Comprehending Cosmos2.0, ATOM ushered in new value capture

22-09-27 11:40
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Original title: A Full Interpretation of Cosmos2.0: From Loose Union to Economic Community
Original author: Morty
Source: Deep Tide TechFlow

Cosmoverse was held in Medellin, Colombia, from September 26 to 28, aiming to make the South American crypto community more aware of the Cosmos ecosystem. Most anticipated at Cosmoverse, Cosmos released a new 2.0 white paper.


The white paper begins with a review of previous Cosmos successes through Tendermint, IBC, and the SDK. After realizing the low adoption rate of the Cosmos Hub network and the low utilization of ATOM pledged on it, contributors hope to change this with Cosmos 2.0.


As Zaki, a core developer of the IBC protocol, said in his speech at the conference,"Today ATOM is a MEME in the Cosmos ecosystem that can do so much more."


In my opinion, the biggest problem with Cosmos Ecology, or ATOM, is at Cosmos Hub, which is the "economic Hub of the Cosmos ecosystem" and aims to be the glue that connects all blockchains to provide valuable services. ATOM is the Token that protects Cosmos Hub. Unfortunately, Cosmos Hub has not fared so well.


On the one hand, many Cosmos leaders opt out of the Hub and use the Cosmos SDK to build their own chains, on the other hand, they can indeed skip the Hub altogether and thrive, so to speak,Cosmos Hub fell victim to the Cosmos ecological success.


How to change all this? To this end,Interchain Scheduler and Interchain Allocator will be an important part of the Cosmos ecologyWith the newly launched functions of Cosmos, such as inter-chain safety margin expansion, inter-chain scheduling, ATOM new Token economics and ATOM pledge liquidity certificate, etc., to form a catalyst to accelerate the development of ecological flywheel and enhance the connection and interaction between chains. Finally, Cosmos ecology becomes a resilient multi-chain ecology.


Extract value from MEV



In the exposed Cosmos stack, we see two new modules, Interchain Scheduler and Interchain Allocator.


Interchain Scheduler is a cross-chain blockspace marketplace in Cosmos that generates revenue from cross-chain MEVs.


Using the Ethereum.org interpretation, MEV can be understood as"The maximum value extracted from block production in excess of standard block awards and Gas fees by including, excluding, and changing the order of transactions in a block", high frequency cross-chain behavior in Cosmos ecology drives the opportunity for maximum extractable value (MEV).


Specifically, a willing Cosmos blockchain can sell a portion of its block space to an interchain scheduler; The latter would then issue NFTs representing "reservations" of the block space, and these NFTs would be auctioned periodically and possibly even traded on the secondary market. The original blockchain will then receive some of the proceeds. According to the white paper, the inter-chain scheduler will complement, rather than replace, off-chain MEV relays, promoting competition.


Interchain Allocator, designed to simplify economic coordination across the Cosmos network, accelerates user and liquidity acquisition for Cosmos projects, while ensuring ATOM's status as the network's reserve currency.


For example, the income generated by Scheduler will be allocated through Interchain Allocator to promote promising new projects in the ecology and the long-term development of the ecology, and the emergence of new projects will in turn promote the distribution of more income.



To sum it up:Scheduler monetizes the economic activities of IBC and the revenue eventually flows to Allocator, which supports new projects in the Cosmos ecology, expanding Scheduler's potential market capacity.


Most importantly, Cosmos Hub will generate revenue from cross-chain activities by creating block-space markets and charging matching fees, which, at the moment, is nothing.


Safely capture ATOM value from the chain


Interchain Security is one of the most anticipated upgrades.


Security is always a fundamental issue for applications built on Cosmos-SDK, and it is not a big issue for large application chains with large numbers of users, such as Terra before.


But small application chains have this concern becauseThere is a risk of attack if a newly launched application is protected by a token pledge with a market value lower than TVL on that chain.


As a result,Interchain Security allows these application chains to rent Security from Cosmos Hub for a percentage of the transaction fee, and these application chains will be able to receive Security guarantees from Cosmos Hub verifiersAfter all, ATOM's market value is around $4 billion, and the cost of doing evil would be around $3 billion (2/3 of ATOM's market value, and it would be hard to collect that much on the secondary market).



Interchain Security can be used in the following aspects: Rollup Settlement (a standardized Rollup Settlement system and extended solution when external data availability providers publish evidence of fraud), IBC multi-link routing, Chain Name Service (Cosmos version of ENS), Multiverse (can be understood as testnet), etc.


Interchain Security launched Cosmos Hub as a Security Hub and helped ATOM capture value from the Security requirements of other application chains.


Another way that ATOM might accumulate more value is with Liquid staking.


todayATOM holders can earn interest by pledging their tokens to the verifier", but doing so would involve locking tokens to an address on the blockchain, at least for a period of time, where they cannot be sold, and simply providing a "Liquid staking "solution that allows users to trade their pledged assets with a derivative Token representing their shares.


At the conference, core developer Buchman stated that "Cosmos Hub will soon staking Liquid staking at the heart of your network code, and with a native Liquid staking module, staking will provide a much better user experience. Now ATOM can start to become more mobile, and even though it already provides security, we can equally start to provide new ways to link ATOM's security and mobility to other tokens being rolled out in the ecosystem."


ATOM new Token economics


A more subjective observation is that when it comes to Cosmos, people praise the SDK and some eco-projects, but complain about ATOM.


One is high and volatile inflationCurrently ATOM inflation is between 7% and 20%, depending on the percentage of the total supply that is being pledged. In March 2019, the total supply of ATOM was about 214 million, and now there are more than 292.5 million ATOM in circulation, an increase of about 36.68%.


The second is the lack of value captureThis is in sharp contrast to Poka ecology, which is generally not as robust as Cosmos Ecology, but DOT is able to capture the value of the whole ecology through parallel chain auctions and so on.


For example,If Poca is a centralised federation, Cosmos is a loose confederation.


The new ATOM Token economy will change its number of issues and value capture. ATOM's launch will be adjusted to two phases:The transition phase and the stabilization phase.


The transition period is 36 months, starting with 10 million ATOM releases per monthIf this were implemented immediately, inflation would spike in the short term, briefly reaching 40%, and then fall steadily until it reached 300,000 ATOM issuances per month, effectively reducing ATOM inflation to 0.1%.


As shown in the figure below, ATOM distribution becomes linear rather than exponential.



After entering the stabilization phase, through Interchain Security, part of the transaction fees and inflation from each application chain will be sent to Cosmos Hub's publishing module to cover the Security expenditure of all chains in place of the current publishing subsidy.


In short,Whitepaper 2.0 replaces Token inflation, which is used to incentivize provers and pledges, with Interchain Security, and instead rewards provers and pledges with the resulting Security fees.


Intuitively, the verifier and the pledgee are rewarded less. However, Cosmos has introduced the ATOM Liquidity Pledge Protocol to enhance ATOM's capital efficiency. That means,Users can get liquidity by pledging their credentials, so as to participate in more on-chain activities, such as participating in more DeFi activities.


However, the reform of Cosmos economic system promoted by Interchain Security will directly implement a new distribution mode through Interchain Scheduler and Interchain Allocator, as shown below:



The inflation award and Interchain Allocator value allocation will be directed to the Cosmos Hub Treasury, a capital pool that is the main driver of new projects and ecological long-term development with the aim of building a resilient economy within the Cosmos ecosystem.


In general,The Cosmos ecology may no longer be a "loose union" but an economic community.


conclusion


The core developers Buchman and Zaki ended their Cosmoverse talk by saying,The development of Cosmos Hub will be up to ATOM holders, who can vote for or against any changes to the blockchain. Judging by the reaction so far on forums and on Twitter, most people are optimistic.


The most optimistic is Zaki, who says,"Cosmos Hub's new feature will make EIP-1559 look like a joke"And titled his talk" $1K ATOM LFG."


Second, we have also seen some skepticism, still focusing on the 36-month interim offering, that the interim is actually a new round of Cosmos Hub financing that will raise more than 37 million tokens (currently worth $525 million) for Cosmos Hub, assuming the collateral ratio remains the same. Dilute the current ATOM holders.


But overall, we see that Cosmos Hub has a way of actually generating revenue, and ATOM has more value capture, less of a completely loose confederation and more of an economic community, as Mindao said of the Cosmos 2.0 white paper:Cosmos 2.0 is trying to turn ATOM into a "Cosmos Union" of unlicensed euros, offering sharing economy security and decentralization as a service, while the member chain still retains full sovereignty.


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