit idle. I applaud the Hydro team for putting together such a details proposal with clear intent to do something beneficial with the funds.

I saw some concerns regarding the ask being 70% of the community pool but I do not see this as an issue personally. What I think would be beneficial in general is knowing what sort of strategies the funds are being deployed into so we could all collectively debate and see if the funds are being properly utilised to generate yield.

In general, when this proposal goes live, we intend to vote as a YES.

Hey Jay, thanks a lot for taking the time to review the draft. You’re absolutely right that continuous oversight is required for these funds, this will be the role of the Hydro committee. Just a few highlights: Phil_RX has 15 years of experience in financial risk management; Carter Woetzel (Shade) and Johnny Wiles (Osmosis) have developed the exact kind of DeFi applications that Hydro deploys into; Andres Monty (Range) currently provides real-time security & risk monitoring for blockchains; RoboMcGobo (now Cosmos Labs) was previously at Stride expanding their LST. Our relationship with them over the past year has been very productive, and the Hydro team gives them significant credit for Hydro’s ability to carry out 78 deployments without losing a single ATOM. We’ll also be bringing additional people onto the committee to provide more oversight of the community funds involved in this proposal. The main Hydro committee DAO will focus only on contract upgrades, hold admin rights over the other DAOs so it can step in if something goes wrong, and hold the Inflow vault shares until they are transferred to the AAA. I completely agree with your point about the need to observe…

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The main problem with this proposal is that Informal Systems wants to take 7+ million Atoms from the pool to stake and spin them in liquidity pools. From the resulting income, Informal Systems will pay itself salaries at a rate of $100-200 per hour, or more than $300,000 per quarter.

I believe that with 7+ million Atoms, any fool can multiply them. As long as inflation persists, this is easy. But Informal Systems, by multiplying them, will regularly sell the profits, devaluing the Atom.

Questions to the community:

1. Why should we give Informal Systems the last of the pool’s money when they can’t make any money themselves? When they took $1.1 million, they promised they would earn money and pay themselves salaries. But they didn’t keep their promise and are once again trying to leech their way into the community pool, and this time for real (they want to take almost everything there is).

2. Why should we hand over almost all the money from the pool to Informal Systems when Informal Systems is developing Malachite, a direct competitor to CometBFT? To me, you’d have to be an idiot to sponsor a competitor.

why are you against Informal ? you could stop this war before it starts.

Strong support from me! Putting those idle funds to use is finally productive for the community pool. 70% feels like a good amount to become productive

We should do the same with IBC ATOM escrow’s too & an adjusted rate limit (probably just the osmosis IBC channel). That’s a future option as well but would require an gaia upgrade

How it will benefit atom stakers ?

I edited the draft to mention that no significant amount of CP funds will be deployed into the vault until the first official audit is completed (which should happen in two weeks).

The Hydro vault also started participating in liquidations this week. I’ve added it as another market-neutral, scalable strategy for non-inflationary yield to Annex 2.

I am generally in favor of this proposal and enjoy the discourse. Thank you Hydro for all the thought and effort.

We firmly believe in the ICF’s plan to focus on institutional adoption and think the zero fee LST thesis makes sense.

It was a lot to read so apologies if I missed something that was explained and ask about it here. I just ended a long weekend of travel and am running on empty.

1. Since 70% of the CP is a sticking point for many, can the job be done for less?

2. Is the 70% being distributed in traunches with clear circuit breakers to stop distribution if certain conditions aren’t met? What are those conditions? If circuit breakers stop a traunch from being disbursed, how can we be certain the previous disbursements won’t be negatively affected and put repayment of those funds in jeopardy?

3. As a validator, we would obviously want to have the ATOM used to mint the LST staked with us and would like to see a detailed description of that process. We felt the previous govmos forum prop to stake idle CP funds was detrimental to small validators and further centralized the chain, so we’d want a Hydro LST staking policy to avoid that.

Thanks team!

Patrick, thanks for the thoughtful and detailed reply. I appreciate you engaging directly with the substance of my concerns. To be clear up front, I recognize that the committee you’ve outlined is highly experienced, and that the operational track record Hydro has demonstrated so far is both real and meaningful. Executing dozens of deployments without loss is not trivial, and I don’t discount that data. I’m not questioning whether Hydro can manage these strategies competently. The distinction I’m trying to draw is between operational capability and institutional responsibility . This isn’t a question of trusting or distrusting DAO governance. It’s a question of whether DAO governance has been explicitly designed and mandated to bear the outcome responsibility of continuous asset management. Simply naming a responsible entity doesn’t fully resolve this; for that responsibility to be meaningful, its scope, limits, and consequences need to be clearly defined. At a minimum, that would imply explicit boundaries such as loss tolerances, stop conditions, reauthorization requirements, and clear accountability if those thresholds are breached. I agree that continuous oversight is…

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Thyborg:

The LST’s validator set will strictly follow the framework set by Cosmos Labs for its delegation program.

does the actual DAO delegation follow this framework ?

DAO DAO

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Do you mean the Hydro committee DAO? The Hydro committee will not be staking any funds itself, but will just custody the funds that are deployed in Hydro’s ATOM Inflow vault.

EDIT: I missed the DAO link the first time around. The DAO you linked is doing allocations of the ATOM that is within the Inflow vault outside of the automated strategies (e.g. in this case, staking some ATOM). I expect that once we launch the LST, if the Inflow vault wants to have exposure to staked ATOM, it could just hold the LST, as with no fee on it there’s no strong reason to not hold it over natively staked ATOM, which means the vault also follows that distribution for its stake.

I’m part of the Hydro committee but my following comment is purely my opinion.

I think Hydro is one of the few if not the only revenue generation product for the Hub, although I’m a little concerned with cost it is the only product that is worth funding for the hub considering the only value proposition for now for ATOM is staking. LSTs are an integral part of this vision so it makes sense for this deployment to fund it.

The big benefit is that all the excess yield generated will be put towards ATOM burns, which reduces supply.

ATOM stakers also gain a new LST that charges zero fees (so they retain the full staking yield instead of paying the typical 10% fee charged by existing LSTs), with easy access to additional yield through the integration with Hydro’s Inflow vault. New users will be able to onboard from CEXs and fiat without a wallet. It will be compatible with Hub governance, so it’ll enable holders to vote directly rather than having their voting power delegated or forfeited (as is the case with existing LSTs).

The big picture is an effort to foster a DeFi ecosystem built directly on the Hub. Hydro will migrate to the Hub as part of this proposal, acting as the first Hub-native DeFi application, and we expect others to follow. I’ll note that there is no opportunity cost, as these funds would be sitting idle otherwise. The proposal puts them to productive use, and only the yield being generated will be spent to fund development of the new LST (none of the ATOM being provided by the community pool will be spent, and it can be later directed towards other efforts as needed).

Thanks a lot for the great questions.

1- We’ve based the size of the CP ask on the $150k yield target (you can see our projections sheet here). If ATOM’s price increases significantly, the amount of yield being generated will exceed that target, and we could send a large chunk back to the community pool. In the meantime, the excess yield will be put towards ATOM burns (this could be updated to use another mechanism) so the capital remains productive.

2- The Hydro committee will be responsible for determining the rate at which funds are deployed into the ATOM vault based on the availability of DeFi opportunities, risk considerations and amount of yield being generated. A portion may be held as the LSTs (e.g the Hydro LST) and ready to be deployed when an opportunity is identified. In parallel, we are working on “circuit breakers” in the form of automated claw-backs when funds are at risk.

3- Absolutely, and we will immediately make this information available and easy to find when Cosmos Labs finalizes their delegation framework. Last time we checked, it was awaiting approval from the ICF.

Hey Jay, thank you again for the thoughtful follow-up, and I completely understand why you would prefer to separate the questions of mandate from the questions of execution.

The practical constraint we’re facing is that the ATOM LST is a prerequisite for many of the downstream objectives this proposal is trying to unlock. Without our own Hub-native ATOM LST, it would be harder to integrate it into the Inflow vault, and harder for the Inflow vault to generate non-inflationary yield.

That said, the proposal does include a second, explicit governance checkpoint. When the ATOM-Aligned Apps (AAA) organization is formed and voted on, the Hub will have the opportunity to reassess whether the Inflow ATOM vault deposit should continue, be modified, or be unwound.

Thanks again for taking the time to engage so deeply with the draft and feel free to message me at any point if you have ideas as to how we should report our performance results (by default we’ll continue to publish weekly updates on Telegram and quarterly reports on the forum).

Thyborg: We propose depositing 7M ATOM from the Cosmos Hub community pool into Hydro’s Inflow ATOM vault, where it will be deployed into low-risk DeFi strategies to earn yield. This is the key point, ‘to earn yield’, what experience does the Hydro team have managing and investing treasuries? I am in touch and discussing with some institutionals pioneers in managing crypto treasuries for years with proven results and interested in supporting ATOM, why are you better than them to manage the Cosmos hub treasury, what are your credentials and historical returns managing similar treasuries? Until you convince me of this I cannot vote in favour of this proposal. Without professional investment experience, the 7M ATOM invested could actually lose a lot in value, so there is a lot of risk involved here. Thyborg: Hydro’s team currently has 6 full-time members (5 on Product, 1 on Growth) and 4 part-time members (technical reviews, design, finance, operations). 5 product, 1 growth, 4 part time operations, design, finance, technical reviews, where are the full-time members with professional experience and track record managing such large treasuries with proven…

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Thyborg:

The current committee members are RoboMcGobo (Cosmos Labs), Phil RX (PRO Indicators), Trix (The Membrane), Johnny Wiles (Osmosis), Andres (Range Security), Carter Woetzel (Shade Protocol/Feather), Luisqa (Neutron), and Arlai (Moonkitt).

Any committee members operating validators should be abstaining from the vote. It’s an obvious COI

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Hell no this is crazy idea. The funds in the community account should be used to stimulate the ecosystem in a neutral way. There is nothing wrong with free competition of LST services but using the community funds to do so is not the way. The community fund is for the community. There are much better ways to use the community funds. Let liquid stakers pay a fee. Fees are everywhere and fair capitalism. LSTs still need to be unstaked to get the full value of them. There is no need for institutions to need to be pampered out of paying fees. If they want liquid staking then that is free choice and is a service. Stride has been collaborative with the Hub and all the other chains and strive to be neutral as possible by only offering LST services. They have ATOM security for their chain and have been audited. If you want to support LSTs in the cosmos ecosystem then buy and stake STRD and change the fees through governance. Good day

POSTHUMAN will vote NO on this proposal

Who needs dApp that works for $150K per month?
This is insane!
This is just smart-contracts!
If you built dApp that is need 150K per month - you’ve built totally usless product!

For this money we will make a revolution in small country, and they will rise the flag of ATOM, and will accept ATOM as a national curensy!
Even Lido cost less per month!

Cosmos_Nanny: The only reason the 450,000 ATOM is going back is because the Hub elected an oversight member to remember. For more context and background on how messy clawbacks can get – you can read this: DAO DAO I also agree the cp funds should be used productively; however, authorizing 7M solely due to a lack of alternative proposals is not, on its own, sufficient justification for funding 7M of this. Maybe time to revisit @Govmos staking proposal. There are several key points here: -Oversight/auditing committee is key as well as allowing external members to apply to join, for context: only when via forum pressure youssef finally allowed to open applications for the AADAO and @Cosmos_Nanny and others joined, it was when finally all the issues of the AADAO started to be known and this led finally to the end of the AADAO -7M ATOM is over 70% of the CP this is huge and @Cosmos_Nanny clearly explained how complex are clawbacks with the example of 450k ATOM and here we are talking about 7M ATOM which is over 15x larger amount -There is no lack of alternative proposals just they are in stealth mode still, for instance I’ve been in talks for months with several…

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Friend, please, vote NO
Not abstain

150K per month for maintaining of dApp - totally crazy

After reviewing the proposal and following the discussion, I’ve reached the conclusion that I will be voting NO. While the proposal does outline a potentially valuable opportunity for the ecosystem, at this stage I see more arguments against than in favor, specifically • Scale of capital involved, allocating such a large portion of the Community Pool significantly reduces flexibility for the Hub and increases systemic risk. • Operational and execution risks even with low risk Defi strategies, the real risk surface remains non-trivial and Cosmos historically hasn’t always executed well on similar initiatives. • Clawback uncertainty, although clawback is defined, past attempts in Cosmos to reclaim funds from multisigs, DAOs have proven difficult, making the guarantee weaker in practice than on paper. Lack of social consensus a notable part of the community points to alternative or potentially better uses for the same capital, suggesting this might not be the right proposal at the right time. In short, despite the technical polish and theoretical upside, the risk to reward balance does not justify deploying such a large amount of treasury assets in this manner. Therefore,…

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I have read the proposal extensively, and the structure of this ask raises several red flags regarding the safety of the Community Pool. 1. The Illusion of Safety via Formal Verification The proposal relies heavily on the narrative that “Formal Verification” and audits (Quint/Informal Systems) guarantee safety. While these are excellent tools, they are not a silver bullet. • Verification ≠ Economic Security: Formal verification proves the code matches the spec, but it does not prove the spec itself is economically sound against black swan events or oracle manipulation. • Composability & Bridge Risk: The proposal mentions deploying capital into EVM chains (Base, Sei) and using various money markets. Auditing Hydro’s contracts does not protect the 7M ATOM from exploits in those external protocols, bridge hacks, or bad debt accumulation on lending platforms. The risk surface here is massive. 2. Why the Community Pool? This proposal effectively asks the Cosmos Hub to act as a Venture Capitalist and Liquidity Provider, bearing 100% of the risk. • If the business model and the LST product are commercially viable, why has external funding (VCs) or the ICF not stepped…

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Without the delegation policy being set, unfortunately we have to vote for now. We’re with you in spirit, but feel the proposal is too early to go on-chain.

Hydro is deploying ATOM into low-risk DeFi strategies. This is what we’ve been doing for the past year since it launched. Inflow simply enables more strategies, which we’ve described in Annex 2 & 3. The Hydro committee will continue to provide oversight into the strategies to ensure risk and security practices are followed, but we won’t be “investing” the capital. We won’t be selling or investing any of the ATOM “principal”. We use market-neutral strategies, so market shifts do not present a large risk of losses. Most strategies are also implemented using LSTs so things would have to go very wrong (exploits or hacks) to get a negative APR.

About the cost you’re referring to, note this is not just salaries but our total operating cost. Do you have some reference points for the going market of senior blockchain developers? According to Glassdoor, the average base wage is 130k to 150k per year.

I understand this point of view but the LST has several features that cannot easily be developed on a separate chain, most importantly the integration with the Inflow vaults and the ability to participate in Hub governance. So zero fees is not the main part of the value proposition. Please keep in mind that the community pool also gets the principal back in full.

This budget is for a new ATOM LST, the Inflow ATOM vault, the integration between the two and Hydro’s migration. $150k is the upper limit, in the event that the vault is able to generate that much in profits. After the first set of LST audits is done, costs will go down and the excess will be burned. We will continue to document everything in our quarterly reports on the forum. If these reports are unsatisfying, Hub governance has the ability to clawback the principal, in full, at any time. No part of the ATOM “principal” will ever be spent (only the yield).

Thanks a lot for taking the time to review it. I’ll try to respond to each of your points: Scale of capital involved, allocating such a large portion of the Community Pool significantly reduces flexibility for the Hub and increases systemic risk. Yes this is a shift in how the community pool is managed, but we believe it is a significantly more productive approach. If higher-priority uses for community pool funds are identified, Hub governance can withdraw the required amount from Hydro’s vault and redirect it to those initiatives at any time. Until such a need arises, the funds would actively generate yield and support the development of a Hub-native ATOM LST, rather than remaining idle. Operational and execution risks even with low risk Defi strategies, the real risk surface remains non-trivial and Cosmos historically hasn’t always executed well on similar initiatives. We take risk management very seriously and have a strong (so far perfect) track record managing ATOM from the Hub community pool over a year. Of course risk can never be eliminated entirely, but we use very conservative rules to minimize it as much as possible. Clawback uncertainty, although…

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Patrick: Do you have some reference points for the going market of senior blockchain developers? According to Glassdoor, the average base wage is 130k to 150k per year. From a Cosmos holder’s perspective, I think it’s useful to clearly separate market salary references from how Cosmos actually funds development , because those two things often get conflated. You’re right that in the US tech market, senior engineers can earn this amount, and sometimes more. That said, broader global and crypto-specific surveys show a much wider distribution, often significantly lower outside the US. Crypto ecosystems also recruit globally and remotely, so a single US benchmark doesn’t necessarily reflect the full labor market available to Cosmos. The more important point, however, is not the absolute salary number, but where the money comes from. developer funding is not coming from revenue in the traditional sense. It mainly comes from: community pool spending, continuously minting new ATOM and staking those treasuries. As a result, compensation is often paid in tokens or token equivalents, not from externally earned cash. In practice, this means that ATOM holders are the…

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I am 100% against this. There is no need for this zero fee LST ATOM. There is no need for Liquid stakers to be able to vote. Only a small percentage of ATOM will ever be Liquid staked at one time it is a niche service not something that is required for ATOM to be adopted by institutions.

Hi whitebear555555, thanks for your feedback on this. I’ll respond to each of your points: 1. The Illusion of Safety via Formal Verification It is true that smart contract risk can never be fully eliminated, and we do not claim that audits or Quint verification provide a guarantee of safety. They are simply preventative measures that strengthen the security of the LST. The same is true for EVM deployments. DeFi risk will always be non-zero, but it can be assessed and managed. The Hydro committee has spent the past year evaluating the risk and security profile of every venue Hydro deploys into, and will continue to do so. We will also leverage tools such as Range Security for continuous monitoring, alerts for suspicious activity, and automated triggers that can rapidly withdraw liquidity when necessary. 2. Why the Community Pool? Under our proposal, the community pool would bootstrap the LST and the vault because it benefits the Hub, but we expect a lot of other depositors too. The funding comes at minimal opportunity cost to the pool, as it relies on yield generated from otherwise idle funds that would not exist without this deployment. 3. Missing Metrics and…

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You’re right that initially a portion of the yield will be inflationary in nature (via LST), but this portion will trend downwards, and possibly towards 0 (if inflation is reduced or cut completely via tokenomics updates) and the ongoing expansion of our strategies beyond Cosmos (see the first part of the Annex3).

If the LST adoption or Inflow yield fails to materialize, governance can reduce or end the deployment, which automatically reduces or cuts completely the funding to the team.

I appreciate the clarification, my concern is less about whether clawback or withdrawals are possible in theory, and more about how they function under real stress conditions. Governance driven withdrawals are inherently slow and procedural, while risk events tend to be fast and nonlinear. From my perspective, the community pool’s primary value is optionality and immediate availability, especially during periods of uncertainty. Allocating a very large portion of it into active defi strategies meaningfully changes its risk profile, even with conservative rules and a strong track record so far. I also think scale matters a lot here, risk does not grow linearly, and Cosmos historical challenges have often been around execution and coordination rather than intent or tooling. Because of that, i’m still not convinced that concentrating such a large amount of community pool funds into a single operational strategy is the right trade off at this stage

Voted YES (conditionally) - Need clarification on the $150k fee structure & Payment Currency Body: Hi everyone, At Snow Fall , we have voted YES on this proposal. We strongly support Hydro’s technical vision and believe the Community Pool should be actively deployed to generate sustainable yield for the Hub. However, we are maintaining our YES vote conditionally while we seek clarification on what we believe are the most critical—and underexplored—aspects of this proposal: the financial structure and the payment denomination. Here’s why this matters: The Math Behind the Fee Structure • Fixed Fee Impact: $150k/month = $1.8M annually . On a 7M ATOM deployment (~$15M at current prices), this represents a ~2.6% flat management fee , regardless of performance.(edited ) • Break-Even Reality: For the Hub to net meaningful returns above passive staking (~10-12% APY depending on inflation), Hydro must consistently generate double-digit yields . If APY drops to 8-10%, the net benefit to the Hub becomes marginal after fees. • The “Catch-Up” Mechanism: The proposal states: “If the yield is below $150,000, the outstanding amount will be taken out of the yield…

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I am voting NO . The reason is straightforward: this proposal contains too many promises and too few mechanisms for control and accountability. First, there is no clearly defined responsibility framework. It is not specified who is directly accountable for the results, nor are there consequences in case of missed deadlines or failure to deliver. Second, the proposal lacks transparency. There is no clear reporting structure, no measurable KPIs, and no mandatory public progress reports that would allow the community to objectively assess performance and fund usage. Third, the entire requested amount is effectively allocated to a single team. This creates a single point of failure and contradicts the principles of decentralization, especially without alternative implementers or a competitive structure. The requested budget size is also concerning. Funding approximately 150 months of expenses upfront, without milestone-based payments or staged releases, is financially inefficient and risky. Additionally, there is no pilot phase or MVP. No test deployment, proof of concept, or demonstrable results are provided to justify funding at this scale. Finally, there are no…

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Your post completely collapses at the most basic level, the math. You claim: On a 7M ATOM deployment (~$70M at current prices), That is simply false. At current prices $2.6, 7M ATOM is around $18M, not $70M. This is not a small rounding error, it’s a 4x mistake. As a result, the quoted 2.6% flat management fee is wrong. The break even analysis vs staking APY is wrong and the entire argument about marginal returns is built on incorrect inputs. When the base valuation is wrong, every conclusion derived from it is meaningless. Frankly, this reads like something copy and pasted from chatgpt without even checking the numbers or understanding the content. If you can’t get a basic atom valuation right, your credibility on more complex financial structures is effectively 0% and to be blunt, anyone who has delegated their atom to a validator making errors of this magnitude should seriously consider redelegating as soon as possible. This level of carelessness is not what delegators expect when trusting someone with their stake. Before demanding clarifications from the Hydro team, you should first correct your own math, otherwise this isn’t a good faith contribution to the…

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After careful review, Cosmos Labs does not support the Hydro proposal in its current form. For the past year, we have communicated transparently and consistently to the Hydro team that we do not support additional major allocations of community pool resources to Hydro without additional private funding. The disagreement here is not marginal. It is foundational. The amount requested, representing more than seventy percent of the Community Pool, is economically disproportionate and inconsistent with principles of prudent and diversified treasury stewardship. An allocation of this size would materially constrain our community’s capacity to support other emerging or potentially higher impact initiatives. While Cosmos Labs could reasonably consider supporting a substantially smaller request (for example 500,000 ATOM or less), the current proposal exceeds what we believe should be our shared concentration risk tolerance. More broadly, we believe that projects within the Cosmos ecosystem should demonstrate independent commercial viability by securing external funding alongside any community support. We have previously shared this perspective with Hydro, but to date we have not seen…

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cosmoslabs:

we believe that projects within the Cosmos ecosystem should demonstrate independent commercial viability by securing external funding

Where is Cosmos Labs independent commercial viability?

I’ve never seen so many bots praising the money-grabbing scheme of six guys from Informal Systems. First, they took over a million dollars for developing a product no one uses. Then they took all the USDTs that were in the community pool (they set the trap, so to speak). And now they want to take 70% of the ATOMS from the pool to generate ATOMS and funnel the profits into the order book so they can pay themselves salaries at $200 an hour.

Subject: Re: Hydro Funding Proposal - Snow-Fall’s Position: Yes to Innovation, No to Financial Hemorrhage As a validator and committed investor, transparency guides my decisions. Initially, I welcomed the Hydro proposal with great enthusiasm. The Hub desperately needs bold DeFi initiatives to regain its relevance. However, upon reviewing recent financial analyses and Cosmos Labs’ position, my perspective has evolved out of economic pragmatism. Here is my current position and the conditions for my vote: 1. Vital Diagnosis: The Patient is in Danger Let’s face facts: the Hub is in “intensive care.” In this critical state, what will save it is Value Accrual and revenue generation—not draining what little liquid assets it has left. Cosmos Labs has just validated what Snow-Fall has been advocating for months: the Community Pool cannot be an exclusive funding source without external revenues. We must think in terms of a “Revenue Module”: every outflow of funds must have a clear perspective of inflows. 2. The Acceptable Compromise: The “500k Path” I am prepared to vote YES , but only if the proposal is recalibrated to the suggested threshold of 500k ATOM . This is a…

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It would be helpful to know who at Cosmos Labs authored this post. For context, @Mag recommended last October that I coordinate this proposal with @RoboMcGobo who reviewed multiple iterations of the proposal. I will make a few brief comments on the “funding history” below, but the key point is that, in the absence of support from Cosmos Labs, we do not wish to move forward with this proposal. Hydro was designed and built as a tool to manage the community pool, which we believe should be in service of Cosmos Labs’s roadmap. To move forward, we would appreciate guidance on what Cosmos Labs would and would not support. On the funding history: Informal funding: I wrote the litepaper in my free time, and Jehan Tremback wrote most of the technical specifications largely in his free time as well. 1 FTE was assigned starting in August 2024, and the project was also the focus of a hackathon during the Informal retreat, with the goal of shipping an MVP by Cosmoverse. The total budget was likely in the $50K to $100K range. Prop 955: The Hydro team received the equivalent of $975,000, including funds returned from Informal. In practice, this amounted to less, as only 70% was…

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Every initiative supported by the community pool should be fully auditable and measurable in terms of its real impact on the ecosystem. From what we hear, Hydro has not met this standard. Therefore, our position should be clear. Hydro should not be funded from the community pool until they demonstrate clear, measurable results from their previous projects and undergo a full audit of their accounts. We can still collaborate in the role of a technical partner, share knowledge, and promote tool adoption, but no further funds should be granted to hydro until a minimum level of transparency and real impact is achieved. As a member of the community, I believe this is the only way to ensure that the community pool serves all participants of the hub, not just a few individuals. Perhaps we should start a discussion on verification, auditing, and scaling mechanisms for initiatives, so that in the future, funding decisions are made solely based on real impact on the ecosystem, not individual interests

Hi Olivier, I appreciate your activity and willingness to analyze the hydro proposal, but I have to be honest, your previous posts strongly undermine your credibility. Just over a dozen hours ago, you valued 7 M atom at $70 M, with a market price of $2.6 , and you sign off as a validator while presenting strategic recommendations. Unfortunately, if you can’t properly edit content generated by chatgpt, how are we supposed to take your opinions or suggestions seriously? You sign off as a validator, so are matters regarding multisig security, key management, alerting systems, or slashing risk also being handled by chatgpt also? Your posts mostly make reasoned discussion harder. It’s worth focusing on facts and precise analyses then comments will be helpful, not misleading

Credibility & Role Separation - A necessary clarification Hi @ l.malkowsky , You caught me red-handed on the valuation error, and I fully accept the “Mea Culpa.” To be transparent: I was rushing to share my analysis before the voting deadline while simultaneously prepping for a major crypto event starting tomorrow. In that haste, I focused heavily on structuring my arguments and, as a non-native speaker, I used AI to help with translation and formatting. Unfortunately, I missed the outdated price assumption ($10 vs current market) left in the draft during the editing process. That is entirely on me. However, let’s be crystal clear regarding your concerns about security. As I have stated previously, I am the Front Office lead (Governance, Marketing, Client Relations). I do not handle the technical operations. My partner , who is the technical expert, manages our infrastructure. Absolutely no AI touches our keys, multisig security, or slashing protection. These are critical systems managed by humans with strict, proven protocols. Conflating a drafting error in a governance forum post with our node security is a leap that does not reflect our operational reality. I…

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Why would ATOM need a no fee LST that allows voting power? How would that even be possible? It doesn’t seem likely that people would be able to vote with a liquid staked token. That seems like a pipe dream to me. It is not a business model to use a mass amount of community funds to fund a fee free token indefinitely. Even if you raise money from the initial money it still a never ending service that costs money to maintain. LSTs are a niche service. I believe it is usually something like 15% or so of the supply of a chain that may be liquid staked at any one time. The only reason to have it liquid staked is to use it in defi and earn additional yield and to autocompound for a higher yeild. Creating this LST ATOM would ruin the free capitalism market in the cosmos. Creating a monopoly for LST ATOM. I don’t believe it is in the best interest of the ecosystem for the Hub to finance this LST atom. Let institutions buy the atom and stake it like the rest of us. The hubs business is to support and facilitate the ecosystem not to provide free LST services to institutions. The hubs business is the technology and development of the stack.

I’ve always wanted to see applications on the Hub, but requesting 70% of the community pool feels like too large an ask. Even if it could be clawed back. That effectively removes the potential for other teams to deploy. How many users does Hydro currently have, and how much revenue does it generate for the team at the moment?

You mentioned Mars Protocol, which had a $1M exploit. Since your post came AFTER the incident, was this an oversight? This raises concerns about teams that still choose to use Mars.

Before Hydro, I’d like to see a DEX on the Hub. You guys are clearly talented. Would you be open to deploying and maintaining a DEX there or a different product?

Just focussing on the technical issue of “How could LST holders vote in governance?”, it’s not too complicated. A bit simplified:
When an LST holder votes, we just query the LST balance across anywhere the holder can have it (can e.g. also include the balance in an LP pool, in a protocol that locks the LST up for some benefit, etc).
The LSTs Cosmos Hub address (that ultimately holds the native delegation the LST represents) casts a weighted vote based on how the LST holders voted and their balances.
For that, we would also submit a change to the Cosmos SDK (adding the option to have part of a weighted vote be “No Vote”; right now, the best that can be done is abstain, which still counts against the quorum, vs No Vote would mean part of the voting power of the weighted vote just literally doesn’t vote).

The most difficult part is getting the data on how much of the LST each holder has onchain in a trusted way. An oracle built on e.g. WAVS https://www.wavs.xyz/ is probably the best option, making that process of getting the data onchain decentralized while still easy to adjust to e.g. add new places that users are holding the LST in.

Why this matters. I want to briefly explain why this matters to me. A validator is not just a forum participant or a content creator, a validator is an operator of financial infrastructure. A validator manages private keys securing funds that can amount to millions of dollars, is directly responsible for slashing events that result in real financial losses for users, also votes on governance proposals on behalf of delegators. At this level, there is simply no room for sloppiness. When incorrect financial data is publicly presented, and the error is not caught before publication, no one on the team flags it, and the content appears to be copied or lightly edited from chatgpt without proper verification, this is not a minor typo. It is a risk signal, not a personal attack. In traditional finance, publishing incorrect numbers in an official context would immediately raise concerns about internal review processes, operational discipline, and overall risk management. Crypto infrastructure should not operate under lower standards if anything, the bar should be higher. That is why a fair question naturally arises are operations secured by robust procedures, or by unchecked ai generated…

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I will keep my statement short:

Pros:

• DeFi on the Hub is urgently needed
• The (zero-fee) LST and Inflow Vault are a great start
• Preserves governance rights
• Financial incentives are partially aligned through yield funding

Cons

• Uncertainties in the proposal text
• No Hard Milestones / KPIs mentioned
• Relies on operational funding rather than goal-based funding

In the proposal’s current state, CrowdControl will vote NO. Proposals with an ask of this size must have a better project plan, including milestones that trigger the release of funding tranches.

Final clarification and focus on Hydro #1022 I will be direct to close this “trial” on form and return to the substance: the actual proposal. 1. Total transparency on my method Yes, I use AI, and I will continue to do so . French is my native language. To participate in these international debates with the necessary precision, I write down my raw thoughts and use AI for formatting and translation. It is an indispensable tool for me to ensure I am understood clearly by the community. Criticizing me for using tools to overcome a language barrier or for a one-time lapse in proofreading is a distraction. The error was validating a post too quickly during a major crypto event where I was personally involved. It was noted and corrected. But do not confuse a “translation tool” with an “absence of thought.” 2. Stop the slippery slope generalizations Linking an editing error on a forum to private key security or financial management is a classic slippery slope fallacy. It is a rhetorical argument, not a rational risk assessment. My infrastructure is secure, and my technical validation procedures are strict. This forum is a space for the exchange of ideas, not a server…

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Thanks for the reply. I just want to clarify one point to avoid misunderstandings, my previous post was neither a personal attack nor a judgment of your competence. It was a reference to facts and communication style in the context of governance, because in these processes details matter. If now you changed your position from YES to ABSTAIN, that’s also information, but it actually reinforces my point , if that change came from reading the proposal and the discussion, then it shows even more clearly that communication, precision, language and presentation of information are key in governance votes, because they influence the final decisions. I’m not going to stretch the side topic further because I don’t see a reason to go down auxiliary axes of the discussion. I stated my position, you stated yours and that’s sufficient. For me the side topic is closed, and ultimately what matters is the outcome of the proposal and the substantive arguments around Hydro and and proposal #1022

Why just we don’t deploy all in liquidity alliance erisprotocol. We can vote on ATOM pools to increase immense External incentives. I was seeing and studying all cosmos network to see which one is doing great in tough times and i see liquidity alliance erisprotocol is best after using it.
Some community pool needs to be considered to deployed in liquidity alliance erisprotocol
erisprotocol .com

Creating such websites with such a crappy design in 2026 is outrageous. And this is supposedly the hub’s main product? The one that shows ATOM costs zero dollars?

image999×808 138 KB

And at the bottom of the site, the same thing… So that the user will definitely not forget about the price of the ATOM coin after scrolling down this terrible site.

image1165×741 135 KB

Creating such websites with such a crappy design in 2026 is outrageous. And this is supposedly the hub’s main product? The one that shows ATOM costs zero dollars?

image999×808 138 KB

And at the bottom of the site, the same thing… So that the user will definitely not forget about the price of the ATOM coin after scrolling down this terrible site.

image1165×741 135 KB