Draft : Proposal to help fundraiser participants who lost their seed phrase

Before anything I would like to extend my sincere thanks to @zaki , @slamper , @sunnya97 , @katernoir & @JayB for answering questions along the way that helped me immensely to draft this proposal. This was a steep learning curve for me and if it weren’t for their support I would not have gotten far. DRAFT : : A Proposal : A humble request to the Community & Validators of the Cosmos Hub to help the fundraiser participants who have lost their seed. *Please note that this proposal shall not be implemented until the next breaking change is required . *i.e : There will be no breaking change for the sole purpose of helping the recovery of funds. *This proposal is only for genesis block accounts. This proposal does not set a precedent for future lost atoms or hacks. *As off on August 30th 4:50 am (UTC time) approximately Only 1.72% (of current supply) of the atoms from genesis accounts have not shown any activity (Excluding AIB and ICF funds) . *Also it is highly possible that the eventual number to be recovered is Actually Less Than 1.72% because some participants may still have their seed , but have not broadcast a single transaction yet. Section 1 : Bitcoin donors…

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Thank you for all the work that went into this, @vee_em.

To this day, I can’t understand how I managed to loose my fundraiser seed. I followed Cosmos all along, even considered founding a company to become a Validator myself at one point. Logged on to vote for a validator when Mainnet launched, and … no seed. A painful moment.

Now there’s hope thanks to this proposal and thanks to me still being able to sign the Bitcoin address I used for donating to the fundraiser. I’d be truly happy if my fellow Cosmonauts (alas, in spirit only at the moment), and the Validators would help us use the flexibility of Cosmos to recover our Genesis coins.

B-Harvest agrees with this proposal with condition that each receiver forcely donate X%(ex:30% in my opinion) of their salvation to the community fund. It will be a win-win for receiver, others, and entire community.

I agree, such operation should not be performed without some kind of “penalty” that would beneficiate everyone

X% is a matter of discussion and I think it can be lower than 30%.(depending on the result of community discussion) We agree any result between 10%~30%.

Governance will forcely send the X% amount to community on the new genesis file, meaning that it is not the holder’s choice, therefore it is technically not a donation. Not sure how US tax law works though.

And I dont see X% as a punishment, but rather see it as a proper economic/community-wise incentive for voters to agree the proposal.

I’ll happily donate to the community fund in return for the recovery. 10% would appear fairer, but I’m probably a bit biased.

I would suggest no less than 20%. Also this should not indeed be seen only as a penalty but also as a reward/incentive for the cosmos community to perform such operation.

Also such refunding would be quite unprecedented afaik. It could be perceived as something positive (i.e thanks to proper governance such operation is possible) but also negative (i e. it would send the signal that losing your seed is not such a great deal)

Regarding taxation : if the x% sent to community pool are considered as a donation, then it is the entity controlling the community pool that would be subject to taxation, not the donator, and most probably this would happen only when convertings atoms to fiat as most countries tax only crypto to fiat trades. By the way, who controls the community pool ? Is it the ICF ?

Cosmostation supports this governance proposal.

Our backend developer JayB gave vee_em some feedback in the process of putting this proposal together in terms of ways to imagine recovery of these funds.

Like @bharvest mentioned, it might be fair to have a portion of the recovered funds to be accumulated in the community fund. Applying this proposal on our next upgrade to cosmoshub-3 requires some effort and participation from the validators. Since this is a governance proposal and and the result of the proposal is in the hands of validators and delegators, there would inevitably be some demand for taxation or should I say “community-wise incentive,” and rightfully so.

I do think however that a 30% taxation may be a little too steep. @ddrdrck mentioned that such refunding could be viewed as both positive and negative, and I completely agree with this viewpoint.

If we were to apply some taxation to recovery of these funds, I think that 10%~15% would be a fair number.

Would like to hear what others have to say.

Community fund only can be controlled by governance, not any single entity. So the actual possession belongs to entire atom holders imo.

I have to be honest: When I started talking to @vee_em and first heard about this idea, I was very much against it for various reasons. Is someone who has control of the donation address always the owner of the corresponding Cosmos address? What if the bitcoin private key was stolen in the meantime? After talking to @vee_em vee_em for a while and thinking about this, I see it a bit differently. Looking at the governance part of the cosmos whitepaper , it describes a human-readable constitution that governs the policies of the Cosmos hub. From my understanding, we don’t have that written down yet (which I think we should, maybe it’s time for another proposal…), but the way I experienced the Cosmos community over the last year, we are a welcoming community that cares about its members and always tries to help out. On-chain governance is a tool for us to form the blockchain-ecosystem in a way we want it to be. For me, that means that “code isn’t law” and that mistakes don’t have to be fatal. In this particular case, recovering funds doesn’t hurt anyone. We don’t dilute the supply (the ATOM are there, just not accessible) and we don’t take away ATOM from anyone. Therefore, Staking…

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Thank you for the comments @katernoir
I appreciate all the very important inputs you had throughout this process.
I will create another section determining time and process of submission of a recovery request.
In the meantime , this proposal needs to reach as many of the genesis account holders as possible so that they do not miss this window. I will request the admin of the cosmos medium page to begin with and other official channels as well.

I also thank StakingFacilities.com for their very kind gesture of committing 200 ATOM for this proposal.
I have updated Section 5 , with this detail along with the conditions specified by you .

While I am extremely sorry for those that lost their fundraiser seed, I must speak strongly against this proposal. The main reason why I am against it is because it is exploitable . There is a chance that some users in the 5% that have not send a transaction yet may see their ATOMs be stolen from them. If their Bitcoin or Ethereum private key were compromised, this proposal would effectively enable the hackers to seize their ATOMs as well. I think that while unlikely, the fact that this possibility exists should disqualify the proposal immediately. Additionally, this proposal opens the possibility for malicious actors to attack the reputation of the network. All they need to perform the attack is to collude with one of the users that have not sent a transaction yet. Here is how the attack could unfold: • Alice is in the 5% of users that have not sent a transaction yet. Alice possesses both the bitcoin private key she used in the fundraiser and the fundraiser seed. She decides to collude with Bob to perform the attack. • Alice gives her BITCOIN private key to her friend Bob. Then, she and Bob both short the ATOM market. Then, Bob performs the recovery procedure in this…

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@gamarin indeed if this proposal was accepted it would create a precedent, however I do not think this is comparable to Parity multisig hack or DAO hack (the most famous examples coming to mind). In both cases, a real hack occured, and people could argue that as “code is law”, it was up to the smart contract coder to make sure there was no flaw with his code. In this case no hack happened

Also the “exploit” you describe is not a technical exploit but a social exploit, consisting in spreading FUD to influence the market. In my opinion it would be easy to dismiss such FUD if it would ever happen. In any case, I would not say the proposal is “exploitable” based on this sole argument.

however I do not think this is comparable to Parity multisig hack or DAO hack (the most famous examples coming to mind). In both cases, a real hack occured, and people could argue that as “code is law”, it was up to the smart contract coder to make sure there was no flaw with his code. In this case no hack happened To me the point is not really about why people lost money though. The point is that we are asking to change the code of the Hub via a method that can be exploited in order to recover some lost funds. “Code is law” is not our tagline, I am just mentioning these hacks because they show how controversial recovery proposals can affect a community, as well as the reputation of this community to the general blockchain ecosystem. Also the “exploit” you describe is not a technical exploit but a social exploit, consisting in spreading FUD to influence the market. In my opinion it would be easy to dismiss such FUD if it would ever happen. In any case, I would not say the proposal is “exploitable” based on this sole argument. I never said it was a technical exploit, just that it was a possible exploit scenario (social, yes). But there is a clear exploit that I…

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TL;DR we should never touch account balances and break economic finality. I truely sympathize and applaud the effort put into draft, but am against the proposal: • If this vote passes and we start messing with account balances, it breaks the Hub guarantees of economic finality . I can’t stress how important that is, if we want real world adoption with real value flowing through the Hub. It requires certainty that your account balance doesn’t suddenly change because some Atom holders you never met decided so. Changing that guarantee will likely be even more damaging than the coordinated FUD campaign/sell-off scenario @gamarin outlined. • There are no guarantees that all fundraiser participants who lost their seed phrase have discovered this yet and will turn up before the deadline. Is it fair to reimburse only some? Recall there was a window before launch where the genesis was public and tools were available to verify balances before launch. Depending on what amounts we are dealing with, an alternative proposal could be to use a similar scheme as the fat-finger refund. • Fundraiser participants file a claim along with their public verified identity (so they have…

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I am in favor of this proposal. This proposal does not affect me financially, but I’m in favor of it because I believe it provides a way for a small handful of unfortunate Cosmos participants who saw the early value in this network / community and contributed their own funds, to continue to participate with Cosmos Atoms they rightfully own. • This proposal does not affect economic finality for your account if you don’t sign a transaction with your Bitcoin or Ethereum keys that were used to fund the original crowdsale. • Social engineering exploits are possible in any decentralized consensus network. That’s the world we choose to operate within when putting value at stake in this space. I cannot speak as a voice for the community, but my strong opinion in this matter is that the Cosmos / Tendermint project is about connecting blockchains and promoting interoperability between chains. If we as a community can’t work towards enabling a simple interaction between Ethereum, Bitcoin and Cosmos Hub to address a limited use case to help founding members of our own community who are rightful Atom owners , then I’m not sure this community will have the cohesiveness to survive…

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Below is a Tx hash of a person who inquired Cosmostation about his lost mnemonics.

TxHash: eb5dd90216d8f9f7f5dcd3d54e4ad0b0dd34f5602d7b779b71ae338fc6586846

FROM: 1PGUzrmXSVhSY6jUtrVTmp3y5nQ3XbBfd7

Amount: 1BTC

Here is my TX info:

TxHash: 331db408685ff221193e88e0d548493920ab785e2d62f3898ce807463afc11e3

FROM: 1JsiFGmKZvr3iR4KejpMswmapCoB2oWsog, 1E1dPcQwyPBxYRUfYBt64BpZnvsgSam6SS

Amount: 0.4BTC

my donated info

Eth address - 0xFF3fA81A59F31bd563D2554401438a1678D43593
TXID - 0xe2bb8c832c237b9ed898d4616649347e84931d56b8942cb409cafd6b01e1913d

@gamarin is right!

While we sympathize with those with lost seed phrases, we found the economic finality concerns outlined above to be compelling.

At first thought I was very much in favor of this proposal. It is terrible that there are people who have lost their fundraiser ATOMs.

On reflection, I have to come down against this, on fairly simple principles.

1. Economic finality of the blockchain.
2. Validators should not be in the business of making subjective judgements. We are not adjudicators. We are not in the business of KYCing random ATOM holders.
3. The precedent setting of validators working together to approve rectification of perceived wrongs. There will eventually be a significant theft of ATOMs, either from an individual or an exchange. What will be asked of validators?

Cosmos is not EOS.

I’m not sure I understand the economic finality argument.

economic finality is just a set of social norms.

I think the norm of the “genesis state” was only fully baked until after some block upgrade would be perfectly acceptable by the economy.

I don’t think responding to a theft is a reasonable thing to respect. It would simply be too difficult to coordinate the validators to do that without introducing a central authority.

Hi Matt , Thank you and Figment for taking the time deliberate on the draft proposal. Some notes based on you comments. • When the next upgrade occurs with the chain-id change , the new genesis block will contain new addresses based on proof that was provided by the fundraiser participants . There will be no change in the blockchain between the blocks . So one could say that economic finality of the next chain will be maintained. • We could say that there will be no subjective decisions. There would be only 2 cases.Keys lost of addresses before the genesis block are different from keys lost of addresses that were funded after Gen0 block . In other words the former cannot be a precedent to the latter . • Validators may not need to perform a KYC in this case . The ICF or another third party may be requested to do it and the cost of the operation can be covered from the donation from the recovered funds. This will act as a big deterrent to what Gamarin suggests may happen. Cosmos is definitely not EOS . The EOS situation unfortunately had a much more complicated form of recovery from what I understand and that is why Block Producers were hesitant to go through with…

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Withdrawal History (Poloniex)
Txid: 1f584ea7b8da75d78dd90168c8d1a4046be88e20f75c867d567944bd17d46973
Amount : 1.5BTC

Withdrawal History
Txid: https://www.blockchain.com/btc/tx/67069e24befe1f5b1cf6c86ab64bd867f409e78dd36c42adc5cf6ebfec5c7a7e
Amount: 1.0 BTC
Thanks for your proposals & considerations.
It was a terrible mistake not to write down seed words anyway.
However, please consider it more with generosity.

my donated info

Eth address - 0x53AD4398F76a453A2d4daC4470F0b81Cd1D72715
TXID - 0x42d0f860e1cd484f51647f34479843008b69d8f1158c94ad44ae30df33fdc080

Amount: 16 eth

Ed Moncada here with Blockfolio. First off, I would like to sincerely thank @vee_em for the time and effort that he has put into this discussion / proposal. Our story is a bit different from the others on this thread, as we did not lose our seed phrase. We simply never received one. Back in April of 2017 on the morning of the offering, my investment partner Calvin opened up his Brave browser while on the phone with me (edit for clarification: he was participating in the offering through his Mac laptop while one the phone with me). He was going to handle the transaction for us (of which I had a minority share). We knew there was a high likelihood that the Cosmos sale would sell out quickly so he was up early and waiting for it to begin, watching the countdown clock make it’s way down until the offering started. When the countdown was complete and the sale finally started, he informed me that a Bitcoin address appeared on his screen and asked if he should go ahead and send the Bitcoin there. Calvin was never presented with a flow to obtain a seed phrase, or one to confirm it. It just went straight to showing him a BTC address (and yes we have the transaction IDs that show we…

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I am for this if they can sign from the accounts the money was sent from. Is anyone going to ever bother submitting this as a real proposal on chain so people can actually vote on it?

I see I can contribute 82 atom for this @vee_em

As a COSMOS fundraiser participant privately, but also holder of ‘LOST’ ATOMS via the ICONOMI holdings I would love to see this happen, a 10-20% fee would seem fair in my view.

Would be willing to donate 50 ATOM to support this, (am sure many more within ICONOMI community will also)