The vision of the Cosmos network, as set out in 2016, is taking shape. The role of the Cosmos Hub is to design the Internet of blockchains. This is now possible with the development of the Cosmos SDK, IBC and Tendermint. These are the main open-source primitives of the applications that now populate the internet of blockchains (interchain). However, with an active and increasingly sophisticated IBC network, the needs of interchain have evolved. As a result, the Cosmos Hub must also transform into a new role: to develop a resilient cross-chain economy. with its ATOM token.
Cosmos is rolling out a new Tokenomics for the ATOM token
Cosmos is a decentralized network of independent blockchains. Not to be confused with the wider Cosmos ecosystem, the Cosmos Hub which is a specific blockchain designed to connect all other blockchains in the network.
In its current form, the main purpose of ATOM is to provide security for the Cosmos Hub through a staking mechanism. Token issuance currently ranges from 20% at worst to 7% at best depending on the percentage of total ATOM supply deposited in staking.
In March 2019, the total supply of ATOM tokens stood at around 214 million. Currently, according to data from CoinGecko, 292.5 million ATOM tokens are available, which is an increase of around 36%.
The white paper proposes a new monetary policy for ATOM, in two stages:
- A transition phase of 36 months would first be introduced. At the start of which 10 million ATOMs would be issued per month (briefly raising the inflation rate to around 41%, if it were to launch today).
- The emission rate would then steadily decline until it reached emissions of 300,000 ATOMs per month, effectively bringing the inflation rate of ATOMs down to 0.1%.
In the long term, ATOM’s emission would therefore become linear instead of exponential.
One of the main reasons for ATOM’s current monetary policy is to subsidize Cosmos Hub validators for providing security services. Under the new model, validators would instead be rewarded with revenues generated by cross-chain securitya mechanism for Cosmos Hub to produce blocks for other blockchains in the Cosmos ecosystem.
Cross-chain security should facilitate the interoperability of the blockchains available in the Cosmos Hub. The faster, cheaper and easier process will also enable the creation of scaling solutions and increase overall IBC connectivity. A security mechanism would gradually reinstate the ATOM token issuance model if revenue from cross-chain security proves insufficient to replace validators.
Three new Cosmos Hub features
The white paper proposed the introduction of three major functionalities in Cosmos Hub: the Interchain Scheduler, the Interchain Allocator and the Governance Stack.
The cross-chain scheduler
Cosmos Hub’s Interchain Scheduler wants to put these trades on-chain and benefit the wider network. A willing Cosmos blockchain could sell some of its block space to Interchain scheduler; the latter would subsequently issue NFTs representing “ reservations block space. These tokens would be auctioned periodically and eventually traded on secondary markets. The original blockchain would then receive a portion of the profits. According to the white paper, theInterchain Scheduler would complement (not replace) off-chain MEV (maximum extractable value) relays, promoting competition and decentralizing the practice.
The cross-chain allocator, or how to streamline economic coordination across the Cosmos network
It is about establishing multilateral agreements between IBC blockchains and entities. The allocator must accelerate the acquisition of users and liquidity for Cosmos projects. This for the purpose of securing ATOM’s position as the network’s reserve currency.
Protocols can use the allocator to:
- Mutual participation
- The expansion of ATOM’s liquid staking markets
- The rebalancing of reserves
- Participation in the governance of another blockchain
It also opens up the possibility of creating liquidity providers as a service. But also to secure under-collateralized financing practices as well as reduce cases of insolvency due to extreme market events.
The liquidity unlocked by the scheduler and allocator ultimately gives Cosmos Hub an advantage over other liquidity providers in the Cosmos network:
- Capital contribution
- Providing capital would reduce its security risks
- The governance stack
Creation of a governance structure for the entire Cosmos network (Governance Stack)
Like the allocator, the mission of the governance stack would be to streamline Cosmos-wide decisions. For this, the concept aims to give each blockchain a shared infrastructure and vocabulary. That implies the creation of a Cosmos Hub assembly. This would work in tandem with councils made up of DAOs from the IBC network.
It is a system already adopted by political structures such as the United States Congress.
Conclusion
The Cosmos Hub gives birth to the internet of blockchains. Cross-chain security and liquid staking are the final components needed for a secure cross-chain economy. This will allow the creation of the application-specific functionality of the Hub, the inter-chain allocator and the inter-chain scheduler.
Allocator and scheduler create inertia with the capitalization of the new Cosmos channels and incentivizes to make transactions. The planner creates a market for IBC transactions and uses the revenue to support network growth.
Thanks to the creation of this powerful economic bloc, the success of the Cosmos center is linked to the success of the other Cosmos chains and that of the IBC economy. Infrastructure and community come together to drive the expansion of cross-chain solutions. All this, thanks to neutral and credible functionality, capital and social infrastructure.
Today, the Cosmos stack represents the primary framework for building interoperable sovereign blockchains. With the introduction of the Scheduler and Allocator systems, the Cosmos Hub becomes the primary platform for scaling IBC-enabled applications. It’s about securing the core infrastructure for cross-chain security and accelerating economic coordination for the next chapter of the Cosmos ecosystem.
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