Cosmos ⚛️ November 2019 Network Analysis

Quick Takes

  • Cosmos Hub 3 – upgrade launch date: Dec 11, 2019
  • Unprecedented voter participation for Prop19–check out the stats
  • Upgrade will enable parameter changes & community pool spending
  • IBC’s incentivized testnet Game of Zones launching in Jan 2020
  • “Ethereum” Cosmos zone? Ethermint development underway
  • Community fund has over 235k ATOMs
  • 7.31% inflation and rewards rate ~9.71% (know the difference!)
  • The bottom 90 validators gained 3% more voting power over the Hub
  • The top 10 validators have minority control of the Cosmos Hub for the first time

You can find October’s network analysis here.


Cosmos Hub 3 upgrade to launch December 11

At last! The Cosmos Hub 3 software is complete and ready to launch, thanks to the work of All in Bits, aka the Tendermint Team, led by Aleksandr Bezobchuk. I solicited and aggregated feedback from the Cosmos Hub community (primarily the validators) and negotiated the process for the upgrade. This culminated in Prop19, which concluded in a ‘yes’ vote earlier today.

Hyung (B-Harvest) co-ordinated a testnet critical for testing the export/migrate functionality, which was our undoing during the first Cosmos Hub 3 launch attempt. Roman from Polychain has provided critical feedback throughout this governance process.


Prop19 Voting Stats

We had unprecedented delegator participation in Cosmos Hub 3 Upgrade Proposal E. I tweeted out a summary, but you can also see a snapshot of more detailed statistics here.


What’s important about the Cosmos Hub 3 upgrade?

This will be the first major Hub upgrade. Some of the noteworthy changes include the items signalled in previous governance proposals:

  1.  Activate the Community Pool — enable governance to spend funds from the community pool (full proposal)
  2. Don’t Burn Deposits for Rejected Governance Proposals Unless Vetoed — if a proposal gets rejected without being vetoed, the deposits will be returned to the depositors (and if a proposal fails to meet quorum, its deposit will still be burned) (full proposal)
  3.  Increase Max Validator Set Size to 125 — (full proposal)

The Community Fund

There are over 235k ATOMs in the community fund that have accumulated. They will be unlocked and available for the Cosmos community to spend, provided that the December 11 upgrade is successful. How?

The Power of Governance

Funds from the community pool can be spent via successful governance proposals. Currently, Cosmos’ governance mechanism is only used for text-based proposals, meaning that they can only be used to signal a decision, not enforce that decision. But that’s about to change.

The Cosmos Hub will enable two important new governance features:

  1. proposals that modify on-chain parameters without halting or forking the network;
  2. proposals that spend from the community fund.

The first feature means that we can fine tune how the network runs by changing things like block rewards without disrupting it. The second means we can fund Cosmos goods that benefit the entire network the same way we fund the security of the network (via inflation).

While some features of on-chain governance are exciting, I’ve raised concerns about the power of governance and its relationship with validators.


What’s next for Cosmos? Interoperability via 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 what fulfills the Cosmos Hub’s purpose.

Cosmos’ underlying tech makes it easy to create blockchains, and IBC makes it easy for them to connect and exchange both data and value. In a world of many blockchains interoperating with one another, ideally the Cosmos Hub will be the most credible blockchain in the Cosmos universe to securely and reliably facilitate these inter-blockchain transactions.

Since the ATOM secures the Cosmos Hub, people using the Cosmos ecosystem will likely trust the Hub to secure transactions involving their wealth, and will pay for those transactions. ATOMs that secure the Cosmos Hub will entitle stakers to the fees that come from these transactions.

What are the next steps? Currently there is a functional IBC testnet and the IBC code is under formal audit. The Cosmos community will participate in an incentivized testnet competition in January 2020 to train IBC operators and stress-test the protocol. This competition is called Game of Zones, and you can read more about that here. After Game of Zones and the code audit, we’ll launch a governance proposal to upgrade the Hub with the IBC upgrade


Ethermint Development Underway

What’s Ethermint? A Cosmos zone specifically dedicated to providing Ethereum functionality, supported by the speed and interoperability of Cosmos. Developers should be able to easily port their Ethereum applications over to the Cosmos ecosystem. While Ethermint is still considered pre-alpha, it is expected to be operational prior to the launch of a functional, scalable, proof-of-stake version of Ethereum.


Key Metrics

The community pool has over 235k ATOMs as of November 29, 2019, according to Hubble.

How is the pool funded? By my calculation, 3.70 ATOMs are currently minted each block, 2% of which (~0.07 ATOM) are funding the community pool.


ATOM supply inflation continues decreasing

As of November 20, 2019, the Cosmos Hub had a bond ratio of ~73%, which is 6% above the target bond ratio of 67%. Inflation will continue decreasing (at a rate of 13% per year) toward a minimum of 7%. At the time of writing, Cosmos’ inflation is 7.31% and, by my calculation, rewards rate is 9.71%. The number of newly-minted ATOMs is in keeping with the monthly average of ~1.4M.

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


Voting Power Inequality

This past month, the voting power of the bottom 90% of Cosmos Hub validators has jumped by 3%, and (provided that their delegators don’t override) they control 52% of the Cosmos Hub voting power. For the first time, the top 10 validators of the Cosmos Hub control a 48% minority of governance and consensus power.

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

The biggest change since October 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.


That’s all folks!

These are items that I think are important.

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.