Written by: Tia, Techub News
Although Cosmos has been embroiled in a governance scandal recently, judging from its dynamics, from June to August, protocols have successively initiated proposals to join the Cosmos Hub consumer chain. Yes, this policy, which has been promoted in Cosmos 2.0 since 2022, has finally begun to make some progress.
It just so happens that LSM has been launched for some time since September last year, so we can also take this opportunity to analyze the data and see how much pledge liquidity has been released.
ATOM War has also gathered a wave of projects that want to apply for funding, and it seems that it is about to officially start the first phase of advancement.
With the three pillars of ICS, LSM, and ATOM War, plus a pledge rate, this article will take a brief look at the specific effects of the implementation of these policies.
Staking
Data from CosmosOutpost
Judging from the pledge data, it is terrible. Since the scandal of Cosmos governance corruption broke out on July 31, Cosmos has begun to see huge amounts of unstaking. About 3.3 million ATOMs were unstaken on July 31, about 1.7 million ATOMs were unstaken on August 4, about 650,000 ATOMs were unstaken on August 5, about 1.66 million ATOMs were unstaken on August 13, and about 8.1 million ATOMs were unstaken on August 15. A total of 12.11 million ATOMs were unstaken in the past few days, accounting for nearly 3% of the circulation of ATOMs. The price of ATOM also fell from $6.15 on July 31 to $4.62 on August 18, a drop of 33%.
ATOM Token Price
Replication Security（ICS）
The main function of Replication Security is to provide verification of Hub validators for other chains in the Cosmos ecosystem, and to provide an opportunity for other small chains in the Cosmos ecosystem that cannot provide huge validator costs to share Hub security. These chains that share Hub security are called "Consumer Chains". If you want to become a Hub consumer chain, you need to submit a proposal first, and write down the cost you are willing to pay for becoming a consumer chain (how much transaction fee to pay to the Hub, etc.) in the proposal. Once ATOM holders are satisfied with this cost, the proposal can be passed before it can officially become a consumer chain.
Currently, there are two chains that have passed the proposal. One is Neutron and the other is Stride.
Neutron is the first consumer chain of Hub, launched in May 2023, and shares revenue with Hub
25% transaction fee, payable in ATOM or NTRN
25% MEV income, fees paid in NTRN
At the same time, Neutron also airdropped 70,000,000 NTRN to Cosmos validators, accounting for 7% of the total NTRN supply. Later, more than half (42,727,950) of the NTRN were not claimed, and this part was transferred to the Cosmos Hub, worth about $15.72 million (data on August 18), which is 0.08% of the ATOM market value.
Another consumption chain is Stride. Stride is a liquidity staking protocol that has a lot of revenue itself, and the portion allocated to Hub is also quite generous:
15% Liquidity Staking Rewards
15% STRD inflation staking rewards
15% of MEV revenue
15% transaction fee
Partial Set Security
Since all validators need to provide verification for the consumer chain, the rewards that the consumer chain receives from ICS usually cannot cover the cost of running the chain, and people began to complain that ICS brought additional burdens to the validators. Then Partial Set Security was proposed. Partial Set Security reduces the cost of ICS to validators by reducing the number of validators that must run each consumer chain. Validators can choose whether to become consumer chain validators. When the number of validators operating consumer chains decreases, validators running consumer chains can receive a larger proportion of rewards. This proposal was passed on April 12 this year.
Permissionless ICS
Permissionless consumer chains are another proposal after Partial Set Security, which allows anyone to create an optional consumer chain without the need for a governance proposal. This will enable chains to start faster and with less friction. Consumer chains can set some basic parameters, such as how many validators opt in before they start. Currently, the fees paid by the consumer chain are given directly to the Hub, and the Hub may initiate a proposal to distribute part of the fees to the validators after receiving the fees. This is actually very inconvenient, greatly delays the time for issuing subsidies, and may be unfair to some validators. In the future, in permissionless ICS, consumer chains can directly set the amount of commission to be paid to validators, and perhaps there will be a direct payment function.
The permissionless ICS proposal is currently on voting and will close on August 21st. Since switching to fully permissionless chain creation would require some refactoring of the codebase, the current version of ICS still uses governance proposals to create consumer chains, although permissionless creation is theoretically possible.
The proposed consumption chain protocol
From June to August, a number of protocols have proposed to join the Cosmos Hub consumer chain. Because there are costs to start a consumer chain, some projects have not been able to complete the subsequent steps even if they have proposed on the Hub. In the past two months, the protocols that may become consumer chains released by the Hub official push are mainly Elys Network, KiiChain and Evmos. Except for Evmos, which has a slightly higher usage rate, the other two chains are estimated to have limited activity. Therefore, from a practical point of view, it seems that this policy of consumer chains does not have such an optimistic effect.
LSM Liquidity Staking
Consistent, available, and deep asset liquidity is essential for any decentralized network. The LSM liquidity staking module allows ATOM stakers to tokenize the staked ATOM into liquid pledged assets through the liquidity staking module. Its main function is to activate the staked ATOM so that it can participate in the DeFi ecosystem, increase the activity of DeFi in the Cosmos ecosystem, and make up for the problem that the actual usage rate of ATOM in the ecosystem is not high due to the ultra-high staking rate of ATOM.
The LSM module was officially launched on September 13. Here we mainly observe whether the activity of DeFi in the Cosmos ecosystem has increased after the LSM module is enabled, and by the way, take a look at the coin prices of these liquidity pledge chains.
At present, the LSM module is mainly used in the three liquidity pledge protocols pSTAKE, Stride, and Quicksilver. Since the historical data of pSTAKE and Quicksilver are not available, this article mainly organizes the data of Stride.
The picture below shows the lock-up value of stATOM minted in Stride. It can be seen that the locked value of stATOM being minted has increased significantly since September 13th, and then began to decrease after the peak on April 8th. Although it is a downward trend, compared with the price of ATOM that has fallen during this stage, the number of ATOM locked should not have dropped much, but the growth rate should have declined.
Data from Stride
ATOM Token Trends
As a liquidity staking chain, Stride’s token price also increased significantly starting in October, but peaked in mid-February and began to fall, a month earlier than the overall market decline of cryptocurrencies in mid-March.
Stride Token Trends
pSTAKE Token Trend
pSTAKE also performed well, with a gratifying increase.
Quicksilver Token Trends
Quicksilver performed well in the initial stage, but as TVL failed to increase, the price of the coin also performed extremely poorly.
Overall, LSM has a significant effect on the consumer chain.
In terms of the number of stakes, the current number of Stride stakes is about 4,223,479 ATOMs, and the number of pstake stakes is 661,066 ATOMs, totaling 4,884,545 ATOMs. Since the upper limit of LSM is 25% of the total stakes, about 60 million ATOMs. Although it is an incomplete statistics, the tokenized staked ATOM currently accounts for less than 10% of it, compared with Ethereum liquidity stakes accounting for 32.34% of the total stakes (the number of liquidity stakes is 11,043,280 Ethereums, and the total stakes is 34,140,035 Ethereums), there is still a lot of room for growth. We can continue to observe the relevant data and whether there are relevant measures to incentivize LSM.
Nuclear War
Atom War is similar to Curve War. Since some projects in Cosmos asked the Hub for ATOM funding (similar to a loan), the idea of Atom War came into being. Projects that want to obtain ATOM funding can compete with each other. Holders of shares in LSM can lock their shares to obtain voting rights to guide projects to obtain funding. This mechanism is mainly implemented through Hydro.
Demex, Electron Protocol, Nolus, and Shade Protocol are the first projects to compete for funding. Since the auction has not yet started, there is no observable data yet.
summary
In summary, it seems that a series of revitalization plans are not optimistic, and the situation of continuous unstaking also reflects this to a certain extent. In fact, Cosmos' vision and many measures are very advanced. For example, some concepts such as shared security were proposed very early, but in the end, there were few benefits. (Of course, this is also related to the conditions of each project itself. The development of Cosmos shared security is indeed more troublesome) But it must be said that it is indeed slow.
At the same time, Cosmos is also facing many problems that all blockchains face when they develop to a certain extent - centralized governance. The community is also quite dissatisfied with Cosmos's xenophobia, factionalism, and wasteful spending. Maybe they have waited too long, or they are really disappointed with Cosmos. Even some Genesis wallets have begun to release ATOM stakes.
I still remember that when Cosmos 2.0 was just launched, a group of people enthusiastically accepted various interviews with hope. When I watched the relevant podcast video interviews, I was even infected by their enthusiasm. But sometimes, the truth is so cruel. At least so far, the results are not so ideal. Although everyone has been blaming Cosmos, especially the man behind Cosmos, Ethan, I still believe that Ethan, who loves to wear skirts, wears hairbands, does not shave, is very interested in currency, and hopes to apply the ecosystem in biology to blockchain design, will not be as unbearable as the community says.
PS: Interested readers can go and take a look at Ethan's self-playing and self-composed songs. They are really real, free and unconcerned about other people's lives.
