Weekly Cosmos Governance Recap 23–29 NOV.
In the past week, we at Simply Staking have voted on 13 governance proposals across the various Cosmos ecosystem networks that we provide security for.
This past week can be classified as one which involved heavy governance discussions stemming from one proposal on the Cosmos Hub. The vote ended up being one of the closest calls that we have witnessed and also had the largest turnout when it comes to governance on the Cosmos Hub.
We will be diving into this in the report that follows alongside proposals from Stargaze, Osmosis, and Archway.
If you find this report insightful, consider supporting us by delegating to our Simply Staking Validator on any of the networks discussed below.
Contents
- Cosmos Hub #848 — ATOM Halving: Set the max. Inflation Rate to 10%
- Osmosis #686 — MilkyWay Whitelist Address for Deployment of Liquid Staking Contracts
- Osmosis #689 — Transfer Incentives to Created Volume Splitting Gauges
- Stargaze #234 — Discontinue the Pablo Dex Incentives
- Archway #32 — Budget increase and restructure of Liquidity Council
Cosmos Hub #848
This proposal sought to cut the Inflation Parameter in Half from 20% to 10%.
The discussion was initiated on the Forums as a temperature check by Zaki Manian and was backed by recent research from Blockworks Research and one of their Analysts (@EffortCapital).
This was a controversial proposal, to say the least. Two sides emerged both with valid criticisms of each other's reasoning.
One of the biggest and most vocal voices against the proposed change was one of the founders of the Cosmos Hub, Jae Kwon. He argued that $ATOM must not be considered money.
On the final day of the Proposal, it seemed that the proposal was due to fail having over 8M ATOM tokens more in NO votes over YES votes. However, as the hours ticked by, the gap kept narrowing and by the time the proposal voting period closed, the YES votes came out on top and the Proposal passed.
This prompted mixed reactions in the community as it was evident that the community was split on the right direction for the Hub.
Shortly after the passing of Proposal #848, Jae Know went public with the intention to fork and create a new chain called ‘AtomOne’.
He invites everyone to participate and ‘coordinate a split’.
What was our stance on #851?
Simply Staking voted to ABSTAIN on Cosmos Hub Proposal #848.
Currently, Inflation on the Cosmos Hub dynamically moves between a range of 7% — 20%. Proposal #848 is the first piece of the puzzle to address the Inflationary Schedule that has been a topic of discussion and concern for the community for some time.
The proposal will adjust the max_inflation parameter from 20% to 10% hence the term ‘Halving’ that has been going around. In reality, the current Inflation (based on the current Bonded Ratio) is roughly 14% so if the proposal comes into effect, the Inflation would instantly drop from 14% to 10%.
How does this affect Delegators? The immediate effects of this change would be that the Staking APR would drop from ~19% to ~13.4% which would result in less Inflationary rewards than they are used to.
How does this affect Validators? This will result in a dent in revenues for Validators. Those fortunate enough to have a reserve of cash or other means of bringing in revenue will see little difference. However, those smaller Validators who are currently struggling to break even due to the increased costs associated with running Consumer Chains will have an even tougher time due to the reduced amount of commissions received. The immediate solution to this would be to increase the commission rates (we passed a Proposal to impose a Minimum 5% Commission rate across the validator set in order for everyone to receive a minimum fee). But this could affect the delegator once again and cause a possible spiral making $ATOM an unattractive asset to stake. Less stake leads to less network security for the Hub’s ICS value proposition.
Some Pros and Cons A decreased APR that delegators receive could potentially lead to a sell-off as they might not view the $ATOM token as something worth holding and move to another ecosystem altogether. On the other hand, a decreased Inflation Schedule could increase the overall price of the $ATOM token since less will be minted per block.
As it stands, we would not feel comfortable actively reducing the amount of APR that the delegators currently enjoy. This paired with the uncertain long-term impact on revenues for smaller validators (due to ICS), we would need to address security concerns if those smaller validators cease operations.
On the other side of the spectrum, we also believe that rampant Inflation is overall a bad look to the token. Based on projections, we could see over 2 BILLION $ATOM tokens in circulation in the next 10 years. The current supply is roughly 370 MILLION tokens so this would represent an increase in supply by over 5x. Reducing the Inflation could also see more use of DeFi within the Cosmos Ecosystem as lower native yield would drive users to make use of Liquid Staking using the Liquid Staking Module which was adopted in an earlier proposal.
Reason for ABSTAINING — Given the uncertain nature that this proposal might have If it passes or even gets rejected, we opted to leave it up to our delegators to decide the fate of this proposal.
Osmosis #686
This proposal is to whitelist MilkyWay Liquid Staking contracts on Osmosis.
MilkyWay offers a liquid staking solution for the Celestia ecosystem. Users who stake their $TIA tokens with the platform receive an on-chain representation of their stake through the token ‘milkTIA’. With these assets, users can then provide liquidity to the TIA:milkTIA pool on the Osmosis Platform which is a benefit to Osmosis as the TVL and trading volume will increase.
The proposal mentions that not all contracts will be granted access but only for these two:
- Staking Contract: This contract handles the minting and burning of stTIA tokens and manages the TIA:milkTIA exchange rate.
- Treasury Contract: This contract is responsible for managing MilkyWay’s protocol fees.
We voted YES on this proposal and if you would like to learn more about MilkyWay, please read the blog linked below:
Osmosis #689
In continuation with the previous proposals #683, and #684 — This proposal moves the current Osmosis Incentives from the current gauges to those created in the previous proposals mentioned earlier.
This would complete the three proposals as outlined initially by Osmosis contributor JohnnyWyles on the Forums:
Creates Volume Splitting Gauges that expand the currently incentivized pairings to include more pools with lower spread factors and volume split incentives between them.
Creates Volume Splitting Gauges that expand these groupings further. Establishing gauges such as ETH/STABLE and OSMO/STABLE rather than differentiating between different incentivized stablecoins at the higher level.
Moves the current OSMO incentives to the correlated newly created gauges.
For more information on the previous proposals, please read the Forum post:
We voted YES on this proposal.
Stargaze #234
We decided to vote YES to discontinue any incentives from Stargaze to Pablo DEX.
Initially, 2M $STARS were put up as incentives on the STARS/DOT pool on the DEX however, after a month it seems that the objective to attract new users from the Polkadot ecosystem to Stargaze has failed.
We’ve noted that no new users have been acquired from the DotSama ecosystem so we are supportive of stopping incentives as it seems like this is not a benefit for the network or the community.
More details on the proposal and its contents can be found on the Stargaze Commonwealth page:
If the proposal passes, the Stargaze community will request for Composable Finance to discontinue the incentives and return the remaining funds back to the community pool.
Archway #32
The Liquidity Council will be undergoing some strategic changes with respect to its composition and budgeting allocations.
We have voted YES on this and support all the proposed changes.
The initial implementation of the Liquidity Council was through Proposal #16 and more details on that can be found on the link below:
Council Restructuring
To begin, previously appointed member Jordan Xavier will be replaced. Additionally, a new member that will be representing the Archway community will be added to the council leaving the council with an equal representation between the community and the core teams.
New proposed Council:
- 3 Community Members
- 2 Phi Labs Representatives
- 1 Archway Foundation Member
Budget Changes
Currently, teams are allocated up to 250,000 $ARCH tokens once their grant submission is granted. This has not been a sufficient amount and limits those teams. The proposal seeks to amend this value to $300,000 USD per project and the existing allocations of 250,000 $ARCH will be retroactively bumped to $ 100,000 USD.
Another change is to the overall budget of the Liquidity Council. The budget currently is 5,000,000 $ARCH and the new proposal asks to bump this to $1,000,000 USD.
About Simply Staking
Simply Staking is a blockchain infra provider across 40+ networks, across various ecosystems. PoS validators on Cosmos Hub from Genesis, Oasis, Akash, Kusama, Polkadot, and many more.
We also operate node infrastructure on the Chainlink network providing price feeds to Aggregator contracts which are used by major Ethereum DeFi apps. Our participation in Chainlink aggregator contracts spans other networks such as Layers 2s, BSC, MATIC, XDAI, RSK, and more.
We’re also a Lido ETH2.0 operator, enabling us to run 1000s of ETH validators.
Simply Staking also comprises other development teams building financial, blockchain, and infra-monitoring tools.
All our infra is run off self-hosted or co-located servers, with no cloud usage at all and our base being in Malta.
Stay tuned to Simply Staking for more Governance updates:
- Website: https://simplystaking.com
- Twitter: https://twitter.com/SimplyStaking
- Discord: https://discord.gg/Kpzc58Gu9a
- Telegram: https://t.me/SimplyVC
