COSMOS NEWS: DYDX V4 BETA PHASE, ATOM, CELESTIA TIA, OSMO & MORE!!
Hi Cosmonauts! ⚛️
Welcome to the Cosmos ecosystem news roundup, here are the top stories in Cosmos in the 1st half of November:SUCCESSFUL DYDX ALPHA PHASE: Congratulations dYdX for the successful alpha phase! The Beta phase and trading in dYdX v4 has now started and several governance proposals in both dYdX v3 and the new dYdX chain will soon incentivize the migration of the trading volume from dYdX v3 on Ethereum to the new dYdX v4 exchange on Cosmos. In October, dYdX v3 had $26.5 billion in trading volume, in this episode we cover all the important updates about dYdX and what’s next in the coming weeks and months, including one click onboarding for dYdX v3 traders into the new v4 perps exchange
ICF DELEGATION PROGRAM UPDATES: The ICF announced the selected validators for their cycle 2 of their delegation program for the Cosmos hub, Osmosis, Irisnet and Celestia
COSMOS SDK UPGRADED: Eden, the v0.50 release of the Cosmos SDK, was announced, in this episode we cover all the important details that you need to know
COSMOS HUB V14 UPGRADE: Automatic tombstoning for double signing events on consumer chains will be introduced with this upgrade, we cover all the details that validators and stakers must know
NEW INJECTIVE ECOSYSTEM NEWS VIDEOS: We are thrilled to announce that Cosmic Validator has now joined the Injective active set and we will start releasing separated videos focused only on the Injective ecosystem rather than a focused section as usual. Make sure to watch our new Injective videos to be updated with all the important Injective news!
Focused sections about Osmosis, Secret Network, Persistence, Juno, Stride and Crypto regulations and compliance updates with MME
All this and much more in this episode, and now for today’s top stories:
Tech
The Alpha phase of the new dYdX chain to bootstrap security was successful. A large amount of DYDX tokens were bridged from Ethereum to the new dYdX chain on Cosmos. Since during the Alpha phase rewards were still not enabled, it is normal that only a small percentage of the bridged DYDX decided to stake during the alpha phase. Nonetheless, a significant amount of DYDX was staked and generally in a decentralized way. When the security of the dYdX was deemed reasonable, Wintermute shared in the dYdX forum a proposal to start the Beta phase and thus enable trading in all markets of dYdX v4 and staking rewards. Since there is no inflation in the dYdX chain, staking rewards come from revenue from trading fees, that’s why since during the alpha phase trading was still not enabled there weren’t staking rewards. The first governance proposal of the dYdX chain to enable trading on all markets (over 33 markets will be added) passed with a great majority of yes votes on the 13th November. During the Beta phase, since now trading is enabled, although still not the full functionalities, there will be staking rewards and this is likely to encourage more staking and thus increase the security of the dYdX chain.
To maximize the security of the dYdX chain, staking should be done in a decentralized way to several validators. However, you might be wondering how you should choose validators. In the Mintscan dashboard you can see several metrics of validators including uptime, number of delegators, governance participation and more. You should delegate to validators with great uptime and performance and with high governance participation. You can also check when a specific validator joined the active set, how many delegators they have or their commission. In addition to this, you should check the MEV dashboard and see which validators have the best score here indicating they are honest validators not performing any MEV on dYdX v4.
dYdX Trading also mentioned that they won’t be staking any of their tokens so the governance of the dYdX chain will be in control of the community and decentralized.
Something that happened during the alpha phase but that was also expected is that some funds launched their own validators. It is likely that more funds in the coming months will also launch their own validators in the dYdX chain, however we think that it is in their best interest to contribute to the decentralization and security of the chain by also staking part of their tokens in a decentralized way across the active set. Otherwise, there is some risk of a few large funds controlling the dYdX chain and this is not the original goal since the aim for dYdX v4 is to be fully decentralized, and this includes also the governance and the stake distribution.
Important to mention also is that the competition to join and stay in the dYdX chain active set has been very intense. Initially, there were only around 30 validators and 1 DYDX token was enough to join the active set. Around two weeks after the genesis, there were 60 active set validators and almost 70 other inactive validators trying to join the active set. The minimum amount to join the active set increased quickly from 1 DYDX to almost 10,000 DYDX which given the recent increase in the DYDX token price it is over $30k.
Some validators like Cosmostation, Keplr or ourselves, Cosmic Validator, received many community delegations and managed to remain in the top 10 even after some institutional validators and funds joined the top 10. But most validators were struggling to remain in the active set, and many had to keep self-delegating DYDX to go back to the active set. Some validators gave up doing this given the very high gas costs to bridge DYDX from Ethereum to the dYdX chain, and since native DYDX trading was not available they had to bridge DYDX and the gas costs became an issue for some validators. This screenshot shown here about the most performant dYdX validators was taken just before the launch of the Beta phase, so it will be interesting to keep monitoring the performance of these validators and also their score in the MEV dashboard.
Noble will be joining the Cosmos Hub as the third consumer chain likely in a few weeks before the end of November. Some estimations indicate that at least 200 million of native USDC issued via Noble is expected to come to the Cosmos ecosystem, largely driven by the start of trading on the new dYdX v4 perps exchange, given that the v3 exchange had consistent monthly trading volumes of over $20 billion, for example during October the volume was $26.5 billion.
Very important news also is that Circle’s Cross-Chain Transfer Protocol (CCTP) on Noble will launch on November 28th and this will be the first non-EVM implementation of CCTP. Thanks to CCTP, users on any CCTP-enabled blockchain such as Arbitrum, Avalanche, Base, Ethereum and OP Mainnet will be able to burn USDC in these chains, re-mint on Noble and forward via IBC to the new dYdX Chain, and all this in just one click, in other words one click onboarding for dYdX v3 traders into the new v4 perps exchange.
So now that trading has started on the dYdX v4 perps exchange, the goal is to migrate all the trading volume from the existing v3 exchange to the new dYdX v4 exchange. In order to do this the current trading and LP rewards will be gradually reduced in v3 while increased on dYdX v4. In particular, v3 trading rewards will be reduced on November 21st 2023, December 19th 2023 and then the trading and LP rewards will be reduced to 0 on January 16th 2024.
dYdX v3 governance already started the process to migrate trading and LP rewards, and also to bridge the Community Treasury, the Community Treasury Vester, the Rewards Treasury, and the Rewards Treasury Vester to the new dYdX Chain.
There will be governance proposals on the dYdX chain to initiate trading rewards, to fund the insurance fund, to fund LP rewards, incentives programs, community initiatives and more. Considering all this, it seems that during November, December and January, a large amount of trading volume will migrate from dYdX v3 to v4 given the migration of trading and LP rewards from v3 to v4. It is likely that after rewards are 0 in v3 there may still be some amount of trading, but this will likely continue to migrate to v4 and in around 6 months once the remaining volume in v3 is negligible then dYdX trading may decide to discontinue dYdX v3 and then the full migration of dYdX would be completed. Very exciting months ahead for dYdX and congratulations for the successful completion of the alpha phase and the launch of the beta phase.
Avalanche will soon enter the interchain ecosystem in Cosmos since an incentivized testnet was launched by Landslide, the team that is developing the IBC light client on Avalanche. This is great news and it is further confirming IBC as the industry standard for blockchain interoperability.
Eden, the v0.50 release of the Cosmos SDK, was announced. This release brings several major improvements. Firstly, Eden finally unlocks the full potential of ABCI++. Also very important, the Optimistic Execution can cut block times by a significant amount, and this is especially relevant for networks with fast block-production such as Injective for example. Several additional new features include the Sign Mode Textual to improve the transaction signing experience or the AutoCLI to reduce the complexity of module creation and to enable a smoother developer experience. Moreover, IAVL 1.0 is also a highlight, since it brings major improvements in disk storage and overall performance. To read the blogpost with all the technical details about Eden you can follow the link here.
The first bridge between Celestia and a Celestia rollup was announced, powered by Neutron and Hyperlane. We include the link here to this bridge.
DeFi/Staking
The ICF announced the selected validators for their delegation program cycle 2 for the Cosmos hub, Osmosis and Irisnet. They also included Celestia, although for Celestia there wasn’t an application process but it was based on the testnet performance and the same delegation was given to each of the 17 selected validators. The delegations for the cycle 2 will be completed before the end of November and they will be maintained for 12 months, instead of 6 months as in the cycle 1.
Regarding the Cosmos hub, out of 126 applications, a total of 102 validators were selected. The main difference compared to the cycle 1 is that more inactive validators were selected. Also, due to the new CAP system in the cycle 2 to limit the amount of points that large validators can receive, the delegations will be better spread across the active set and thus the decentralization will be improved.
For Osmosis, a total of 34 validators were selected from 72 applications and in the case of Irisnet 6 validators were selected from a total of 23 applications.
Project launches & network upgrades
With the upcoming Cosmos Hub v14 upgrade, there will be automatic tombstoning for double signing on consumer chains, and the previous mechanism of submitting equivocation proposals to the Cosmos Hub for slashing will be removed. So far there was only one equivocation proposal in the Cosmos Hub concerning Citizen Cosmos and Pupmos, however this proposal was not approved. Once the v14 upgrade is implemented any previous double signing event on consumer chains will be slashed unless a key reassignment is done 21 days before the implementation of the v14 upgrade. This means that to avoid being tombstoned, Citizen Cosmos and Pupmos need to do a key reassignment at least 21 days before the implementation of the v14 upgrade. However, it is technically possible that other double signing events happened on Neutron or Stride but they weren’t noticed, so it is recommended to do a key reassignment for Neutron and Stride to minimize the risk. In addition, if keys on consumer chains were reused for example on previous testnets with the same chain id there is also a risk, therefore the overall recommendation to minimize risks is to do a key reassignment at least 21 days before the v14 upgrade for both Neutron and Stride. This v14 upgrade concerns only consumer chains, not the Cosmos Hub, because in the Cosmos Hub any validator doing a double signing event is instantly tombstoned. Lexa confirmed that no previous Neutron or Stride testnets had the same chain id as their mainnet so this reduces the risks. But given she cannot be 100% sure that there wasn’t any cosmos sdk testnet with the same chain id as the Neutron or Stride mainnets, and also given that technically there could have been double signing events on Stride or Neutron not noticed until now, to minimize risks the recommendation is to do a key reassignment for the current consumer chains of Neutron and Stride. Furthermore, Noble did have a testnet with the same chain id as the mainnet as mentioned by Lexa in the Cosmos Hub forum, noble-1, so for the upcoming Noble consumer chain it is especially important to not reuse any keys and use a fresh set of keys instead. For any new consumer chain it is recommended to always use a new key and avoid reusing keys.
In summary, the recommendation is to do a key reassignment for Neutron and Stride at least 21 days before the v14 upgrade, and to use a new set of keys for each additional new consumer chain and never reuse any keys. Also, the v14 upgrade doesn’t concern the Cosmos Hub, since in the Cosmos Hub tombstoning happens instantly after a double signing event. It is important to remember also that a double signing on a consumer chain is very serious, because the consequences are being tombstoned in all consumer chains and also in the Cosmos hub.
Governance
The Cosmos Hub proposal 826 to enforce a minimum 5% commission was recently approved. However, it seems that the implementation of this proposal won’t happen until January 2024 according to information in the Cosmos Hub forum as you can see here with the next v15 upgrade.
Proposal 839 in the Cosmos hub passed to fund the Cosmos hub development in 2024 by Informal Systems and Hypha Worker Co-op. The ICF mentioned that a significant part of the approved funds will actually be covered by the ICF and they will send these funds to the community pool, so the funding will actually be a joint funding between the ICF and the Cosmos Hub community pool. We think that Lexa, Jehan and other people at Informal and Hypha have a lot of talent and we trust that they will bring huge value to the Cosmos Hub in 2024.
The Cosmos Hub proposal 842 titled ‘Cosmos Hub adopt the Skip Block SDK’ passed. The Skip protocol team has been one of the teams adding the most value to Cosmos during the bear market. They led MEV efforts allowing several projects in Cosmos to capture MEV revenue, and for example one of the largest revenue sources for Osmosis currently comes from the MEV capture developed by the Skip team. Furthermore, the dYdX v4 MEV dashboard, which is a critical component of the new dYdX chain, was built and is maintained by the Skip Protocol team. Therefore, we trust that initiatives in the Cosmos hub by the Skip Protocol team such as the Skip Block SDK will also bring huge value to the Cosmos hub.
The Neutron grants program is finally live and accepting applications. In the new website you can find the RPFs with priority for funding and the different categories eligible for funding. If you would like to apply you can follow the link included here.
Events/conferences
The IBC summit on Istanbul contributed to educating other ecosystems about IBC and the fact that it is the industry standard for blockchain interoperability and ecosystem agnostic, meaning that other ecosystem outside of Cosmos such as Ethereum can leverage IBC as well for interoperability to connect to Cosmos or other ecosystem.
Osmosis news
Great news for Osmosis since native wrapped BTC will soon be available. The advantages of native wrapped BTC are similar to the advantages of native USDC. Instead of having to bridge wrapped BTC from Ethereum for example, wrapped BTC will be directly issued on Osmosis. The wrapped BTC DAO on Osmosis is now live and the members include BitGo, Wintermute or the Osmosis Foundation amongst others. Cosmos native wrapped BTC is now imminent.
Juno news
The Juno proposal 319 passed to approve the Juno charter. This charter is to dissolve and/or transition Juno’s current subDAOs into new Departments and to federate those Departments under a Council and all this with the Juno Commonwealth as their administrator. We included here the link to the governance proposal with links to the full Juno charter text.
Persistence news
Great news for Dexter since native USDC from Noble and native USDT from Kava are now available on Persistence, and USDC and USDT pools have been launched on Dexter. In addition, Persistence mentioned that they are working on a new improved host chain validator selection process and rebalancing mechanism for stkATOM on the Cosmos hub, so stay tuned for further updates soon about the eligibility requirements and timeline. Furthermore, Persistence is doing internal research on Skip Protocol’s Block SDK. Persistence is a very hard working team and the community is looking forward to their updates and progress.
Secret Network news
Several amazing news about Shade protocol. Firstly, private DYDX arrived and the dYdX chain and DYDX token are supported on the Shade bridge. Moreover, the first DYDX LP in Cosmos SILK/DYDX went live on ShadeSwap. Very important as well, Shade Protocol launched a native integration with MetaMask allowing easy access for Ethereum users to private DeFi on Secret network. Ethereum users, in just a few clicks, can bridge ETH and ERC20 tokens to Secret network. As you can see, the wrapped ETH/ wrapped stETH has already become in a short time a very popular pool on Shade protocol.
Remember that Secret will soon shut down its old EVM bridge since there is now the improved Secret Tunnel bridge powered by Axelar. Therefore, it is encouraged to migrate any locked assets still in the old bridge before December 5th.
A new Secret network delegation program was announced. There are no rigid or detailed delegation criteria or requirements, but the goal will be to delegate to validators providing public goods, participating in governance and doing overall a good contribution to the network. Existing delegations will be reduced or removed from validators not adding value or not contributing to the network. In terms of the timeline, the 20th November is the deadline to submit applications, then there will be a review period and around mid December the selected validators will be notified and the new delegations will be completed by the 21st December.
Stride news
The growth of Stride is expected to accelerate with the upcoming launches of stDYDX, stTIA, stNAM and more. Regarding dYdX, since rewards will be received in USDC, Stride will provide a solution to automatically exchange USDC to DYDX and restake to compound staking rewards. The community seems to be looking forward to this restaking solution from Stride. Even during a tough bear market, Stride had impressive growth and became the leader in liquid staking in Cosmos, the 2nd consumer chain to join the Cosmos hub and the first ever live chain to migrate and join replicated security. Therefore, as the market conditions start to improve it seems likely that Stride’s growth could further accelerate. Currently, a very small amount of ATOM is liquid staked, and in recently launched projects such as dYdX or Celestia liquid staking doesn’t even exist yet, so the growth opportunity for Stride is immense. Stride is also responsible with their host chain delegation programs, contributing to the decentralization of the host chains, encouraging more governance participation and also better uptime and performance. Furthermore, Stride rewards the validators adding the most value to the host chains in terms of community and engineering contributions, so overall Stride adds huge value to the host chains, as shown already in the Cosmos hub and Osmosis.
Crypto regulations & compliance news with MME
EBA launches consultation on MiCAR RTS and Guidelines.
On November 8, the European Banking Authority (EBA) — the authority responsible for ensuring effective and consistent prudential regulation and supervision of the European banking sector — published a comprehensive set of consultation papers on draft Regulatory Technical Standards (RTS) — an instrument for the preparation of implementing and delegated acts — and Guidelines under the Markets in Crypto-Assets Regulation (MiCAR). MiCAR establishes a single set of EU market rules for crypto-assets, covering key provisions for the issuance and trading of crypto-assets, including disclosure, transparency, authorisation and supervision of transactions.
The consultation papers aim to regulate liquidity and funding requirements, stress testing, recovery plans, reporting and the college of supervisors under MiCAR. All consultation papers address the issuance of asset-referenced tokens — crypto-assets that reference the value of multiple FIAT currencies, commodities or crypto-assets — and e-money tokens respective stablecoins.
There are 5 sets of drafts in the EBA consultation:
Adjustments of own funds requirements and stress testing of specific issuers
The draft adjustments includes criterias for assessing higher risks, the procedure for authorities to determine the period of time for issuers to increase the amount of own funds and measures to ensure timely compliance, and the minimum requirements for stress testing programs for token issuers of asset-referenced tokens and stablecoins;
Liquidity and liquidity stress testing requirements for relevant token issuers
The draft requirements specify the highly liquid financial instruments to be included in the MiCAR asset reserve and the liquidity requirements for this reserve, the minimum content of the liquidity management policy and procedures under MiCAR, and the methodology for identifying the reference parameters of the stress test scenarios;
Guidelines on recovery plans
In anticipation of potential regulatory compliance challenges related to asset reserves, those responsible for asset-referenced tokens and stablecoins should engage in proactive recovery planning. The proposed Guidelines includes supervisory expectations, emphasizes the need for issuers to identify and understand the risks, and prescribes potential actions to regain regulatory compliance;
Reporting of transactions of asset-referenced tokens and stablecoins denominated in a non-EU currency
The draft of reporting of transactions clarifies the reporting requirements for transactions involving asset-referenced tokens and stablecoins in non-EU currencies. It provides guidance to issuers in estimating the volume and value of such transactions. These standards are in line with MiCAR’s objective to monitor and mitigate the risks posed by the widespread use of asset-referenced tokens and stablecoins denominated in non-EU currencies to the transmission of monetary policy and to the sovereignty of the EU; and
Criterias for the term “most relevant” and conditions for the supervisory colleges
The proposal sets out the criteria for determining the “most relevant” custodians of the reserve of assets, trading platforms and payment service providers, as well as the general conditions for the functioning of supervisory colleges under MiCAR.
The consultation will be open for three months — until February 8, 2024. The drafts are expected to apply from June 30, 2024.
Conclusion
And that is all for today’s Cosmos ecosystem bi-weekly review so if you enjoyed it Cosmonauts remember to click that like button, subscribe button and bell icon too. Thank you so much for reading and I’ll see you Cosmonauts very soon in the next episode!
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