Cosmos Validators Brief #8: Figment Networks

Jesse Livermore
Feb 26 · 6 min read

Figment Networks

My first discussions with Figment occurred in summer 2018 when Figment’s Hubble explorer showed itself to be an incredibly useful tool for Cosmos’ early testnets. At the time I was talking with Andrew Cronk, Partner and Co-Founder of Figment Networks. We realized that the two of us initially had been early members of the Coinfund Slack channel years prior, but we hadn’t started chatting until Figment was an early validator in Cosmos’ testnets in 2018.

Figment is located in Canada and in the U.S. (with one location in Wyoming, which I always found intriguing). And besides Cosmos, Figment Networks provides Validating services for Iris, Tezos, Livepeer, Horizen and FOAM (coming soon).

In this Brief (which might actually be the longest Brief yet) they bring up possibly one of the most intriguing ideas with regards to Cosmos’ governance related to Elinor Ostrom’s work that completely disproved the tragedy of the commons without requiring top-down regulation:

“Elinor Ostrom’s work on group governance suggests that empowering small groups with governance tools may be superior to top down “planned economies” that many blockchains resemble today.[…] Since we are in such early stages, networks must continue to iterate rapidly and we think that innovating in structured small group governance could lead to an edge.”

Tell me a bit about yourselves — as much/little as you guys would like to share.

The founding team has over two + decades started, built, and scaled four internet infrastructure related businesses. This deep experience in IP networking, data centers, cloud security, and databases combined with our passion for decentralization lead us to starting Figment Networks.

We are investing in infrastructure, software (eg. Hubble), and research because we care deeply about the possibilities enabled by Proof of Stake blockchains. Beyond simply running validators, we believe active participation in these communities is an absolute requirement to grow these new networks.

We want to build an organization that on the one hand provides needed infrastructure & software to these networks/communities, and on the other hand serves the needs of institutional and large token holders. To do this we are focusing on operational best practices (including security), software tools, research, and legal/regulatory compliance.

For example, for VC funds who have PoS tokens, Figment Networks provides a safe and compliant way to stake their tokens to avoid inflation and support their founders/networks.

Our data center and technical operations are based in Toronto, Canada and we are building a decentralized organization with team members located in New York, Chicago, Vancouver and…Wyoming.

Outside of Cosmos/Tendermint, how have you been involved with blockchain so far? What projects have you participated in? What projects do you find particularly intriguing?

We started with Proof of Work (PoW) mining using both ASICs and GPUs, doing mostly “spec mining” or running on newer/smaller networks that we wanted to learn about. The idea was that we could better understand network and community dynamics by being involved and having skin in the game.

At the same time, we were participating in various forms of ICOs. In those halcyon days, most teams had spiffy websites and “whitepapers” which we thought seemed like weak signals for evaluating investments. We found that participating in the networks gave us better research for making investments. It seemed to make sense to combine the mining and investing activities, and Figment Networks was born.

We are active on Tezos, IRIS, Horizen and Livepeer, each of which is interesting for a different reason. Tezos is the only layer 1 decentralized delegated PoS that is active on a mainnet. IRIS is a Cosmos Hub, launching in parallel or maybe ahead of Cosmos, which we see as both an important proving ground for the technology, and also an interesting project in its own right. Horizen is a hybrid PoW/PoS project with active development in privacy infrastructure.

Livepeer is particularly interesting because it’s a PoS application layer project. While it is mostly a cryptoeconomic testbed right now, as it matures operating on Livepeer is going to look more like a SaaS business, with economics driven by fee for service, not pure staking. We view applications like Livepeer as critically important to the development of the space, because in the long run the success of the L1 networks is going to be driven by the application layer.

We’re active on a number of other testnets, and will be active on several privacy focused projects as they come onstream.

How did you get into blockchain space initially and what keeps you interested?

Initially by accident, when we discovered an employee at a previous company was mining BTC on company servers!

That put Bitcoin on our radar as something to watch and then the distributed/decentralized technology drew us in deeper (previous company was a distributed database service).

From there we began mining as a hobby and participating in early ICOs.

Looking forward, one area we are interested in is the applications built on top of blockchains that may find an early edge. For projects that are not trying to be a money or store of value, like Cosmos, it seems that the success of these applications is crucial to the underlying network. Similar to how Amazon Web Services (AWS) is successful/valuable because of the applications built on top of it.

However, today’s decentralized applications are inferior to centralized applications in almost every way. So we are watching closely and supporting applications with differentiating features.

Where do you see the blockchain space evolving in the next 1–3 years?

We’re very interested in governance models and DAOs, specifically the size, scope and composability of DAOs.
Elinor Ostrom’s work on group governance suggests that empowering small groups with governance tools may be superior to top down “planned economies” that many blockchains resemble today.

So how can we take the onchain governance enabled by a system like Tezos, and create DAO-like substructures to manage more discrete areas?

Since we are in such early stages, networks must continue to iterate rapidly and we think that innovating in structured small group governance could lead to an edge.

With regards to Cosmos, what do you think will be the biggest challenges faced by the project overall?

In the end, like every new technology, end-user adoption to solve real world problems will determine the project’s fate.

Specific to Cosmos, we see the following challenges:
Offchain communication/consensus around hard forks: how will the chain restart in a way to respects Delegators, Validators, and Cosmos team?
Documentation and software change management for Validators: how hard will it be for new Validators to enter/challenge and run a high quality/secure system?
Legal, tax, contracting, and regulatory issues for Validator businesses: will Validators be able to run sustainable businesses in uncertain legal environments?
Centralization of stake in hands of small number of exchanges or custodians

We elaborate in this blog post:

With regards to being a validator in Cosmos, what do you think will be the biggest challenges you will face?

Business model: how will transaction fees be priced and how will commission fees play out?
Managing governance proposal votes to reflect delegator’s needs/wants
Running production network on actively developed software stack that is still finding bugs
Setting up HSMs on Mainnet

At a high level, we expect the business model of running a Validator to be discovered/solidified over the next 12–24 months, and many of the variables in our model (below) can be filled in.

In addition, we expect the Tendermint and Cosmos software will find numerous bugs and implement community-driven enhancements in rapid succession. The challenge for a Validator will be keeping on top of quick changes while maintaining high security.

The Figment Networks team is obviously very active on Medium:

They are also very active on Twitter:

And their site shows many more upcoming Validating services (like for FOAM):

Jesse Livermore

Written by

Long-time investor and manager of Other Peoples Money and worked as a pirate of Wall Street for too long. Found Crypto long time ago. Passionate about it.

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