How effective is the grand ATOM revival plan?

Written by: Tia, Techub News

Although Cosmos has been embroiled in a governance scandal recently, judging from its dynamics, from June to August, protocols have successively initiated proposals to join the Cosmos Hub consumer chain. Yes, this policy, which has been promoted in Cosmos 2.0 since 2022, has finally begun to make some progress.

It just so happens that LSM has been launched for some time since September last year, and we can also analyze the data to see how much pledge liquidity has been released.

ATOM War has also gathered a wave of projects that want to apply for funding, and it seems that the first phase of promotion is about to begin.

With ICS, LSM, and ATOM War, plus a pledge rate, this article will simply take a look at the specific effects of the implementation of these policies.

Pledge

Data from CosmosOutpost

From the pledge data, it is terrible. Since the scandal of Cosmos governance corruption broke out on July 31, Cosmos has begun to see huge amounts of unstaking. About 3.3 million ATOMs were unstaked on July 31, about 1.7 million ATOMs were unstaked on August 4, about 650,000 ATOMs were unstaked on August 5, about 1.66 million ATOMs were unstaked on August 13, and about 8.1 million ATOMs were unstaked on August 15. A total of 12.11 million ATOMs were unstaked in these days, accounting for nearly 3% of the ATOM circulation. The ATOM price also fell from $6.15 on July 31 to $4.62 on August 18, a drop of 33%.

ATOM Token Price

Replication Security (ICS)

The main function of Replication Security is to provide Hub validator verification for other chains in the Cosmos ecosystem, and to provide other small chains in the Cosmos ecosystem that cannot provide huge validator costs with an opportunity to share Hub security. These chains that share Hub security are called "Consumer Chains". If you want to become a Hub consumer chain, you need to submit a proposal first. In the proposal, write down the cost you are willing to pay for becoming a consumer chain (how much transaction fee to pay to Hub, etc.). Once ATOM holders are satisfied with the cost and the proposal is passed, you can officially become a consumer chain.

Currently, there are two chains that have passed the proposal. One is Neutron and the other is Stride.

Neutron is the first consumer chain of Hub, launched in May 2023, and shares revenue with Hub

• 25% transaction fee, paid in ATOM or NTRN

• 25% MEV revenue, paid in NTRN

At the same time, Neutron also airdropped 70,000,000 NTRN to Cosmos validators, accounting for 7% of the total supply of NTRN. Later, more than half (42,727,950) of NTRN were not claimed, and this part was transferred to Cosmos Hub, worth about 15.72 million US dollars (data on August 18), which is 0.08% of the market value of ATOM.

Another consumption chain is Stride. Stride is a liquidity staking protocol, which has a lot of revenue itself, and the portion allocated to the Hub is also quite generous:

• 15% of liquidity staking rewards

• 15% of STRD inflation staking rewards

• 15% of MEV revenue

• 15% of transaction fees

Partial Set Security

Since all validators need to provide verification for consumer chains, the rewards that consumer chains receive from ICS usually cannot cover the cost of running the chain, and people began to complain that ICS has brought additional burdens to validators. Subsequently, Partial Set Security was proposed. Partial Set Security reduces the cost of ICS to validators by reducing the number of validators that must run each consumer chain. Validators can choose whether to become consumer chain validators. When the number of validators operating consumer chains decreases, validators running consumer chains can receive a larger proportion of rewards. This proposal was passed on April 12 this year.

Permissionless ICS

Permissionless consumer chains are another proposal after Partial Set Security, which allows anyone to create optional consumer chains without governance proposals. This will enable chains to start faster and with less friction. Consumer chains can set some basic parameters, such as how many validators choose to join before starting. Currently, the fees paid by consumer chains are given directly to the Hub, and the Hub may initiate a proposal to distribute part of the fees to the validators after receiving the fees. This is actually very inconvenient, greatly delaying the time for issuing subsidies, and may be unfair to some validators. In the future, in permissionless ICS, consumer chains can directly set the amount of commission to be paid to validators, and perhaps there will be a direct payment function.

The permissionless ICS proposal is currently under voting and will end on August 21. Since switching to completely permissionless chain creation will require some refactoring of the codebase, although permissionless creation is theoretically possible, the current version of ICS still uses governance proposals to create consumer chains.

Consumer chain protocols in proposals

From June to August, a number of protocols have initiated proposals to join the Cosmos Hub consumer chain. Because there are costs to start a consumer chain, some projects have not been able to complete the subsequent steps even if they have initiated proposals on the Hub. In the past two months, the protocols that may become consumer chains released by the Hub official push are mainly Elys Network, KiiChain, and Evmos. Except for Evmos, which has a slightly higher usage rate, the other two chains are estimated to have limited activity. Therefore, from the actual situation, it seems that this policy of the consumption chain does not have such an optimistic effect.

LSM Liquidity Staking

Consistent, available and deep asset liquidity is essential for any decentralized network. The LSM liquidity pledge module allows ATOM pledgers to tokenize the pledged ATOM into liquid pledge assets through the liquidity pledge module. Its main function is to activate the pledged ATOM and enable it to participate in the DeFi ecosystem to increase the activity of DeFi in the Cosmos ecosystem and to make up for the problem that the actual usage rate of ATOM in the ecosystem is not high due to the ultra-high pledge rate of ATOM.

The LSM module was officially launched on September 13. Here we mainly observe whether the activity of DeFi in the Cosmos ecosystem has increased after the LSM module is enabled, and take a look at the coin prices of these liquidity pledge chains.

Currently, the LSM module is mainly used in the three liquidity pledge protocols pSTAKE, Stride, and Quicksilver. Since the historical data of pSTAKE and Quicksilver are not available, this article mainly organizes the data of Stride.

The following figure shows the locked value of stATOM minted in Stride. It can be seen that since September 13, the locked value of stATOM minted has increased significantly, and then began to decline after the peak on April 8. Although it is a downward trend, compared with the price of ATOM that fell during this period, the number of locked ATOM should not have dropped much, but the growth rate should have declined.

Data from Stride

ATOM token trend

As a liquidity staking chain, Stride's token price has also risen significantly since October, but it peaked in mid-February and began to fall, a month earlier than the overall cryptocurrency market fell in mid-March.

Stride token trend

pSTAKE token trend

pSTAKE also performed well, with a gratifying increase.

Quicksilver token trend

Quicksilver performed well in the initial stage, but as the subsequent TVL did not rise, the price of the coin also performed extremely poorly.

Overall, LSM has a significant effect on the consumer chain.

In terms of the number of stakes, the current number of Stride stakes is about 4,223,479 ATOMs, and the number of pstake stakes is 661,066 ATOMs, totaling 4,884,545 ATOMs. Since the upper limit of LSM is 25% of the total stakes, about 60 million ATOMs. Although it is an incomplete statistics, the current tokenized staked ATOM accounts for less than 10% of it, compared with Ethereum liquidity stakes accounting for 32.34% of the total stakes (the number of liquidity stakes is 11,043,280 Ethereums, and the total stakes is 34,140,035 Ethereums), there is still a lot of room for growth. We can continue to observe the relevant data and whether there are relevant measures to incentivize LSM.

Atom War

Atom War is similar to Curve War. Since some projects in Cosmos asked Hub for ATOM funding (similar to a loan), the idea of ​​​​Atom War came up. Projects that want to get ATOM funding can compete with each other. Holders of shares in LSM can lock shares to obtain voting rights to guide projects to obtain funding. This mechanism is mainly achieved through Hydro.

Demex, Electron Protocol, Nolus, and Shade Protocol are the first batch of projects competing for funding. Since the auction has not yet started, there is no observable data.

Summary

In summary, it seems that a series of revitalization plans are not optimistic, and the continuous release of pledges also reflects this to a certain extent. In fact, Cosmos's vision and many measures are very advanced. For example, some concepts such as shared security were proposed very early, but in the end, there were few benefits. (Of course, this is also related to the conditions of each project itself. The development of Cosmos shared security is indeed more troublesome) But it must be said that it is indeed slow.

At the same time, Cosmos also faces many problems that are faced when it develops to a certain extent-centralized governance. The community is also quite dissatisfied with Cosmos's xenophobia, gang formation, and wasteful spending. It may be that they have waited too long, or they are really disappointed with Cosmos. Even some Genesis wallets have begun to unstake ATOM.

I still remember that when Cosmos 2.0 was just launched, a group of people enthusiastically accepted various interviews with hope. When I watched the relevant podcast video interviews, I was even infected by their enthusiasm. But sometimes, the facts are so cruel. At least so far, the results are not so ideal. Although everyone has been accusing Cosmos, especially the man behind Cosmos, Ethan, I still believe that Ethan, who loves to wear skirts, wears hairbands, does not shave, is very interested in currency, and hopes to apply the ecosystem in biology to blockchain design, will not be as unbearable as the community says.

PS: Interested readers can go and have a look at Ethan's self-playing and self-singing songs, which are really real and free.