Cosmos ⚛️ October 2019 Network Analysis
- Nov 20 Cosmos Hub 3 upgrade? Maybe.
- Proposal for proportional slashing
- Sikka dominates the validator set
- KysenPool has launched CosmosOutpost, a Cosmos analytics dashboard
- Community fund has over 200k ATOMs
- 7.42% inflation and rewards rate ~9.96% (know the difference!)
- Almost no difference in voting power inequality compared with the last two months
- The top 10 validators have 51% of the governance power (unless delegators override)
You can find September’s network analysis here.
When Cosmos Hub 3 upgrade?
I’ve floated the idea of November 20, 2019 for the Cosmos Hub 3 upgrade, but the window for that is closing. What’s the hold up? A number of things, and a lot of “measure 10x, cut 1x.” Primarily we’re awaiting All in Bits’ release and freezing of the latest version of Gaiacli, which could happen tomorrow.
Proposal: Proportional Slashing
What does that mean? If this proposal were to be passed via governance, the punishment for equivocation (signing two blocks at the same block height) would be much greater than 5% for larger validators, and much smaller for small validators.
Why do this? The idea is that this helps to economically secure the Cosmos Hub in order to counter an increase in staking centralization. However, I’ve shown (see previous network updates) that overall there has been a decrease in centralization since April 2019, with the exception of the validator Sikka (see below).
What’s the impact? Proportional slashing would be a pretty big change, given that slashing is the most heavy-handed disincentive that a proof of stake network has in its arsenal. Typically slashing is used to only target malicious behaviour, and ideally never punish honest validators, though occasionally it punishes non-adversarial validators that make mistakes. For delegators, their validator’s slashing rate could suddenly and quickly change with a large delegation, which may make it difficult to manage risk. Overall, the impacts of proportional slashing seem to be uncertain.
Validator Sikka Dominates
I recently broke down the problem inherent in combining governance power with validator consensus power, which I see to be a gradual threat to the Cosmos Hub. Check that article out here.
What’s the big deal?
It may be more valuable to a validator to have governance voting power than to earn income for providing network security. My concern is that the Hub rewards power-seeking validators with governance power, while punishing the rest of the validators for putting a price on validator security and services.
This vulnerability seems to be being exploited now, but fortunately by an All in Bits employee, rather than an adversary. Sikka, a validator run by well-known Cosmos researcher Sunny Aggarwal, appears to be leveraging a zero-fee commission with Sunny’s public recognition and insider status to dominate the validator set’s governance voting power.
Day by day, month by month, Sikka has been accumulating delegations that have been increasing their governance voting power.
This appears to be the only obvious case of voting power centralization since transfers were enabled in late April 2019. I’ve made a call to research to consider how we can better design the Cosmos Hub.
The community pool has ver 200k ATOMs as of October 24, 2019, according to Hubble.
How is the pool funded? By my calculation, 3.78 ATOMs are currently minted each block, 2% of which (~0.08 ATOM) go to the community pool.
ATOM supply inflation continues decreasing
As of October 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%. At the time of writing, Cosmos’ inflation is 7.42% and, by my calculation, rewards rate is 9.96%. 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 remained 49%, and (provided that their delegators don’t override) they still hold 49% of the Cosmos Hub voting power. The top 10 validators of the Cosmos Hub control a 51% majority of governance power.
The red, dotted line is what an equal distribution of voting power among all 100 Cosmos validators would look like. The yellow line blue line shows the Lorenz curve for Cosmos validators on April 19, 2019 (right before transfers were enabled), blue is July 19, 2019, purple is a snapshot of August 20, 2019, yellow being the most recent Oct 20, 2019 snapshot.
Almost nothing has changed since September (or August), as seen by the Oct 20, 2019 snapshot, depicted by the yellow curve. 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.