There comes a time when it becomes evident that the platform we built for the greater good is no longer bound by the principles that we hold so dear. These are times when it becomes necessary and natural to exit and form new associations. This is our right, as given by the laws of nature and cryptoeconomics.
"All atom holders are free to fork, slash, and hack each other in accordance with the spirit of the Cosmos Constitution." - Cosmos fundraiser PLAN.md from 2017
Atoms are not money. The dual token model is superior as it prevents the hostile takeover of governance from the common token holder. Bitcoin would be easier to take over if bitcoins themselves were used for governance, but it is not, rather it is mining infrastructure that determines voting power. Bitcoin would not be secure if mining infrastructure were as fungible and transferrable as money, as there would be less skin in the game.
"Atoms are not designed to be a medium of exchange nor a store of value. ... Inactive or unbonded atom holders do not earn the inflationary atoms, and are thus taxed. This makes atoms ill-suited as a medium of exchange or a store of value. Instead, atoms are a tool, like Bitcoin miners are a tool." - Cosmos fundraiser PLAN.md from 2017
The Atom inflation model is a shortcut for penalizing non-staking. That's it. It is not the primary economic incentive model for the Cosmos Hub. The primary economic incentive model for the Cosmos Hub is transaction fees through many chains secured by ICS.
While the ATOM is a staking token, and the plan had always been for there to be many non-staking fee tokens, we also set out to provide a taste of the economic model through what we called the PHOTON token, which was originally intended to be a fork of the Ether distribution, back in 2017.
Each member of a validator’s staking pool earns different types of revenue:
- Block provisions: Native tokens of applications run by validators (e.g. Atoms on the Cosmos Hub) are inflated to produce block provisions. These provisions exist to incentivize Atom holders to bond their stake, as non-bonded Atom will be diluted over time.
- Block rewards: For the Ethermint zone, block rewards are paid in Photons. Initial distribution of Photons will be hard spooned from Ethereum. This means Photons will be emitted 1:1 to Ether.
- Transaction fees: The Cosmos Hub maintains a whitelist of token that are accepted as fee payment.
This total revenue is divided among validators' staking pools according to each validator’s weight. Then, within each validator's staking pool the revenue is divided among delegators in proportion to each delegator’s stake. Note that a commission on delegators' revenue is applied by the validator before it is distributed. - VALIDATORS_FAQ.md Dec 2017
So when the core proponents of Atom2.0 tell the community that ATOM is merely a meme-coin with no economic model, they are intentionally misleading the Cosmonaut community in order to get their ATOM2.0 proposal to pass.
The conflict of interest involved in this maneuver is astounding. Ethan Buchman is one of three foundation council members of the ICF, who recently elevated Zaki Manian to oversee the transactions of the ICF's treasury. Another member of the FC council is the leading proponent of liquid staking. There is no reason why the ICF cannot fund for the development of everything in the ATOM2.0 whitepaper. The ICF has on the order of $150M or more, and a for-public and for-Cosmos mandate. It has enough funds to fund the development of ATOM2.0 multiple times over.
Instead, certain proponents of ATOM2.0 have planned a hostile takeover of the Cosmos Hub by means of clever social engineering.
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They modified the header of the cosmos.network website to make it appear as if ATOM2.0 was an "official" roadmap, in clear violation of the conflict of interest and the ethos of decentralization.
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They announced this roadmap during CosmoVerse to further the narrative that there is a centralized team making an official announcement of this plan; where the event doubly served as a dog-whistle for centralization.
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While the ICF already has $150M+ that can be used toward the development of ATOM2.0's project ideas, it instead proposed to inject $500M+ into a treasury whose charter would take control away from the Cosmos Hub governance to the treasury's centralized council for those funds and more.
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After the initial highly negative reaction from the community against the original proposed ATOM2.0 plan, they have merely managed to split the $500M+ of funding into tranches, that still go to this treasury. While the subsequent tranches supposedly require the approval from Cosmos Hub governance, fact is the Cosmonauts with eyes to see are already planning to leave this network, so there is little reason to doubt that all the inflation will happen as they originally planned.
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The justification for the $500M+ inflation was supposedly to inflate up-front for development and economic alignment given that ATOM2.0 turns the ATOM token into a deflationary token; yet the whitepaper doesn't actually turn ATOM into a deflationary token at all, because it still inflates exponentially in order to keep 2/3 staked. All that would have been needed was to remove the minimum inflation rate of 6%, and the existing ATOM tokenomics would have allowed for the inflation rate to even become negative with the adoption of ICS (and the ATOM2.0 whitepaper even admits that this is to be expected).
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Rather than include limitations on liquid staking, the final ATOM2.0 that was proposed for governance removed any notion of limiting liquid staking, and rather included the only piece of criticism that I had mentioned recently from the quicksilver whitepaper that only 5% of ATOMs are at stake of slashing (and therefore that 95% of staked ATOMs are wastefully left unused). This is not true, as more than 5% of staked ATOMs should be slashed in certain scenarios, especially when malice is involved. The whitepaper says nothing about the various and real systemic risks associated with liquid staking but rather goes all-in on it.
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Liquid staking combined with shorting markets will incentivize the employees or insiders of validator companies to sabotage their own validator. As far as I am aware, nobody has considered this risk factor, because not enough is known about the risks of liquid staking.
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The ATOM2.0 whitepaper confuses the economic engine as being both ICS for the atom inflation tokenomics part, but also puts too much emphasis on the experimental allocator and very loosely worded section on the scheduler that appears to support value extraction as the economic model for the hub. MEV (maximal extractable value) primarily needs to be solved in the application. To make a block space market and to call that the economic model, and as one proponent says, to "democratize extractable value" is to opposite of what we need to do. It confuses an attempt to ameliorate centralizing factors of MEV by putting it on chain, as an economic model of the new ATOM2.0 vision. This is quasi-exploitative, and not generative. ICS scaling is generative.
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The co-authors of ATOM2.0 even proposed Prop75 to redefine the NoWithVeto option to attempt to ban this option from being used to veto such proposals as ATOM2.0 Prop82; when in fact prop82 is exactly the kind of proposal that should be vetoed using the NWV option. Furthermore, they passed prop75 under the notion that it is merely a "sentiment proposal", but then used the passage of prop75 to shame people from voting NWV on prop82. And of course they say that prop82 is again merely a "sentiment proposal". This is intentional gaslighting and social engineering.
Make no mistake, these are not mere coincidences. These are intentional and meticulously planned to take over and subvert the spirit of the Cosmos Hub, to ultimately rug us yet again like Luna was rugged.
Given all of these points, what is clear is that should ATOM2.0 prop82 pass, good people will leave the Cosmos Hub ecosystem, and subsequent proposals will become worse, and all the tranches of inflation will easily be approved for the centralized treasury.
There is no negotiation possible with the leadership in hand. We must stop pretending that we can reform them, or work with them. I have been dealing with these exact problems since 2017, and now 5 years later coming to the conclusion that it is completely intentional and by design, and that I should have left them years ago.
So here is my call to action to the Cosmonaut community. Vote NoWithVeto on prop82. Do not be fooled, and do not tolerate this behavior from leadership. Do not work with them, for they have already made their choices long ago to manipulate their way to power. Do not drain yourselves of energy trying to help them do the right thing, if you know that their interests are maligned.
If we show up in massive numbers to veto ATOM2.0, then stay and expel them from the ecosystem. Do not be cowered by their lies that nobody else will be able to develop the Cosmos Hub for us. The Cosmos Hub has spawned many teams to help us maintain the hub. Even Jehan Tremback, co-author of ATOM2.0 has stated that he will work on whatever the Cosmos Hub decides is its mission.
If we do not succeed in vetoing ATOM2.0, or we barely succeed in stopping it, then it is time we organize an alternative minimal hub. We must start with a constitution, and in this fork we should remove the MintTx option and make sure that it is deflationary like Bitcoin, or in the very least not inflationary, like Dogecoin. MintTx is a source of corruption that will draw in the worst of us, and something like ATOM2.0 will happen again without us knowing it until it is too late. So let us throw this ring of power into the fire before it becomes a problem once again.
"What do I do if I want to tweet about controversial positions on April fools but I want people to take them seriously?" - Ethan Buchman, April 1st, 2021
"After careful thought I've realized that in fact, the most efficient, effective, and sustainable way to structure the economy is to have one global currency that all 7B+ of us can use and it should be backed by the largest and strongest nation state government" - Ethan Buchman, April 1st, 2021
Let this serve as an eviction notice to (not all, but the malicious) proponents of ATOM2.0.
I returned in May to provide organizational leadership and design direction for the growth of Cosmos. NoWithVeto on prop82 enables me to dedicate myself to the urgent development work needed on the hub without distractions. I will reapply to the foundation council of the ICF. Gno.land is complementary to my vision of what a minimal hub needs; one solving the token pegging and ICS scaling problem, and the other solving the smart contract problem.
I can and want to do both. We must do both. I am committed to doing all of the above.
- Jae Kwon