The Cosmos Hub has long been a source of innovation within the world of blockchain. Public goods like the Cosmos SDK have been used by large swathes of developers, unlocking app-specific blockchains with levels of customization that could have only been dreamed about back in the 2017 era.
Along with the Cosmos SDK, the Cosmos Hub helped spearhead and support the Inter-Blockchain Communication Protocol (IBC) – the industry standard for safe and secure asset transfers between blockchains. One of the key features of IBC is its “Atomic” nature – ensuring consistency of state across communicating blockchains.
Finally, Interchain Security is the mechanism by which the Cosmos Hub can help secure other blockchains – leveraging its economic security and its battle-hardened validator set. Interchain Security is achieved by utilizing shared validator nodes between the Cosmos Hub and a blockchain using the Cosmos Hub for security (i.e. consumer chain). When a validator node on the consumer chain behaves improperly, it faces an economic slashing penalty on the Cosmos Hub. This system ensures economic security is supplied from the Cosmos Hub to the underlying consumer chain.
The Cosmos Hub has a clear path to monetization surrounding its security offering. The ATOM token is highly distributed and decentralized, with a high-quality, globally distributed validator set, that makes it highly censorship-resistant while also maintaining excellent uptime guarantees. By continuing to expand the number of chains secured by the Cosmos Hub, we will cement ATOM as a token that has direct economic value accrual via its security provisioning.
However, the competitive landscape around security offerings continues to evolve. With Eigenlayer, Avalanche, Optimism and others entering the market with more nuanced offerings, security commoditization is leading to price wars. The Cosmos Hub must continue to innovate beyond its initial public good technology offerings.
The following is a list of powerful monetizable offerings that the Cosmos Hub can pursue:
- Security
- Liquidity
- Venture Funding
The development of ATOM Wars sets the stage for the monetization of Cosmos Hub liquidity – giving Defi protocols the opportunity to bid on ATOM liquidity that can be utilized to bootstrap the underlying DeFi protocols. Prior to ATOM Wars, we have begun to see protocol covenants and protocol liquidity deals become an increasingly common offering throughout the broader interchain ecosystem. An example of this was proposal 858 which lent out 900k ATOM (~$7.3M) in Cosmos Hub owned liquidity to the Osmosis ATOM/stATOM pool.
This leaves a final category – Venture Funding. The Cosmos Hub has an exceptionally strong treasury (which arguably could be made even stronger) to the tune of $70M – $100M in digital assets. Due to the public nature of IBC and the Cosmos SDK, to date, it has been difficult to monetize and invest in entrepreneurial chain creation. The Cosmos Hub, via the ATOM Accelerator DAO (AADAO), can solve this public good monetization problem by embracing a role of providing capital to early-stage builders in exchange for airdrops, ATOM as whitelisted gas, and new project token allocations directly to the Cosmos Hub community pool (governed by stakers).
As a result of this positioning, the Cosmos Hub will be a security provisioner, liquidity provider (via ATOM Wars), and venture grant seeder. This will create a strong diversified offering that outpaces the race-to-the-bottom security commoditization that the likes of Eigenlayer are headed towards.
The Cosmos Hub Trifecta
The Cosmos Hub is evolving towards a triad offering – while security and liquidity are increasingly understood offerings, venture funding play a uniquely vital role to unlocking the growth of the ATOM Economic Zone (AEZ). The AEZ is defined by any protocol or application that interacts with the Cosmos Hub with respect to security, liquidity, or venture funding in some capacity.
Within the AEZ there are two zones:
- ATOM Secured Zone (ASZ) – any application or protocol that inherits security through Interchain Security via the Cosmos Hub.
- ATOM Adjacent Zone (AAZ) – any application or protocol that does not inherit security through Interchain Security via the Cosmos Hub, but still has some form of a liquidity or venture grant relationship to the Cosmos Hub.
Within the ASZ & AAZ are “clusters” – specific groups of applications that are grouped by use case vertical. These clusters come in the form of AI, DeFi, Bridging, etc. The AADAO will specifically be focused on investing across the full scope of the AEZ, with a particular emphasis on the ATOM Secured Zone as the primary target for its investments (due to the symbiotic nature of shared security).
In aggregate, these investments will be focused on contributing to higher level goals of the Cosmos Hub such as:
- Improving ATOM as Interchain Capital across the broader AEZ
- Align Cosmos Hub’s growth with the expansion of IBC
- Accelerate the number consumer chains onboarded into the ASZ
- Accelerate the number of clusters and participants in both the ASZ & AAZ
- Expand the size of the Cosmos Hub community pool
- Improve the adoption of ATOM as gas
Venture Funding Summary
- Ecosystem Growth and Innovation: Venture funding provides financial support to early-stage builders and entrepreneurs, encouraging them to innovate and develop new projects within the Cosmos ecosystem. This funding can catalyze the creation of novel applications, protocols, and services that leverage the capabilities of the Cosmos Hub and contribute to its overall growth.
- Diversification of Offerings: While the Cosmos Hub already provides security and liquidity services, venture funding offers an additional avenue for diversification. By investing in a broad range of projects, the Cosmos Hub can expand its ecosystem beyond its core offerings and explore new opportunities for value creation, the end result being a more robust and vibrant AEZ.
- Strategic Alignment with Cosmos Agenda: Venture funding can be used to support projects that align closely with the goals and priorities of the Cosmos Hub and the broader ATOM growth plan. This ensures that funding is directed towards initiatives that contribute to the long-term vision and sustainability of the Cosmos ecosystem.
- Community Empowerment: Venture funding empowers the Cosmos community to play an active role in shaping the future of the ecosystem. By providing funding to community-driven projects, the Cosmos Hub fosters a sense of ownership and collaboration among its stakeholders, leading to a more vibrant and inclusive ecosystem. Additionally, Cosmos Hub stakers will have the opportunity to have a voice in the governance of other chains.
- Leveraging Treasury Assets: The Cosmos Hub’s treasury, which consists of a significant amount of digital assets, can be leveraged to fund venture funding. By allocating a portion of these assets toward supporting promising projects, the Cosmos Hub can maximize the impact of its resources and drive meaningful growth and innovation within the ecosystem.
- Alignment with Security and Liquidity Objectives: Venture funding can complement the Cosmos Hub’s security and liquidity initiatives by supporting projects that enhance interoperability, liquidity provision, and security infrastructure within the ecosystem. This holistic approach ensures that the Cosmos Hub remains competitive and resilient in the evolving blockchain landscape.
In summary, venture funding deployed through AADAO offer a strategic and impactful way for the Cosmos Hub to support ecosystem growth, foster innovation, and align with its long-term objectives. By investing in early-stage projects and entrepreneurs, the Cosmos Hub will strengthen its position as a leader in decentralized infrastructure and drive sustainable value creation for its community and stakeholders.
Note: “Cosmos Hub Venture Funding”, deployed via the Atom Accelerator DAO, was previously called “Venture Grants”
