Cosmos ⚛️ December 2019 Network Analysis

Quick Takes

Key Metrics

  • Community fund has over 260k ATOMs
  • 7.19% inflation and rewards rate ~9.42% (know the difference!)
  • More stake decentralization
    the top 10 validators lost a further 2% voting power over the Hub

You can find November’s network analysis here.

Scroll to the bottom for links to each network analysis of 2019.


Launch of Cosmos Hub 3

December 11, 2019 was the first major Cosmos Hub upgrade. We now have a maximum of 125 validators, which has lowered the barrier of entry from ~100k ATOM to about 100 ATOM. That means that right now you can run a validator if you have 100 ATOM or more to stake.

Avoiding Hard Forks

Governance is more powerful than ever. The protocol can enact a variety of parameter changes via governance proposal–a powerful new tool that will allow the community to change how the Cosmos Hub works without needing to change the software with a hard fork. I think that stakers should only use a wallet that supports voting functionality. You can test out proposals using the Gaia-13007 testnet.

Deposit Burning

My understanding is that the protocol will now burn governance proposal deposits in only these cases:

  1. Failure to reach deposit minimum (512 ATOM) during the deposit period (14 days)
  2. Failure to reach quorum in the voting period (I think abstain votes do not count toward quorum)
  3. A no-with-veto vote of at least 33%

My understanding is also that the life of a proposal is currently 14 days, regardless of how long the deposit period takes.

Community Pool Spending

The upgrade has also enabled spending from the community pool. Not long after the Cosmos Hub 3 launched, the first community spend proposal went live. Unfortunately, the proposal failed to reach the deposit minimum, and so the 104 ATOM contributed to the deposit were burned on December 26 without having had the chance to be voted upon.

This inspired a number of conversations to emerge, including this one from Terence Lam on AiB’s Cosmos forum, asking general questions about the use of the community pool’s funds. Anticipation of these challenges inspired Figment Networks to propose funding for a Cosmos governance working group.


Cosmos Governance Working Group

The Cosmos Hub 3 launched with enhanced governance functionality, but without guidance for creating or assessing proposals. We’re preparing to launch a proposal to improve Cosmos Hub governance, with the intention of funding the development of a Cosmos Governance Working Group.

TL;DR


What’s Next?

Inter-Blockchain Communication (IBC)

The next major upgrade for the Cosmos Hub will likely feature inter-blockchain communication. I’ve mentioned this a number of time times in various places because it’s a big deal–it’s basically the Cosmos Hub’s reason for existing. We’re awaiting the completion of a formal audit and the announcement of the IBC-based Game of Zones contest, which you can read more about that here. When IBC is production-ready, you should expect a governance proposal for the next Cosmos Hub upgrade to be drafted.

Smart Contracts

You may have noticed that the Cosmos ecosystem doesn’t have any well-known smart contracts. That’s about to change, thanks to the efforts of Confio, who are leading the development of support for multi-chain smart contracts. IBC enables more than just value to be exchanged across chains. Data will be transferrable as well.

It’s not just CosmWasm working on Cosmos smart contracts–others like Agoric are also aiming to bring this functionality to a new, groundbreaking level. Check out Kate Sills’ interview on Interchain.FM.

Decentralized Development

Not much to say here, but something I want to make note of it for the future. Being decentralized is multifaceted, and reliable protocol development is no exception. I think it will be important to recognize which players are contributing to Cosmos’ codebases (including and beyond All in Bits). We should expect a proposal from B-Harvest to improve validator operation functionality for the Cosmos Hub in the future.


On the Horizon

Parameter change proposal consideration led by Cryptium Labs

Picking up a conversation that began in late April, Cryptium Labs is asking that we revisit some of the parameters of the Cosmos Hub by considering the following four proposals. You can participate or just follow along on AiB’s Cosmos forum.

Increase the slashing penalty for equivocation (ie. double-signing) from 5% to 20%

Reasoning: Cryptium believes that this will provide a higher degree of economic security for the Cosmos Hub.
Potential impacts (as per Christopher Goes):
– increased cost of bribery attacks
– increased supply deflation due to burned tokens should a slash occur
– increased focus on validator security by rational delegators
– increased reluctance to delegate due to the higher risk

Increase the rate that inflation changes from 13% to 52%

Note that this is the speed at which inflation changes, not the rate itself. Right now it takes ~1 year for the inflation rate to change from min (7%) to max (20%) inflation or vice versa. Cryptium is proposing that this should be possible within three months.
Reasoning: Cryptium thinks that this will enable quicker reactions by the Hub to maintain security in the face of ATOM price changes.
Potential impacts (paraphrased from Christopher Goes):
– we don’t know, and would like to collect data points about user behaviours that result

Increase the size of the validator set from 125 to 150

Reasoning: Cryptium thinks that this increase will not reduce the Hub’s performance and that the validator cap will be less of a limitation to validator decentralization.
Potential impacts (as per Christopher Goes):
– more operators may join the Cosmos Hub and experiment with validation

Increase the rewards tax that funds the community pool from 2% to 10%

Reasoning: Cryptium thinks that public goods will make or break the Cosmos Network and we should spend corresponding amounts of effort & funding on them.
Potential impacts (as per Gavin Birch):
– my estimate is that the community pool currently accrues approximately 28k ATOM per month, and that would increase to about an estimated 150k ATOM per month
– my estimate for staking rewards is currently ~9.61% annually, and that would decrease to an estimated ~8.83% annually


Key Metrics

The community pool has over 260k ATOMs as of December 30, 2019, according to Hubble.

How is the pool funded? By my calculation, 3.69 ATOMs are currently minted each block, 2% of which (~0.07 ATOM) are funding the community pool.


ATOM supply inflation continues decreasing

As of December 20, 2019, the Cosmos Hub had a bond ratio of ~74%, which is 7% above the target bond ratio of 67%. Inflation will continue decreasing (at a rate of 13% per year) toward a minimum of 7.00%. At the time of writing, Cosmos’ inflation is 7.19% and, by my calculation, the rewards rate is 9.42%. The number of newly-minted ATOMs is in keeping with the monthly average of ~1.4M.

Source: direct query to cosmoshub-3

Want to understand the relationship between inflation and rewards rate? Check out this article.


Voting Power Inequality

Note: there are 125 validators this month, but for the sake of comparison, I’ve cut off the bottom 25. In other words, I’m comparing the top 100 validators of November with those of December 2019. Next month I will compare between 125 validators.

This past month, the voting power of the bottom 90% of Cosmos Hub validators has increased 3%, and (provided that their delegators don’t override) they control 54% of the Cosmos Hub voting power. This means that the top 10 validators of the Cosmos Hub control a 46% minority of governance and consensus power.

The biggest change since November involves validators greater than the bottom 50. Circles refer to the 50th data points, while triangles represent the 75th data points, and the diamonds represent the 90th data points.

The red, dotted line is what an equal distribution of voting power among the top 100 Cosmos validators would look like. The orange line shows the Lorenz curve for Cosmos validators last month on November 20, 2019, and green is the most recent snapshot for December 20, 2019.


That’s all folks!

If this sort of data interests you, check out KysenPool’s Cosmos Outpost for other statistics. I’d be grateful for new ideas and additional key metrics.

Hopefully you found this useful. Questions? Comments? Feedback is always welcome! I’m on Twitter.

Cosmos ⚛️ 2019 Network Analysis Articles