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ATOM Tokenomics: AEZ Growth & Alignment
Recorded: Sept. 26, 2023 Duration: 1:31:52Space Recording
Full Transcription
It looks like we now have no remarks added to speakers.
I'm just going to give it a few minutes for people to join the space and then we'll dive
in with some introductions, et cetera.
I think perhaps if we kick off with some introductions now, it'll still give time for people to join the space and not miss too much.
Noam, would you mind just giving a quick introduction to yourself and also kind of what Binary Builders are doing in relation to the tokenomics grant that they're going to be doing?
Yes, absolutely.
Yes.
Yes, absolutely.
Hi, everyone.
My name is Noam.
I work at Binary Builders.
We're the primary maintainers of the Cosmos SDK and we run the interchain builders program and we have a company called Numia.
We do analytics.
And so, yeah, we've recently been awarded a grant from the AADAO to do some work on the future of the hub, the tokenomics specifically, and we're working on three modules.
One of them we'll be discussing today, the Atom Alignment Treasury, and the other two.
One of them is called the Developer Revenue Incentivization Program or the DRIP, which is a better way to do community funding basically, which I'm posting that on the forum this week.
By the way, for those interested.
The other thing we're designing is a stability reserve fund, which is basically a way of saying when Atom is doing well in USD value, we put some Atom aside.
When Atom is not doing so well in a bear market, we use that Atom to pay for some of these basic expenses that we hold very valuable, such as our validators and maybe some critical development costs.
Yeah, and so the Atom Alignment Treasury is a whole different thing, and we'll get to that once we're all here and ready to get started.
Max, I see you keep dropping up and down, so I don't know whether you will be able to speak, but it'd be great just to get a brief intro from you and also explain TimeWave in relation to some of this.
We can get into the details later, but just a quick intro would be great.
Hey, everyone. My name is Max. I'm one of the co-founders of TimeWave.
TimeWave is an offshoot of the Cosmos Hub white paper.
I was one of the co-authors of that paper and the lead architect of the itcher chain allocator from that paper.
With TimeWave, we wanted to make sure that we learned the right lessons from that Prop 82 note with veto and the ideas in there.
First of all, it was just a lot of ideas.
And second of all, they were pretty big and out there and they could have been more specific.
And so at TimeWave, what we're trying to do is create the most specific, the most actual things right now that allocate capital more efficiently within Cosmos and the broader interchain.
We are starting out with covenants, which are Dow to Dow, blockchain to blockchain, economic agreements.
We can get more into what that is. And so, yeah, that's TimeWave and myself.
I've been in crypto since 2017, and it was actually Cosmos that inspired me to YOLO into crypto in the first place.
I was really inspired by the ideas in it, in the original white paper, was re-reignited my passion once IBC shipped and I started to see what was happening.
And so for the past year and a half, I've been exploring how to be of most value to this community.
And Allocator, TimeWave is my and my team's best bet on how best to do that.
Awesome. Thank you both very much.
We are expecting both representatives of the Stride team and Neutron to join us.
However, I think that everyone knows them well enough that they can probably just join and dive in without an intro when they eventually get here.
I know that there may be reasons why they're running slightly late.
So I guess without too much more sort of stalling on my part, it would be really good just to get into sort of some of the nitty gritty.
So really looking at growth within the atom economics zone.
And I suppose it's kind of one of the key thoughts that's been doing the rounds recently is around protocol liquidity.
So I wondered if that would be a good sort of starting point in terms of what sort of why do we think that that why does it seem that that is playing a key role in what we anticipate will drive growth within the atom economics zone?
Yeah, sure.
So, you know, like historically, the hub has been, you know, sort of this credibly neutral platform that wasn't specifically opinionated on anything that's happening within Cosmos.
But then with energy and security, that sort of went away in the sense that, you know, now atom holders benefit from the success of Neutron and Stride and other consumer chains and projects that are launching on there.
And so this credible neutrality is sort of shifted.
And we are sort of like biased in some sense to the growth of what's happening within the AEZ.
And so, well, how can you facilitate growth?
Right.
And, you know, if you take a look at a project like Stride or take a look at a project like Astroport, what attracts users there, specifically a place like Astroport?
Well, if there's a lot of liquidity, there is going to be much more frictionless way to trade.
So let's be more interesting to trade there.
And in some sense, you know, we are invested in the success of these protocols and we want them actually to succeed more than we want, for example, Osmosis to succeed.
And so the hub has, you know, quite significant amounts of money in the community pool.
A lot of it's not being used.
And, you know, I guess I'm not necessarily talking about like investments or anything, but we're talking about the usage of this liquidity in safe means and safe ways to provide liquidity on other networks like Astroport.
And so the best example here is, again, the recent Stride proposal where 450,000 Atom was used, half of it was liquid stake benefiting Stride and the other half of it was kept in Atom.
And then it was used in Astroport to create a or to participate in the LP position there between the liquid stake Atom and Atom.
And now that's a much more frictionless sort of environment.
So that's generally, you know, one of the things you can do as a hub.
We have this protocol on liquidity available and we can do a lot of really interesting things with it.
And I know, Max, also you've thought about this topic maybe even a lot more than me.
You guys have been building this out with TimeWave.
So maybe you have some additional comments there.
Yeah, I'd be happy to share.
So POL is an acronym, Protocol on Liquidity, that a lot of people in crypto have heard.
It was especially popular with OlympusDAO a couple of years ago.
We're sharing a new meme called Liquidity as a Service.
The idea is basically that instead of just having protocol on liquidity, you can charge additional fees on that to choose where you allocate that liquidity.
And just to make sure that people are aware, a lot of this is stemming from a forum post in the forum that started with the Atom Alignment Treasury.
Within that forum post, I had a response about liquidity as a service.
And off the bat, I just want to help shape the relationship between these two because they are not competitive.
They are highly complementary.
No one can speak more to the Alignment Treasury, but the idea there being that there will be a pool of capital that is specific to the Cosmos Hub to allocate.
And the idea with Liquidity as a Service is that it is a strategy that the Cosmos Hub or any Internet native organization that has liquidity or wants liquidity could use.
And so what we posit in that forum post is that liquidity as a service would be the we posit that's the best north star for the Cosmos Hub.
And no, I'm alluded that we've been thinking about this for a while.
Well, we've been thinking about this for about a year and a half now.
A year and a half ago, when we were thinking about what to put in the Cosmos Hub white paper, I spent a lot of time reflecting on what is the Cosmos Hub the best at?
What are its strengths and how can we use those strengths to its best advantage?
And the first things that come to mind are one, the most liquid token to the strongest validator set.
Those are really the two biggest things.
And already we have replicated security that makes use of the validator set.
But we're not really doing that much to make use of the liquidity.
We could be doing a lot more.
And right now we're defining the atom economic zone as only blockchains that are secured by the hub's replicated security.
And we think that this definition could become much broader.
It could also include chains that borrow atom.
You could imagine a world where the first thing that a chain does is borrow atom from the hub before actually entering into an economic relationship with the hub.
And only if that chain wants to borrow more atoms and wants a higher limit or they want to lower interest rates.
At that point, they would choose to enter into the security relationship.
And this has the dual benefit of not only making the hub's replicated security offering more attractive because there is the potential for a race to the bottom here.
As mesh security comes online, as eigenlayer comes online, fees might compress and be a race to the bottom.
If you are able to also add liquidity in your economic package similar to what happened with Stride, it can really supercharge the replicated security offering as well.
So I already threw a lot out there.
So why don't I take a break and let people ask some questions?
Well, yeah, I think I was going to start with just a really basic one, which is like, why are protocols so obsessed with having deep liquidity?
But I appreciate that's probably a super basic question, but I think it's such a fundamental cornerstone of the ideas that are built from here.
I just want to make sure that we've covered why is depth of liquidity important.
Yeah. So, well, I mean, I just wanted to point out there was this thing on Twitter where we saw some whale, I think, sell or buy liquid stake out of.
And we saw like this huge spike in the prices. Right.
And and that's why you need liquidity.
So the more the more money is available on the AMM or in any sort of exchange, whatever version you have of it, the less the price moves when somebody wants to purchase or sell a large amount of assets.
So when you see that slippage number and you're trying to sell a bunch of stuff and that slippage number is high, it's because there's not enough liquidity.
That's a simple way of putting it. Yeah. And I think in the context of that, probably what's important to recognize is that the there was a sharp fall on the price of the staked atom and of the ST atom.
And then it made its way back to to sort of the soft peg, as it were, based on the redemption rate.
So I suppose what happened over a period of time is that you get kind of people are being et cetera, but it gets back there and actually were them deeper liquidity, the total fall wouldn't have been as sharp.
And then people who are trying to sell post that can actually do so without kind of being penalized because of the actions of the people before.
So I think that that's kind of useful to recognize in terms of why that should come from a protocol.
I just wondered if either of you would be kind of able to speak to that.
Yeah, I'm happy to share. So what one of the things that we were thinking about was how the if the hub wants to use its capital more efficiently,
it faces structural disadvantages relative to other players.
For example, if it wants to make an investment, it has to wait two weeks.
If it thinks that because that's the length of the voting period, if it wants to exit a position, it also has to wait two weeks.
Both going in and coming out, the entire Internet can front run this trade.
And so the hub would be has these structural disadvantages.
And so if you're if it's going to have structural disadvantages in order for it to have any hope of getting a profit by allocating its capital, you need to give it structural advantages.
And so if we want to think about what sort of structural advantages we give it, making sure that those play to the strengths of the hub can help ensure that those are sustainable advantages.
And so in the forum post, I mentioned a few ways of of doing that, but liquidity is a really core way of of doing it like the it basically makes it such that the core product of the hub is Adam.
And since it controls Adam owns Adam, it's not necessarily even lending Adam, which is something I want to be clear, it's not lending Adam, it's lending Adam liquidity in this stride example, the 450,000 Adam.
Adam, this isn't 450,000 Adam that's going to some wallet that an individual is owning and that one individual can now do with that Adam, whatever they want, know that the hub still owns this Adam.
And the hub is ultimately what's in control of the printing or the burning of Adam, its own monetary policy.
And so by using liquidity as its means of entering and exiting into positions, it does something that a VC can't do, like most VCs don't have coins, at least not ones that I'm aware of.
And so using POL, using liquidity as a service, it's something that is uniquely possible and uniquely advantageous for blockchains like the hub.
Maps, could you just articulate, is there a difference between liquidity as a service and protocol owned liquidity or is this just a different framing?
So I would say that they are very similar.
Usually when people think about protocol owned liquidity, they are thinking about from the perspective of like their treasury and how they're going to deploy their treasury into various other things.
And it's, it's sort of like a, for the most part, it's usually like a one party idea.
Like I run this now, me and my friends run this now.
We want to use our liquidity to enter into another position.
Like it's, it's, it's usually that, that one, that first degree of thought.
Liquidity as a service takes that one step further to say, hey, I'm a member of a DAO or a blockchain, some sort of internet native organization, the token, and we're not sure where we want to allocate our liquidity.
We are open to allocating it to project A, B, C, D.
And we want to allocate it to who, whichever is the most strategic, but also who's willing to pay the highest fees.
And liquidity as a service is the idea that you can structure these incentives such that project A can like, yes, I will borrow at 1%, project B might borrow at half a percent.
And so liquidity as a service is that opportunity that you're giving to others to borrow your liquidity.
And there are all sorts of factors that can go into it, but that's, that's really the, the core of it.
POL is just that at first degree, you are unilaterally entering into position.
Liquidity as a service is that second degree of like, hey, I am open to entering into any of these positions.
Liquidity as a service is the market mechanism that will surface the demand that project A has for liquidity versus B and have that liquidity flow to the most profitable place.
So just to jump in here. So I think like going back to what Max was saying, and I don't want to take up too much time.
I want to make sure the floor is open for everyone else, but I think security, this isn't 2018 anymore.
Like shared security is going to be a commoditized trade that just, I know Max already said that is going to be a race to the bottom.
The next best thing we can do is like, there's not many assets out there in the crypto space today that I would say reached escape velocity to the point where people actually want to hold it.
And Adam, I personally think has kind of reached a social contract where people want to hold Adam in the cosmos ecosystem.
So what we're trying to think of is like security is not the only offering in the cosmos hub.
The product of the hub is Adam. How do you make Adam or how do you incentivize more of like a soft lock in to make other ecosystems, other chains and other projects in the atom economics on the wire interchange?
How do you make them more reliant on the hub outside of security?
Well, a lot of people want Adam, make Adam the base, you know, pairing in liquidity positions, make Adam the most, you know, I would say.
Yeah, I guess make like the largest pairing in liquidity positions and also, you know, kind of jumpstart the economic engine of the atom economic zone in the wider energy and economy leveraging out of liquidity.
I know there's obviously some people that don't believe in protocol and liquidity, don't believe in liquidity as a service narrative.
And they ultimately think, like, what is in it for Adam stakers?
One thing I think you can do is and this is something I'm kind of like ripping off right now, but the hub community can also kind of institute an option.
Like, look, if you want Adam liquidity, not only do you need to, you know, borrow at a certain rate, but you and not only do you actually need to like maybe start out on Neutron, for example, like let's actually incentivize people to launch on Neutron to drive more economic activity.
But maybe you also need to airdrop a certain percentage of your supply to Adam stakers.
I think early on in the Cosmos ecosystem lifecycle, a lot of projects that are launching the Cosmos ecosystem started airdropping because they want to have like a large base of initial users.
And they started airdropping a decent supply. Osmos is being a great example to the Cosmos hub community.
But you start to see that kind of that go away.
Nomada is a great example.
Nomada is, I think, a really promising project in the Cosmos ecosystem.
And only a portion of their supply was, I believe, airdropped to Osmosis.
None was airdropped to the Cosmos ecosystem.
And there's a bunch of reasons why, I think.
I think the Cosmos hub kind of got away from being like the large driver of public goods funding and actually, you know, driving innovation of the tech stack.
Osmosis, I think, did a really good job with that over the past couple of years with the Osmosis grants program, for example.
But you can start kind of creating other lock-in incentives to get people to leverage Adam liquidity and maybe do things that maybe more directly benefit Adam stakers and airdrops could be an option there.
I haven't really talked about that at length with any of the people here on this stage, something I was kind of thinking about.
But I think overall, like what we're trying to do is create other lock-ins to make Adam more in-demand asset in the ecosystem and drive like some of this money in this aspect that I think it already has.
But we're trying to reinforce it.
Great.
I noticed that Riley has managed to join us, which is fantastic.
I suspect it's not necessary to do an introduction, but Riley, at this stage, just as we're kind of discussing top level elements and strides, use of kind of the liquidity of the hub as part of its process in the AEZ has been referenced a couple of times.
I just want to know if you've got anything particularly you want to say about that or if we should start to move into the kind of nitty-gritty of some of the work that binary have been doing.
Hey, good morning, guys.
We can talk about the specifics of how Stride is using its Adam POL.
It's currently deployed on Neutron, supporting Mars only right now, but soon some other apps.
It might move around in the future if proposals go up to shift it, depending on what DeFi is deployed on Neutron.
But for now, it's sitting there supporting Mars and I think three or four more apps that are coming live in the next few months.
I think it's probably most useful to dive into the specifics of the binary proposal, and I would love to talk a little bit about a comment that Stride made on that proposal for some actionable next steps, but maybe once Noam gets an overview.
That's great. So that probably does mean, Noam, would you be able to just sort of start to take us through the, is it best to start with the alignment treasury? Is that probably the best place to start?
Yeah, why not? I'll try to keep it short and simple. The post itself is quite the opposite of that.
So the four posts that I did was more of a, you know, a lot of open ended questions and like, well, you know, how should we approach some of these things with definitely some suggestions.
Really just trying to solve for or like address three main objectives.
So again, we talked about AAC growth already. So, you know, providing liquidity.
The second thing that I think is very important, and we're seeing this now with the proposal coming up with to have the Neutron airdrop tokens be delivered to the Cosmos Hub community pool, is financial alignment with consumer chains.
So, you know, we have a very strong sort of alignment with all the other consumer chains and maybe also other protocols that exist on there, but it's not really formalized in the sense that we don't have any voting power on Neutron, for example.
And so when this, if the community agrees to this and they want this Neutron airdrop to be deposited in the community pool, then an interesting thing happens.
We have actually quite a significant, it would be 5% of the total supply of Neutron, but it would be 50% of the, or at least currently 50% of the voting power.
So that's quite significant. If Neutron would say, hey, we want to go leave and become an independent chain, hopefully they won't, but if that's the case, we should be able to vote on that, right?
We were considerable stakeholders in the ecosystem.
So, and then, you know, we're just thinking of like, how do we design the infrastructure for doing so? And what are sort of the use cases though? So again, like these like token swaps or token gifts, if you want to call it that, liquidity and that kind of stuff.
So how do we, how do we do this? Right. And at first, well, there's really three things here. You want to try to figure out like, well, how do we build up this treasury in the first place? Right.
And normally we have, we have this community pool. But if you look at sort of like your normal way of doing accounting, you don't have, you know, you don't put all your savings into your spending account. You generally have a separate account for that.
So the first step would be to like, enable the community pool to have two addresses, probably one that we could call the item alignment treasury, the other one, which is be the regular community pool.
And then we have to think about, well, how do we fund this item alignment treasury? Is this going to be a percentage of the money that's going to the community pool?
Or is this just going to be a one-time payment or something? Is it coming through a specific revenue stream, like energy and security or some other thing?
Okay. I'll have to talk about that. And then we have to sort of like figure out, well, how, how are we going to start expressing some of these things we want to do on the, in the AZ?
So like token swaps or just like liquidity as a service, or maybe we want to decide to, I mean, now that we have a bunch of neutron tokens, maybe we like those neutron tokens.
We want to make sure we always have a certain percentage of neutron tokens in our treasury, right?
And maybe we want to actively manage our portfolio in some ways.
I think the interesting stuff comes to when, when we start thinking about how to actually execute on some of these desires or these expressions.
So, and this is sort of where a time wave also comes in because they build out a lot of the infrastructure there on that other side.
But so let's say you were talking about this, let's take the stride example, right?
Right now, the 450, yeah, 450,000 Atom had to be sent to a multi-signature wallet, which was in this case, the Atom Accelerator DAO.
And they had to then, you know, liquid stake half a fit manually, and then transfer that to AstroPort, and then put it in the LP, in the pool, basically.
And that's a lot of steps, and it's a lot of trust.
And of course, we all trust the Atom Accelerator DAO, but in a decentralized future, we need to think of better solutions for this.
And so what really the Atom Alignment Treasury really does then, in this case, would be trying to see if there's an automated way to execute these things,
where really it comes down to a simple proposal on-chain that says, like, hey, we want to put, you know, 450,000 Atom onto AstroPort, liquid staked via stride.
And then in the background, everything just magically happens, basically, through the use of probably something similar to Covenants, or whatever else TimeWave is building, maybe some other functionality.
I can also imagine that some chains or some protocols build out this sort of API layer that we can plug into.
But on the hub itself, a few rudimentary changes have to be made in terms of, like, the community pool, making it sort of, like, more flexible, having this separate address,
improving the governance system so that we can, like, express ourselves effectively.
And then also, and this is the second part, which is kind of interesting, when we talk about these Neutron tokens that are coming to the hub.
Well, that's great that we have these tokens and we have this voting power, but how do we actually execute on that?
And in my mind, if the hub has protocol-owned liquidity and its assets that are in the community, sorry, in the AEZ,
we should be able to use our Atom token to vote on what happens on Neutron.
So in my mind, if we have 50% of Neutron's network, then my Atom, if I have 5% worth of Atom, that should be worth 2.5% of voting power on Neutron.
And so we're thinking about how do we build a governance mechanism where you can do this, where we can actually say,
hey, this is a very important proposal on Neutron.
We think everyone should vote on this, so we'll move it to the hub, and now I can use my Atom tokens to basically weigh in on that decision.
And that's, I'll stop there because I can keep going, but that's, I think, a decent summary.
I think what's really interesting with this, and it explains probably why the forum post was quite so mammoth,
is that there's this kind of mixture of financial relationship and political relationship,
and that the two are kind of very inseparably interlinked, and that you kind of start looking at tokenomics,
and you immediately move into political alignment, and how does voting work, and how does governance work,
and then you move into, okay, and how would that ever be executable within the hub?
And obviously there's a huge amount to unpack here, and I kind of know that both Macs as TimeWave have a number of ways that they think we can execute.
I know that Stride wrote a very practical set of steps that they think we could take pretty much immediately.
But before we get into the detail of those, I just wondered whether anyone who's on stage at the moment,
and I see that Spade's here as well,
like whether there's anything that's sort of at that top kind of conceptual level,
either on the financial side or on the political side,
that people want to say before we kind of get into the more practical responses that there were to Gnome's post.
Absolutely deafening silence.
So that's either a good thing or a bad thing.
So this isn't a direct response to that question,
but maybe a good transition into what you were referring to.
We kicked this conversation off by introducing liquidity as a service pretty early.
Something that I want to emphasize is that this liquidity as a service idea,
especially the part about it that is the charging of interest,
and also giving blockchains greater security guarantees,
similar to like senior secured debt in a capital stack.
I think these are really good for the hub long term.
This should be the way we think about it.
But in the short term, I think that the top priority for the hub should be distribution of atom liquidity,
really making sure that the entire interchain thinks of atom as that base asset,
that trading pair, maybe it's ST atom.
But point being is really prioritizing atom distribution and not letting interest rates
or onerous security guarantees get in the way,
so long as you are deploying it into positions that have high strategic value.
So that could be a good segue for Riley and Stride,
because they came up with some short-term next steps that could be good to discuss.
Yeah, happy to jump in and discuss some of those.
So we posted a short reply to the forum post that outlines some immediate steps
that could be taken to improve the liquidity conditions in the cosmos.
And I think these are actionable on the one to three-month timescale.
And thereafter, we could roll into something that's more elaborate and long-term sustainable for the hub.
But these are kind of – think of them as baby steps,
some initial governance-gated actions that could be taken now.
And the high-level idea is to solidify the AEZ by providing lots of liquidity on the AEZ's main decks,
which is today Astroport, not Neutron, and promote Atom by making it the common base pair on that decks,
kind of like you see Osmo as the main base pair on Osmosis.
It would be a great way to ease the Cosmos hub into using the AAT,
and it's, I think, easily actionable right now.
It's an elegant solution.
In addition, you really only need one USDC Atom pool to support basically unlimited liquidity between Atom and any token,
because to get to USDC, you route through the Atom USDC pool.
And given that pool would be supported on Neutron,
Neutron would have the responsibility to maintain the USDC pool,
so the Cosmos hub wouldn't have to sell any Atom to raise USDC to LP that pool.
So there would be no controversy around having to sell Atom in order to LP.
Further, the solution we outlined introduces the concept of deploying non-Atom POL
using some of the Neutron that's already in the community pool.
It introduces the practice of balancing,
since liquidity pools automatically balance between their two constituent assets.
So you don't have to build any complicated logic on-chain to do that.
You just LP the pool and let it balance based on the prices automatically.
It introduces the concept of a token swap with the stride Atom swap and the liquidity deployment there.
And it builds on the STAtom process already established by adding more liquidity to STAtom Atom,
which has more favorable IL properties than some of the other pools.
It increases Atom's relevance by making it the common base pair.
We've seen this work for osmosis in certain ways.
And most importantly than all, it hugely increases TVL,
and presumably also economic activity in the AEZ,
excuse me, in the AEZ,
and it prepares the Cosmos Hub for more advanced things in the future,
like what Noam described.
So the actionable short-term plan is to provide liquidity on Astroport Neutron.
We proposed some amounts and some pairs.
Those aren't super important,
but the main detail is that they're all paired with Atom,
and the Cosmos Hub wouldn't have to sell any Atom in order to LP the pools.
I think just to sort of like expand on this,
hey everyone, by the way,
I think in general I'm like a huge supporter of the sort of like initial steps
that are proposed by like the stride folks as well as,
you know, outlined in Noam's post.
I do think that like the beauty of them is that we can iteratively build,
you know, further alignment on these steps.
Like for example, you know,
say the hub was to deploy NTRN as liquidity on Neutron.
Neutron does have this like very elegant solution called Voiding Vaults,
which allow the Neutron DAO to basically allow NTRN in a variety of forms,
right, whether it's like deposited as collateral on the money market
or provided as liquidity to be recognized and counted in governance.
And so like we can use this system for enabling the hub
to just like deploy NTRN into Voting Vaults
so that it is able to vote like similarly to what Noam was describing,
right, so like your share of Atom state
would represent your share of the hub's NTRN voting power,
or we can also essentially do the same,
but with the hub's liquidity, right?
So even if the hub was to,
and especially if the hub was to deploy liquidity
in the way sort of like depicted,
like there could be a technical solution,
which of course would have to be like rigorously audited and tested and such,
but there is a technical solution to allow that,
that, you know, Cosmos Hub owned liquidity
to basically also generate voting power
for the Cosmos Hub community as a whole, basically.
So I think like these things feel like they're starting to fall into places,
and I think it's like a very, like a super exciting kind of direction
that we're headed towards as a community, basically.
Yeah, just my two cents.
Thank you, Spade.
Jihan, I know you just asked to speak,
so let me hear your thoughts.
I wanted to ask, I don't know if I came in, you know, 10, 15 minutes ago,
maybe this has been covered,
but on these positions that Stride is proposing,
they, as I understand it,
the Hub community pool would put in Atom
and then the counterparty asset
would be coming out of that counterparty's chain's treasury.
So for matching as the Stride,
you know, against Stride, Stride would be coming out of the Stride treasury
or Neutron out of Neutron treasury, right?
Is that correct?
Yeah, that's basically the idea,
with the exception that for the proposal that was made,
some of those assets would be provided via a token swap.
Okay.
Some would be provided outright from the community pool.
I see.
Okay, so...
Yeah, so for example,
for the potential like NTR and Atom liquidity
that the Hub could provide,
like the Hub just so happens to have,
or like soon to have,
like something like $18 million of NTR.
And so if it wanted to pair some of that with Atom,
then it would have the, you know,
the sovereign ability to do so.
Other assets,
like the Stride proposal includes the idea that like,
oh, well, go first, Jihan,
and then we can touch on this one later.
Oh, I was going to say that's interesting.
I've really thought about that.
If the community pool owns both assets,
that's interesting.
How it compares having them in an LP position
versus holding both of them outright.
I assume that in a change,
if the price of the assets changed a lot against each other,
the Hub would be seeing some impermanent loss
versus if the hedge has held those,
but maybe the liquidity provided is worth it
for it's kind of, you know, enhancing the ecosystem.
But on the ones, okay,
so on the ones,
let's say we take an example where,
let's say the entirety of the other,
of the counterparty token
came from that counterparty chain's treasury,
and the entirety of the Atom
comes from the community pool.
I still feel like the Hub is taking a position
on the price of that asset.
So I think that needs to be,
and that might be worth it,
but I think that always needs to be considered.
Would you agree with that?
The Hub would be taking position then?
Sort of kind of making an investment in a way?
I think it depends on,
I think it depends on how it's actually implemented,
but like given the current technologies,
I think what most likely would happen
is that assuming that like the,
you know,
the two sides that are being provided
are of equal value,
you'd probably see something
whereby half of the LP tokens
are sent to the Cosmos Hub
and half of the other LPs
are sent to whatever the counterparty DAO or chain is.
And so, yeah,
as a result of this,
the net exposure of both parties
is actually like half each asset.
So yeah,
there is like permanent loss risk
and there is like price risk and such as well.
I think this is why it's important
that this is seen through the lens of alignment
rather than investment
because the risk of IL is high,
you know,
for either party.
But the value,
I think if I've read
Noam's post correctly
is that that sort of strategic relationship
makes that alignment critical
to the success of the AEZ
and therefore the sort of,
while there is a financial position
that's taken,
it's kind of outweighed
by the political alignment.
Forgive me if I'm making an absolute hash
of your very well-worded post Noam,
but is that broadly kind of correct?
Yeah, I mean,
I think,
yeah,
again,
it's definitely more about alignment
than anything else.
Alignment for the reasons of,
you know,
maintaining voting power
and just for growth as well,
like being able to use this
as liquidity as a service.
On the topic of like
a permanent loss though,
like,
you know,
this is something,
I don't recall who said this.
Actually,
maybe it was you,
Jahan,
but that there's this risk
where technically,
you know,
if we have a sufficient amount
of neutron atom
in a pool,
neutron could just go ahead
and dump basically on the market
and then take all this atom
and walk away.
No offense,
I don't think that's ever going to happen,
obviously,
but we need to protect ourselves
for something like this,
right?
And so you could use
concentrated liquidity for this,
right?
You just set some,
some,
some parameter that says like,
well,
below this,
we'll,
we'll leave the,
we'll leave the situation.
So, you know,
Astroports support this environment,
correctly.
And,
and so,
so there's like an emergency stop there
where you say like,
hey,
if the price is going down rapidly,
let's get the hell out of here.
That's,
I mean,
that seems like a great thing to add.
Forget the whole situation.
That way the LP stops below a certain price.
so yeah,
that makes a lot of sense.
Another thing that has been discussed,
I think,
was the concept of,
and maybe the soft topic,
we're getting too far afield,
you know,
let me know,
but there would be the topic,
maybe we,
you know,
obviously we want to do these kinds of things
like we're talking about here,
but also there's the,
maybe there's a possibility of a protocol,
basically like borrowing Adam.
So using,
so let's say this counterparty chain,
Foo chain,
it uses its Foo tokens in the treasury
to like borrow Adam
with a collateralized loan
using collateralized by Foo tokens.
And then,
and then could set up an LP position
both sides of that with their,
with other Foo tokens.
And then there are Foo token collateralized atoms
on the other side.
Would that like,
I mean,
you know,
that,
that would maybe be another option.
You think that's something that,
that would make sense for,
for,
for people or is that not a good idea?
Yeah.
Jihan,
I love that idea.
That's actually exactly the direction
that we're hoping for liquidity as a service.
we mentioned in,
in our apply that the amount of collateral
that a chain puts up could play a factor
in like how much Adam liquidity
is lent to that chain,
what interest rate is provided.
So I think that collateral
will eventually play a really big role.
Interest rates play a really big role.
Borrowing limits playing a really big role.
But I also think that those
probably shouldn't be the first step.
I think the first step should be
as simple as possible
through some proofs of concept.
And then once,
once you really,
once the community gets comfortable with this,
once we prove that machinery works,
we then add features on top.
And I think collateral is absolutely direction
you would go.
And,
and just to hit on some earlier points
that were mentioned,
something that came up a lot
when replicate security
was first introduced
was the idea of bootstrapping
a chain's security
where they can go from zero
to like having a really,
trustworthy amount of security.
We can think of some of this liquidity
as a service
as complementing that security bootstrap
by also having an economic bootstrap.
Liquidity begets liquidity.
And so you have a cold start problem.
And so if from day one,
you have the security
and you have the liquidity,
the chances of your project succeeding
are much higher.
And so even though there is
impermanent loss risk,
if you enter into a position,
there's also just like existential risk
if the hub is entering
into the security relationships
with Neutron,
with Stride,
with others,
and those projects don't succeed.
And so providing security
and also providing liquidity
helps increase the chances
of that succeeding,
increases the,
improves the narrative,
the mobility of all of this.
And so I just wanted to
really highlight that
when we're talking about
the strategic value
of these economic partnerships.
I'm really conscious
that I've had a few people
requesting to speak
and then they've dropped back down
just because the conversation
is really flowing,
but it's fantastic
to see people requesting to speak.
I can see that
Zach is asking to speak.
So I'm going to bring him up now
just to see if we get
some sort of further thing.
Zach, did you have a question
for the people on stage?
Hi, guys.
Can you guys hear me?
Yeah.
Hey, so I actually have a question, right?
Is it proposed that
when a token that wants to join
the liquidity as a service,
so they want to pair with Atom, right?
Is it a suggested idea
that that particular token
has to provide collateral
in order to borrow the Atom?
So if the answer is yes,
would Cosmos Hub
actually consider
waiving the collateral?
The reason why I'm suggesting this
is because I think
the strategic benefit
of aligning
the liquidity
as someone said,
liquidity begets liquidity.
I think
that position
is much more important
than requiring
a collateral
to borrow Atom
because
after all,
providing the liquidity
into, say,
Astropod,
the hub
actually still owns
the LP pair.
So I think
in that sense,
there's no
outright
huge risk
involved.
the fact that
we can bootstrap
the liquidity
very quickly
if there's no
collateral
required
would
really help.
And also,
I think
when it comes
to liquidity
LP losses,
it goes
both ways,
right?
So there might
actually be instances
that
the hub,
you know,
the community
actually make
money from it
even though
that's not
the end point.
So I think
my point being
I think
liquidity
as a service
is very important
there might be
certain
criterias
that
maybe we
can consider
foregoing
such as
collateral
things like
that
to really
get things
going
at a
faster pace.
I just
want to say
really quickly
just thinking
about what
Noam was
saying
about limiting
the,
you know,
not what,
I forget
the technical
term,
but you know,
not LPing
below a certain
price,
the concentrated
liquidity,
that might
actually,
if you
say the
counterparty
can't go
lower than
this,
you know,
before the
LPing stops,
I feel like
that would
actually limit
the downside
risk for
the counterparty
token's price
for the
hub,
maybe in a
better way.
Any thoughts
on that?
Yeah.
Yeah.
Zach,
I think you
are totally
right and
I just want
to address
Jihan's point
real quick
and then get
back to
yours.
Jihan,
yeah,
I think
concentrated
liquidity
is a
great idea.
Another
feature you
can have
is basically
create a
covenant
between the
two parties
that prevents
either party
from doing
anything with
those tokens
including selling
them within
X period of
time,
like six
months,
one year,
whatever it
And so,
even if you
do have
that concentrated
liquidity
position,
it gives
more of that
position to
the broader
market and
not the
counterparty to
the trade.
that's just
one additional
mechanism to
think about.
And,
yeah.
just one more
thing I was
going to ask.
Is it possible,
I know we're
trying to keep
it really simple
for the first
one here,
so maybe
I'll ask Riley
if I can answer,
but is it
possible to do
the concentrated
liquidity right
now on
Astroport?
Would that be a
viable thing to
do in this
existing proposal?
Max,
maybe I'll take
this one quickly.
concentrated
liquidity on
Astroport is
not live on
Neutron today.
It should be
live within
approximately
two to three
weeks.
The reason for
that being that
it's being
deployed,
it has been
deployed on Terra,
it is being
tested currently,
has been
audited as well,
assuming that
everything goes
well there,
we should see
a proposal on
the Astroport
governance within
I think a week
or so that
will basically
lead to the
deployment of
the PCL
pools.
One thing,
just a quick
note as well,
is that you
might have seen
this end of
fragmentation
blog post we
released recently
with Astroport
and Duality,
but basically
Astroport's PCL
itself is already
very powerful,
and then it
becomes a whole
different level
of customizability
once that
becomes integrated
with Duality
itself,
because you
get to a
place where
you have
essentially
app-specific
level of
control over
the way that
the liquidity
is structured,
and so I
think what
we're going
to see is
that we
can even
get to a
point where
specific types
of pools can
be deployed
for the purpose
of these
covenants so
that even
the parameters
of how the
liquidity is
structured can
be customized
as part of
the deals
between the
protocols and
without fragmenting
liquidity because
at the end of
the day,
since it's the
same pair,
it's provided
on the same
book as
other more
mainstream types
of pools like
vanilla PCL
or such,
which allows
one,
both to
really contribute
to the
economic growth
of the
ecosystems,
but also do
so in a way
whereby the
agreements themselves
can be very
deeply customizable,
which I think
is fairly
super exciting.
Yeah,
thanks for
that,
Everall.
So just to
close some
of the loops
here,
so these
sorts of
deals,
like the
customization
of it in
terms of
how to
enter into
that consecrated
liquidity
position,
how much
collateral,
what sort
of interest
rate,
what are
the borrowing
limits,
what are the
hold terms,
all of these
things,
these are all
things that
we're building
a time wave
into the
covenants.
These are
very highly
customizable
things,
and for the
first period
of time,
these will be
pretty tailor-made
situations.
But to make
sure we're
answering Zach's
question,
Zach, I think
you are
exactly right.
We're talking
about collateral,
we're talking
about interest
rates and all
these things
that could
be barriers
in these
negotiations
that slow
down the
distribution
of Adam,
and I agree
with you that
we should
not be asking
for these
onerous
terms,
maybe these
terms at
all,
we really
should be
prioritizing
distribution,
and just
to put
this in
a larger
context of
why we
think liquidity
as a service
should be
the north
star for
the hub or
at least
the Adam
alignment
treasury,
Bitcoin does
not have
on-chain
governance.
Ethereum does
not have
on-chain
governance.
Both of
them have
more liquidity.
If they
did, the
hub would
not be the
best position
to do
this.
But the
hub does
have on-chain
governance,
obviously,
and it
also has a
very liquid
token, and
because of
that, it
is uniquely
well-positioned
to make
this happen.
I really
want to
stress this
because there
is a
pattern of
ideas starting
in Cosmos and
getting popularized
elsewhere, and
if we put
hurdles in the
way of these
deals, like
onerous
collateral, like
onerous
interest rate,
we might miss
the boat on
this.
It's one of the
reasons why
we're so
supportive of
Riley's and
Stride's ideas
of just
getting these
deals out
there quickly,
relatively simple,
that are just
clear next
steps, and
we're sharing
these other
ideas to
give food for
thought for
the community
to think about,
okay, once we
get these baby
steps under
our belt,
what is
possible in
the future?
So a lot of
this stuff is
longer-term
thinking, and
in the short
term, we
should just
really get
some deals
done quickly
with
strategically
relevant
players.
I just want
to say,
though, really
quickly, if
we had done
an LP
position like
this with
Juno last
year, the
entire
Adam's
team would
have gone.
Max and
guys, so
I really
appreciate...
Exactly.
Jahan was
speaking.
I don't know
if you can
hear him.
Sorry,
sorry, yeah.
That was all
I wanted to
say.
So I just
think it's
essential to
limit the
downside
somehow.
And, yeah,
that's just my
point.
I agree, but
also Juno
isn't
strategically
important to
the hub the
way that
Neutron or
Stride is.
If the
hub had
entered into
a replicate
security
relationship with
Juno and
it just
immediately
died, that
would look
really bad
for replicate
security.
It would
look really
bad for
the hub's
judgment.
And so
I'm not
saying that
anyone should
be able to
show up to
the hub and
borrow liquidity.
That's
absolutely not
what I'm
saying.
But what I
am saying
is that for
highly strategic
partners,
we should
get that
liquidity
flowing in
reasonably
intelligent
ways.
What I
would like to
do for the
moment is
just part
this little
bit of the
conversation
because I
feel this is
connected to
some of the
stuff that
probably we
want to talk
about, about
governance
changes that
might be
necessary to
make this
happen.
And I just
want to make
sure that we've
closed off the
questions that
Zach was asking
and then we
could move to
talking about
how governance
might need to
adapt for the
hub to act in
this way.
Zach, was
there something
you wanted to
add at this
point?
No, I just
wanted to say
I'm very
appreciative of
what Max
has said because
I think the
larger picture is
really to get
things moving
forward.
So really
appreciate on
that comment.
That's great.
I don't know
what everyone,
I'd sort of
imagine the
space with less
now, but
conversation is
really great.
So I'm
happy to
keep rolling
as long as
other people
are.
In terms of
because as
you were
talking and
obviously taking
Sheehan's point
about trying to
limit downsides,
it feels to me
like there's
far more
sophisticated
governance that's
probably needed
in terms of
agreeing what's
a strategic
pair, working
out a kind
of range of
liquidity that
we're looking
to do, how
you manage
those positions,
sort of
known, where
do you
think the
beginnings of
these kind
of changes
that might
be needed
starts?
Yeah, exactly.
I've been
thinking about
this the last
couple of
weeks, like
what is
phase one
of the
Adam and
Lyman treasury,
right?
And my
initial thinking
here is that
well, firstly,
it's this
community pool
change.
So it's like
let's make
sure that the
community pool
has two
addresses, right?
It's spending
account for
grants and
whatnot and
the things
that we're
doing right
now is
community
spends and
then the
investment in
alignment address
or something
let's call it
that's the
AAT.
And then
there needs
to be some
kind of it.
So this is
something that
I think
should happen
on all
SDK chains
anyway.
So for
those who
don't know,
governance has
changed in
SDK version 46
and above.
And basically
now instead
of just like
these four or
five different
specific governance
proposals, you
can execute any
sort of message.
So you can
say, I want
to do an
IBC transfer.
Can we vote
yes or no?
Or I want
to, I don't
know, create
this vesting
account or
whatever.
We can do
all these
things now.
But the
problem is
that the
governance
module, the
governance
module itself
within the
hub or any
SDK chain
doesn't actually
own the
community pool.
There's a
weird little
hack basically
that's built
to enable you
to do a
community spend
basically.
So it's like
a little hack
that says when
we do a
community spend
proposal, then
and only then
is the
governance
module authorized
to do
something from
the community
pool.
So this is a
bit annoying
and there's
the simple way
to go around
this is using
all C, but
that's a kind
of a hack
as well.
So ideally
what I'd like
to do is it
is not a
trivial problem
to solve, but
basically I want
to make sure
that the
governance
module actually
owns the
community pool
address or
addresses.
We have to
think about
how to do
this.
This is like
going to be
a design
process, but
it will enable
us to do a
lot more.
It will enable
us to say
like, hey, I
want to now
do, what's the
word again?
Is it autopilot
stride?
Is it
called autopilot
to do like a
liquid stake and
then get your
tokens straight
away back?
Yeah, yeah,
autopilot.
Yeah, exactly
cool.
So for example,
you would have
a governance
proposal that
says, okay,
well, let's
create an
interchain account
or maybe not
even, you
don't need that
for stride, but
it would say
like, hey, we
want to do an
autopilot thing
and get our
liquid stake
tokens back.
Or if
time wave has
built out stuff
that we can
plug into, we
can say, hey, I
want to plug into
that smart contract
over there and do
this with this
amount of tokens.
So this will
enable us to
plug into all
these other
things that are
being built
outside of the
AEZ.
So that's
one of the
first changes.
So that's
changes to the
community pool
slash governance.
And the other
changes that
will be necessary
really is this
part about voting
on other
networks with
Atom.
So this is
just like, you
know, the
stuff we talked
about, like,
now that we
have these
Neutron tokens
either here or
on Neutron,
on Astroport or
somewhere else,
but we're able
to vote, how
do we vote with
them?
And what does
that structure
look like?
I think that
is generally
phase one.
The first one
being maybe
really the
community pool
stuff, and
we'll have to
see if it's
in scope to
work on that
governance part,
but I'd like
to have all
of that sort
of sorted
in V1.
And then, you
know, then
we'll see what
the rest of
the community,
how they think
about, you
know, plugging
into sort of
like all these
modular pieces
that exist out
there, you
know, the
Covenant
system, the
TimeWave is
building, autopilot
on Stride, and
whatever else is
there at that
point.
But I think
this is a good
starting point.
And so my
plan is to,
you know, do
another forum
post with
basically a
description of
what this
phase one looks
like, and
then have that
proposal on
chain, but
also super
eager to get
feedback from,
you know, the
speakers on
this Twitter
space right now
about whether
or not this
is the right
priority.
I think the
priority as you
outlined them
makes sense to
me, focusing
on, you
know, just
preparing the
community pool
and these
mechanisms for,
you know, to
be ready for
and convenient
for these
things to
happen.
On the
governance
side, I
think like
there's a
lot more
like work and
thinking to be
done because
due to the
fact that
like virus
consumer
chains have
various
different like
voting model.
Like for
example, Stride
I think has
the governator
system, whereas
Neutron has
like a custom
admin module
plus like
smart contracts.
So I think
that's probably
where we
should like
kind of like
fuck around
and find out
a little bit
more.
Like for
example, you
know, I
think on the
Neutron side,
it will most
likely be like
fairly easy to
roll this out
due to the
fact that like
as long as
we can transfer
the tokens into
a contract that's
owned by the
Cosmos Hub via
an interesting
account, then
the hub can
retain ownership
and have voting
power and we
can, you know,
instead of like
changing the
version of the
Cosmos SDK on
like both chains
and, you know,
which could be a
bit like heavier,
we can, you
know, like try
these mechanisms
out with, you
know, just like
iteration on small
contracts, which I
think is a lot more
realistic in the
short term at
least.
so yeah, like I
think from that
perspective, it's
it seems very
reasonable to me.
I think the
other two things
that I would
sort of like
gesture towards in
terms of things
that we should
consider on the
hub as well, and
especially with
regards to the
community pool is
the first one is
like it's currently
fairly unwieldy to
send tokens to the
community pool because
like, like as I'm
sure a lot of our
like the folks on
the panels, but
also in the
audience are aware
like the community
pool is not like
just a normal
account, it's a
module account.
And so you can't
just IBC transfer
tokens into them,
you have to have
some account on
the hub make a
fun community
pool message,
right?
So you have to
execute a specific
message that's
doable via ICA,
right?
So for example,
for the purpose of
transferring the
tokens from the
Neutron airdrop,
like the 42
million in
Ethereum to the
Cosmos community
pool, it's
possible to have a
contract on Neutron
that registers an
intrusion account
on the hub,
transfer the tokens
to that intrusion
account, then do
an execute, like
execute a fun
community pool
message to actually
transfer the tokens
to the hub's
community pool, but
that process itself
is not super
streamlined and
efficient.
And so potentially
there's ways to
make it like a
little bit more
accessible to
facilitate these
kind of like
crushing
interactions.
Yeah, that
should really just
be an address like
any other address
so you can just
deposit tokens like
anything else.
Well, I think
there's a trade-off
space, right?
Like do you want
people to be able
to just like drop
tokens into this?
Might be a great
thing, might be a
vector of like
you know, like
denominations that
are kind of like
spam denoms and
then how do you
handle them as
part of like the
selections in the
other modules to
ensure that you're
not, you know,
surprised to be
providing like
doku on tokens to
the liquidity pair
that you meant to
have with Atom
instead or
something.
But yeah, no, I
agree.
Like making this
like a lot more
accessible is probably
a good idea.
I think on like
not on the
community pool part
but just like
general SDK
stuff, I think it
should be considered
a priority to get
the ICA controller
functionality on the
hub enabled.
I'm not sure if
there's any like
technical blockers
or such but I
think having the
hub be able not
just to have
accounts being
registered on
onto the hub by
consumer chains but
also having the
hub be able to own
things on consumer
chains and control
accounts and sub
DAOs and stuff is
like something that's
like going to be
required to really
further this alignment
right and it would
unlock stuff like
you know, having
DAODAO for example
be like, sorry,
having a DAO for
example have its own
customizable structure
of DAOs on
Neutron, having the
hub have like, you
know, like the
sub-treasuries for
various purposes that
he could manage
like trustlessly.
I think all of these
are like super, super
interesting like
directions that would
be unlocked by this.
Yeah, thanks for
that on the
on the ICA
host, I forgot
about that one.
It's actually kind
of strange that we
haven't enabled this
yet because that's
a no-brainer.
I think it kind of
made sense while
there was no like
direct use case for
it but now that
you know, replicated
security is a thing,
the AZ exists, I
think like that's the
right time to turn it
on basically.
Exactly and then we
can already preload
basically we can
always start creating
accounts on the
networks that are
within the AZ and
then have those set
up and then we
know what they are
and put the LP
tokens there, etc.
One of the things
that had occurred to
me around some of
this conversation was
some of the tooling
that I think Wind
had on it around
gauges so that
there's a kind of
ongoing vote
where you as a
atom staker are able
to say I want, I
think that we should
allocate liquidity in
this sort of structure
seemed interesting to me
as opposed to things
being like one vote
and it's done and
then you have to
come back with
another and I
recognise that that's
a very radical change
from the kind of
very, forgive the
slight pun here,
binary voting
structure that we
have where things
either pass or fail
and then that's it
until we vote again.
I think that we're
heading to a period
of almost like
ongoing continuous
governance where if
we have positions they
need to be in some
ways actively managed
and actively evaluated
thinking about the
things Jihan was
saying about if the
hub had had this
kind of relationship
with Juno then the
hub might have got
wrecked based on the
price action.
Voter sentiment could
change over time and
I'm just interested in
kind of how governance
evolves from kind of
quite this linear thing
and I know Spagey've
got kind of more
sophisticated governance
within Neutron,
right?
Yeah, I mean,
I guess we do.
But the, yeah, I
have a couple of
thoughts.
Like first, like I
completely agree.
Like once you have
like kind of like
life positioned,
probably makes sense
to have some way to
manage them like more
actively, right?
Like a lot of like
the, like some of
like Max's and
time wave, like most
valuable insight to me
were, you know,
realizing like, like I
think he puts it very
well when he says like
there are structural
disadvantages to
DAOs and protocols
participating in the
economy because of the
way that they can
actually like make
decisions and react,
right?
If you have to, you
know, take two weeks
before you can do
anything and you have
an active position in
the market, then you're
potentially opening
yourself to being
front run on a number
of these like situations.
And so I think there's
two things, right?
There's on the one
hand, and we can
discuss this like further
like evolving the
governance system, but
you know, the like
decentralization and
security of this
process will always be
something that like has
to be taken into
account.
So I don't think
that, you know, we'll
ever sort of like match
necessarily the like
speed of decision
making of like one
person that owns the
keys, right?
And I don't think that
should be an objective
either.
But like to
counterbalance this
though, we can
structure the
agreements, the
pools, the
positions, the
contracts themselves,
right?
We can encode into
the markets the
things that will
protect the DAOs and
the protocols
participating in them,
right?
So like the PCL and
the fact that it sort
of like, you know,
like has kind of
like limits to the
impermanent loss that
it will accept, for
example, is one
example of such
things.
I think like the
timeway folks propose
other mechanisms as
well, whereby like the
position would be
scaled back or up
based on like the
evolution of like the
ratio and the
balances between
prices so that, you
know, the more
impermanent loss can
like increases, the
less there is of a
position to suffer
that impermanent loss
anyway.
There's like a
variety of mechanisms
that we can consider in
this regard.
And so I think like
the combination of
both these things,
like evolving the
market structure and
evolving the
governance structure is
what actually ultimately
will make this like
kind of like endeavor
and like train of
thoughts like successful
on like very briefly,
just on the governance
side.
I think like, you
know, you mentioned
gauges, there's like
conviction voting, there's
like optimistic decision
making.
There's a number of ways
that we can approach
this, which, you
know, all fall onto
this like security to
decentralization to
like efficiency of
decision making kind
of like spectrum.
And I don't think
there's like a one
size fit all sort of
like mechanisms for,
you know, for
governance in general,
but also for like
specific types of
decisions.
And so I think this
will most likely require
a lot of like
iteration.
And so what I think
is likely the most
like reasonable path
here is that like use
the more flexible kind
of like stack that are
like smart contracts.
And especially given
the fact that a lot of
these systems have
already been built,
right, Dowdao, for
example, has worked
on gauges for
neutron related
purposes and that
tech can be reused
for the hub, right?
And so like use these
as experimentation
layers, right?
Try to figure out
what works best.
And then eventually
that can then be
brought into the
SDK if we want to
really bring it as
part of the Cosmos
hub.
But then perhaps it's
also fine to just
control this like
remotely by interesting
accounts and stuff and
have this kind of like
mycelium of governance
of the hub around the
entire AZ.
Yeah, just a couple
of thoughts.
I think Max, you
wanted to interact as
well, perhaps on the
market structure points.
Yeah, I was just
going to add, we've
been, I kicked off this
conversation mentioning
that the allocator and
we've only been talking
about the covenants
since then.
And so just to be clear
on the relationship that
we're seeing here and
thank you, Spade, for
those words.
we view the covenant
system as an initiator
of economic
relationships.
So you will use a
covenant to kick off
to start a
relationship and then
the rebalancer would
be that piece of
technology that would
manage that
relationship over time.
So all those things
that Avril was
saying, those are all
things that we have
been thinking about
for a while.
And once we have the
covenants live, once
we have the rebalancer
live, like we will be
bringing the allocator.
So just wanted people to
be aware of that.
If anyone listening to
the call would like to
ask questions, now would
be a good time to do so.
But I kind of just want to
loop back to Noam because
I'm thinking that, you
know, this all started
with the binaries,
incredibly detailed
post.
So really, I
suppose, A, do you have
any responses to the
kind of bit of
conversation we've just
been having, but also
in terms of next
steps in the process,
what can the kind of
community expect next
from you and
Binary?
Sorry, I forgot to
put this on mute.
Yeah, specifically on
the topic that we're
mentioning governance,
I mean, I have no
much to add.
I mean, I'm a big fan of
sort of the neutron
governance model.
I'm not sure if it
applies to, you know,
all of the things that
we're doing within the
hub.
And I think I'm
mostly just very curious
to see how also RMIT is
like researching this
specific topic.
I don't think, I guess
like what's interesting
here is that Binary
takes a very, you
know, we're an
engineering company
mostly and somewhat a
business company, but
we take a very
engineering heavy
approach to a lot of
this stuff.
You know, some of you
might notice that in
the rest of the
proposals that are
coming out, like the
stuff that we do is
very focused on like,
well, you know, this
is how we practically
do X, Y, Z, you
know, to Marko
basically.
And this is something
that, you know, we
are focused and, you
know, eager to work
on basically.
So in terms of next
steps, which is
something I always
love to talk about,
I think the next
thing is, well, I
have to think for
the atom alignment
treasury, the next
steps would be
probably a follow-up
in the same form
both that we have
outlining phase one
and two on a high
level, and then soon
followed by, and it
depends on the
timeline here, with
the rest of the stuff
that's happening with
the AADAO RFP for
BlockWorks and RMIT,
but soon followed by a,
you know, an official
proposal in the forum
for phase one, basically.
And then we'll have
to see how the
funding gets done
there, because Binary
would love to build
this out.
We'd have to
collaborate with
Informal Systems, of
course, and Informal
has their own
roadmap.
But yeah, so that
would be on the
atom alignment
treasury, and then
hopefully we get to
build this next year
or sooner, who
knows.
And then on our
end, of course, like
we have the drip
coming this week, the
forum post at least,
that is a bit more
opinionated on what to
do, and it's quite
specific, actually, and
I think it should be
a really interesting
conversation starter,
especially with some
of the proposals coming
up soon.
And then the
Stability Reserve
Fund, right?
So that's coming
out.
Also, not sure if I
can make that before
Cosmo first, but
hopefully around that
time, that will go
online as well.
That'll be a great
conversation point.
That will follow the
same trajectory as the
atom alignment
treasury, where it's
first just like a
high level, can we
talk about this, and
then probably like a
phase one, phase two
kind of like on-chain
proposals.
That sounds
fantastic, and it's
great, I'm sure, for
everyone to be hearing
what's coming up.
I haven't had any
further requests for
people to speak, so I
assume that everyone
is just trying to
absorb, but is there
some, sorry, no, go
on, is there something
you want to ask?
Well, there's some
spicy questions from
Jim in the chat, so
maybe we can go over
some of those.
That's always fun.
I don't know if
anyone specifically
sticks out, but I
think it's important
to address some of
these things, even
though they're quite
spicy.
Let me try, sorry,
with where I'm
viewing this from, I'm
not seeing them, but
let me just, sorry, I
know what, and I need
to open the space up in
a different way to see
I'll pick a couple.
The first question is,
well, the most recent
one, at least, is like,
are covenants
enforceable?
To which the answer
is like, yeah, that's
the whole point.
So, like, covenants are
like small contracts,
which can be designed
to basically only
execute messages that
are, you know, only
behave, let's say,
according to the rules
of the agreement that
have been programmed
into the small contracts
themselves.
So, yeah, they're
enforceable.
They're not like social
agreements, they're small
contract, they're code
agreements.
And I'll also take,
like, how deep was
Terra Liquidity?
I think it was pretty
damn deep, because it
was a pretty big,
valuable chain.
At the peak, it was
like $60 billion
of liquidity, of TVL,
sorry.
It had liquidity, like,
across multiple chains
and such.
So, yeah, Terra was
pretty massive in this
regard.
Yeah, I think that was
a response to some of
the early discussion
about why does depth
of liquidity matter.
I think what my
personal take is, is
that it really doesn't
matter how deep your
liquidity is if your
protocol is built on
sand.
So, exactly.
That's what I was
going to say.
That is the major
difference, for sure.
One of the questions
for Jim is, sorry, just
to jump in, I know Jim
is a pretty vocal
naysayer for a lot of
things that we've been
proposing, and honestly
this kind of discussion
is good.
Like, we want differing
opinions, we want
people to push our
buttons or push and ask
why we're proposing
these things.
So, one of the
questions they ask is
like, what part of
your proposals would
incentivize anyone to
buy Atom?
So, I think it's
really, this is a
really important
question, right?
Because at the end
of the day, like,
we're trying to create
demand for Atom, we're
trying to make Atom the
asset that people want
to hold, and the way
I envision, the way I
think about this
anyways is, the hub,
in order for the Atom
Economic Zone to
thrive, we need to have
a strong Atom.
And in order for it to
have a strong Atom, you
need a strong Atom
Economic Zone, in my
opinion.
And obviously, it can
expand beyond the Atom
Economic Zone.
Liquidity as a service,
like what Max was
saying earlier, like,
we actually see a
world where Atom starts
lending liquidity out to
other chains outside of
the security zone of the
hub.
But I think in order to
jumpstart the economy
around the hub, the hub
needs to kind of, like,
be that, I guess, the
one that jumpstarts the
engine.
And there's a cold
start problem with
on-chain, with on-chain,
the on-chain economy in
general.
I think if the hub is
able to enter these
agreements with chains in
the Atom Economic Zone,
with protocols that are
launching specifically on
Neutron, I think you're
going to see, like, a
jumpstart of liquidity
that's going to create
more economic activity
that's going to lead to
more fee revenue for the
hub over time with the
revenue share agreements
that we're seeing.
So I think, like, it's
going to take time.
Like, and I think that's
one thing everyone has to
understand.
Like, we're not going to
see a large amount of fee
revenue happen tomorrow.
It's not going to happen
overnight.
These types of things will
take years to happen.
But in order to jumpstart
that, in order to
hopefully, like, shorten
the time frame it takes
to actually see, like,
sustainable revenue for
Atom Stakers, I think the
hub's going to have to
play, like, a major role
in jumpstarting the
economy around it.
So I also think, like,
the Atom alignment
treasury that Noah's
proposing is now that
instead of the treasury
just holding Atom, it's
now going to have, it's
going to be, I'm sorry,
I'm blanking on the word,
but you're actually going
to see, like, the Atom
treasury actually hold
multiple assets, which I
think is important because
I think that actually raises,
like, the fundamental
floor for what Atom is.
As soon as you start
seeing, like, more
productive assets being
held in its treasury, that
should generate more
revenue for Hub Stakers
over time, and
ultimately, like, it
makes Atom, like, the
shelling point of the
ecosystem, it makes
the Atom the asset
that people want to
hold.
So there's, like, a lot
of indirect benefits,
but there's also going
to be a lot of direct
benefits that you're
going to see over time,
but again, it's not, to
be realistic, it's not
going to happen tomorrow
overnight, it is going
to take some time.
I think, you know, as a
sort of short form, I
think that a lot of the
work that's happened
here is around fixing the
economics associated with
interchain security, so
that Atom benefits from
I think that what
Informal have done in
terms of shipping
interchain security on a
technical side has been
phenomenal, but the
economic side of it
doesn't yet deliver on to
the same level, and it
doesn't return for Atom
stakers in the same way,
but as we create better
alignment and create these
flywheels within the AEC,
that should start to pay
off on the economic side
of it, is sort of
broadly where I think
this is going from.
Max, do you want to
chip in?
Yeah, just wanted to
check in.
Jim, I saw your comment
about just trust us,
bro, right?
So I want to address
that.
So the whole point about
covenants is that you
don't have to trust us.
Right now, with the 450k
Atom, that's being
managed by a multi-sig.
That is the trust us,
bro situation of the
multi-sig.
With covenants, these are
smart contracts.
So all you need to do is
look at the code, trust
the code.
And so I guess, like,
okay, you need to trust
that we have the ability
to build these contracts
and just to give you guys
a little teaser of what
we'll probably be posting
in the next few weeks or
months, but TimeWave has
already built Covenant
The Covenant V1 is the
set of smart contracts that
will enable the Atom
Accelerator DAO to migrate
away from a multi-sig
and start using smart
contracts.
And we got these
contracts audited by
Informal.
There were zero critical
issues, zero high issues,
zero medium issues.
There were only, like,
two small ones and, like,
three informational.
Like, it was a very
successful audit.
So the whole point that
we're trying to really
stress here is that it is
not trust us, bro.
It is let's make these
agreements crypto-native.
I think there's another
good point that's raised
in these comments, which
is, like, hey, what
happens to Atom if now
suddenly the hub is doing
all of the actions and
taking all of the
opportunities that generally
motivate, like, owning
and, like, having exposure
to Atom, right?
So the idea that, like,
hey, maybe I can LP it or
something, right?
I think, like, the first
thing is, like, currently I
don't think that's such a
driver of, like, having
exposure to Atom.
I think, like, you know,
staking is generally
preferable to being an LP.
But beyond this, I still
think it's a good question.
And, like, in my sort of,
like, frame of reference,
these things should be used
kind of, like, strategically
in two ways.
Like, first, they're really
good at bootstrapping
things.
If you bootstrap a pool,
that doesn't mean that
there's no, like, opportunity
for other organic liquidity
to, like, from users to
come in and also contribute
to that pool, not that it
gets necessarily too
diluted.
And especially since
when you do these
deployments, you have,
like, some tools that you
can leverage.
E.g., if the goal is to
really maximize revenue
for the hub, you could
argue that the LPs
should be staked in what
are called, like, on
AstroPort, at least,
like, generators, which
are, like, the contracts
that are used to
distribute incentives.
I think in most cases,
it makes sense not to do
that because, like, at the
end of the day, given
sort of, like, the size of
the hub, the revenue is
actually kind of
meaningless because it's
so diluted.
But if you don't stake it
into the generators, what
happens is that the pool
stills, like, the liquidity
position still accrues
trading fees.
It just doesn't accrue
additional incentives.
And so what, like, the,
you know, the additional
tokens that can be slapped
on top of the pool.
And so then what happens is
that you can have the pool
be bootstrapped and stable
by having this, like,
layer of protocol on
liquidity that, like,
ensures that regardless of
the conditions, kind of,
like, there's a liquid pool
and liquid market for, like,
Atom and all of its
pairs.
And then you can still
slap additional tokens,
like, for example, the
consumer chain tokens
or the DEX protocols tokens
on top of this to
incentivize, like,
organic liquidity and just,
like, you know, like you
and me to basically join the
pool as well.
But because the LPs are
in stake, the incentives
aren't diluted.
They're only distributed to,
like, to actual LPs,
right, not to the
protocols.
And so what that does is
that it allows you to
basically granularly
control and make sure
that you're preserving
the opportunities for
people to actually use
these assets in DeFi
without having necessarily
all the yields or
rewards being kind of,
like, you know,
captured by protocols
themselves, right,
which would probably
hinder the velocity,
the churn in the market
and wouldn't be such a
great outcome at the
end of the day.
That's an excellent
point.
CryptoGuru,
after you had your hand
up to speed,
so it just brought you
Can you hear me?
Yep.
Fantastic.
So, yeah, guys,
thank you very much for
a wonderful space here.
Just in terms of
alignment to Adam
Economic Zone,
I think what is
important is not to
lose the retail
perspective,
not, yes,
you know,
dynamic liquids taking
tax with all the
graphs and stuff,
I think it's really,
really important to
dump it down to the
level of ordinary
people who not
necessarily have the
same vision as
you guys.
For example,
part of the
fees is accruing
to Adam Stakers,
but the reality is
it's just dust.
Same is true for
Stride, same is true
for Neutron.
So, it really is
not any value to,
let's say, a normal
retail staker.
So, I think the
point number one here
is obviously what
can we do as
users, as
supporters of
Cosmos to
think cleverly
around it.
One of the ideas I've
been putting forward
is rather than
giving the dust
to the
stakers,
there is an
opportunity here
actually to give
all the dust back
to actually Adam
community pool.
So, the community
pool in future
doesn't need to
sell Adam
and then have
the sell pressure
and boot,
like Spade was
saying, bootstrap
liquidity.
I understand
that if
the hub
starts selling
Neutron, for
example, or
starts selling
Stride, instead
of Adam, that
might actually have
a downward
pressure on
the Neutron,
on Stride, and
others,
tokens, but
maybe there
has, we can
reach a
balance.
So, that's my
point number one.
Point number two,
obviously, as I
have hinted,
we are talking
about Adam
tokenomics here,
I think we
really need to
make an effort
to speak to
common man, and
then explain
things in way
they understand
why these
three labs
that are working
on improving
tokenomics, what
are they doing,
and explain it
to retail as
well, because
let me tell
you something,
for you guys
might not be
important if the
price goes up,
but for retail,
to bring massive
amount of users,
I think
positive price
action goes a
long way.
Thank you,
folks.
Really
appreciate it.
These are some
great questions,
and to your
first point,
and in general,
just a really good
feedback, actually.
To your first
point, I'm
personally of the
opinion that,
yes, that should
probably happen.
I understand that
other people might
look at it
differently, but I
do think it makes
a lot of sense
for the dust of
inter-chain security
to go to,
for example,
the atom
alignment treasury
or the community
pool in some
way, especially
exactly for the
usage of liquidity
as a service and
all these other
things that we
talked about today.
So I'm a fan of
that.
I think that's a
separate sort of
proposal that also
the consumer
chains need to
ratify this
internally.
But yeah, I'm a
big fan of that
idea.
But as to your
second point of
basically dumbing
what we do
down, which I
think is a
really valid
point, you
know, it
shouldn't be
that atom
holders have
to read like
a 10-page
essay to keep
track of what's
happening, right?
It needs to be
digestible.
It needs to be
simple.
To that point, I
do think we are
currently just still
at the research
stage.
And so we will
speak in research
language, if you
will.
And, you know,
the conversations
are going to be
rather in-depth
because we have to
work out a lot of
these kinks and
details.
However, you know,
when we get to
that stage, we're
these things go
on-chain or, you
know, on the
forum where it's
like an official
proposal, yes, the
language needs to
be much simpler
and, you know, the
motivations need to
be very clear as
to why we're
doing what we're
doing.
I think Cosmo
First will be a
really good place
for this as well.
I know, Effort
Capital, David,
you're doing a
keynote talk, if I
remember correctly.
I'm going to be
on the panel on
day three together
with Chris from
RMIT to discuss
this specific
topic.
I'm sure there
will be plenty of
opportunities to
discuss this also
in person with
all the people.
I think I really
encourage people to
just, you know, walk
up to any of the
people that are
working on this and
to just, you know,
start a conversation.
But yeah, we've got to
do a better job also
online in terms of
like, you know, these
Twitter spaces are here
for that.
But I think we would
do well with, you
know, partnering also
with some of the
people who are good
at explaining these
things in very simple
terms, like Crypto
Cito, for example, and
so many other
influencers in the
space.
So, yeah, definitely
point taken and
noted and we'll do
our best, of course,
to make this as
palatable as we can.
Yeah, just to chime
in here, I think
ultimately what we're
trying to do is we're
trying to show the
wider interchain and
other projects I want
to launch in the
Cosmos ecosystem that
one, the Cosmos hub is
open for business, not
just as a security
provider, but potentially
as a liquidity
provider as well.
And what you're
getting in the hub, if
you take part in this
like this new vision, is
like you're getting a
long-term partner.
You're getting a
partner that actually
wants to see you
succeed because there's
like skin in the game
now.
I think what you're
seeing like with, I've
said this on a handful
of other spaces at this
point, but the, and I
think Max alluded to it
very eloquently, like
not only is the hub a
shared security provider
now, when you leverage
on-chain governance with
those two, with the
shared security property,
you're actually getting
like bilateral or
multilateral like
alignment.
L2s align with
Ethereum, but Ethereum
is not aligned with
L2s.
And I think this
special superpower that
the hub has with
on-chain governance is
like you're allowed to
create like opinionated
agreements with, with
chains and other
products that want to
launch in the Adam
Economics Zone.
I think that's super
powerful.
So I think when it
comes, when it comes
back to like the
original question, it's
like how do you, how
does this create demand
for Adam?
I think the vision is
if the hub is able to
leverage its on-chain
governance, leverage its
shared security properties
to align with other
chains and other
projects that also
want to align back with
the hub, you're getting
like a long-term
partner, you're not
getting mercenary
capital, you're, you're
getting like a
partnership that we
think is going to
hopefully stand the
test of time.
And we think like
through those long-term
alignments, you're
actually aligning
agreements politically,
socially, economically,
and from a security
perspective, that's going
to naturally create a
demand for Adam over
time.
And then ultimately
what it's going to
hopefully create is
such a large on-chain
economy that's going
to create like actual
revenue for the hub
that, and for its
staker, so it's no
longer, it's no
longer dust.
It's actually like a
legitimate yield
bearing asset.
So that's why I think
it's really important
that the dust that
we're getting today,
or even like treasury
swaps that we
ultimately do with
Neutron and Stride
and other consumer
chains and projects,
is like we're not
using those assets to
just dump it.
Because the moment
that we start selling
Neutron and Stride,
like to me that
alignment is gone.
Like we want to see
them succeed as a
project, and vice
versa, they want to see
the hub succeed.
So we're kind of
trying to balance
out, we're trying to
balance it out, long
story short.
I think unless there
are any further
questions, I feel like
that's a really great
sort of position to end
It is worth me saying
we're going to try and
do more of these spaces
with BlockWorks and
with RMIT.
We've also got some
scheduled live from
Cosmoverse at the end
of each day from there.
So there are plenty of
opportunities for people
to continue to listen
to these conversations,
take time to digest
things, reread forum
posts, come back with
your questions.
This is going to be a
very iterative process
and we really value
everyone's input.
I'd like to thank
everyone that's spoken
today and asked
questions, whether that
was by coming up on
stage or asking them
in the chat or between
the panelists themselves.
I think this has been
a super useful space.
I'm really looking
forward to us doing
more of these and
getting as much input
into the process as
we possibly can because
as I think the
conversations have shown,
it's all very complex,
but there's some really
big opportunities here
for the hub and the
more input we get at
this point, the more
useful that can be.
Thank you very much
everyone and we will
catch you soon.
Bye.
Bye guys.
Thanks everyone.
Bye bye.
Bye.
