ATOM 2.0 : integration phase
This article will attempt to popularize the new Cosmos Hub whitepaper published on 26.09.2022
Intro :
Since the launch in 2016 the Cosmos Hub has always positioned itself as a “proof of concept“, show to the world that the idea of the internet of blockchain is not just a theoretical concept, but a reality. During these years Cosmos has focused on developing this vision by funding the development of the Cosmos SDK, the IBC and Tendermint. This has led to the birth of an ecosystem of various Cosmos channels, the interchain was born and is now growing exponentially.
The ATOM2.0 whitepaper describes the architecture and the new features of the Cosmos Hub :
Hub has a source of open-source software funding
Interchain security (ICS)
Liquid Stacking
Interchain Scheduler
Interchain Allocator
The goal is to increase the economic value of ATOM within the ecosystem, develop sources of revenue through ICS and from crosschain MEV. Enable expansion of DEFI via liquid stacking. Establish ATOM as a store of value for the Cosmos Network, affirming ATOM as the preferred collateral.
1. ICS + Liquid stacking = DEFI + security
The main concern of the DEFI on cosmos chains is that it is necessary for Dapps to be more competitive than the APRs offered by inflation via stacking. Thus it was almost impossible to offer attractive lending, or for Osmosis, a real challenge to guarantee the security of the chain when it is more interesting to put in LP rather than stacking its tokens.
The liquid staking module revolutionizes the DEFI on Cosmos, allowing the best of both worlds: securing the chain via stacking and DEFI opportunity with liquid tokens. Dramatically increasing the usefulness of ATOM in the interchain. You don’t need to choose between securing the chain or farm the juicy APY, do both !
The incorporation of Interchain security (ICS) for liquid stacking chains is a must. ICS provides a stable security base for these chains with a marginal cost. It is expected that ICS V1 will allow to onboard a number of about a dozen of consumer chains.
2. A new monetary policy
Currently ATOM inflation is based on a straightfoward principle, inflation increases according to the stacking ratio. The lower the stacking ratio is, the higher the incentive to stack will be, and vice versa. A simple formula that guarantees the security of the chain. But with the arrival of liquid stacking we expect to see the number of stacked tokens increase, this offers the opportunity to implement a new monetary policy. This one will be done in two phases:
a 36 month transition phase
to reach a stable state
The transition phase will smooth the transition to ICS (allowing validators to finance ICS costs) and increase Cosmos Hub's cash flow to continue developing the interchain.
Thus, according to the published model, ATOM's cumulative inflation now tends linearly towards 100 million. In other words, post activation of the transition phase, the total supply will be: total supply in circulation + 100 million, if the transition were activated tomorrow the total supply would be about 400M (300M + 100M ATOM).
3. Hub specific features
You may have sometimes wondered what the "Hub" in Cosmos Hub meant, with Atom 2.0 cosmos tries to give the means of its pretensions with two new features:
Interchain Scheduler
Interchain Allocator
Interchain Scheduler : ATOM MEV Friendly
The MEV is a central topic of the blockchain and the DEFI, appeared on ETH and pursued on the POS EVM chains or Solana & others. Actors are now specialized in the MEV, and draws juicy revenues (cf Flashbot, jitolabs ...) .
MEV is a shadow war between skilled actors, on POS chains validators play a key role, they can reorganize transactions within a block to favor the interests of an arbitrageur through a modified software.
Being the first of a block to a value, the interchain scheduler like a fee market allows to trade this place but with a more elaborate system. Actors will now be able to reserve a place in a block of a consumer chain, in advance and for several blocks. These places can be exchanged via a primary and secondary market in the form of NFT. Thus, arbitrage opportunities can be booked and traded on a dedicated market. Revenues will be shared in an equitable way between ATOM holders.
Interchain Allocator :
Over the past few years, one of the Cosmos Hub's missions has been to fund utility tools for the growth of the interchain. Whether it is for the IBC, gdex, gbridge or Ethermint (Evmos), but also recently the funding for the development of ICS and Neutron. All of them have been funded by the Cosmos Hub, by ATOM. But technically, there is nothing very decentralized in the way they work. Indeed, in practice, we multiply the multisigs, which are held by respectable and trusted actors of the ecosystem. This is sufficient for a young ecosystem, but not sustainable for a model aiming to revolutionize the financial industry.
The interchain Allocator introduces a more elegant solution for managing funding, directly by the governance, onchain. The funding can be conditioned to the achievement of certain objectives (building a dapp, providing liquidity).
The first example that may come up is an allocation from ATOM for the Agoric protocol to back the IST stablecoins.
This mechanism opens the path to even more interchain financial collaboration, and may allow the use of ATOMs to support new protocols. Adding liquidity, stacking ATOMs through Onchain governance, financing consumer chains through sub-collateralized loans...
The Allocator interchain is quite complex in its operation and requires some time to fully consider its potential, but the objective is clear, ATOM must be the central partner and engine of the interchain.
By deploying his capital more efficiently, ATOM2.0 seems to want to set itself up as a "DAO VC", combining his financial and community power to serve the growth of the Cosmos Network.
With ATOM 2.0 Cosmos enters in a new era thanks to the interchain security and interchain accounts. This is a key development phase for interchain dapps that will not only be able to use the features of each separate zone, but also eliminate most of the complexity of the UX. ATOM 2.0 opens up new perspectives, especially in terms of interchain composability, for which new applications are coming soon.