New Cosmos White Paper Revamps Cosmos Hub, ATOM Token

The paper cites interchain security and a new issuance model for ATOM as the keys to pulling the first Cosmos blockchain out of its yearslong identity crisis.

AccessTimeIconSep 26, 2022 at 4:07 p.m. UTC
Updated Sep 27, 2022 at 4:22 p.m. UTC

Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.

A new white paper released at the Cosmoverse conference in Medellín, Colombia, proposes major expansions to the utility of the Cosmos Hub – the blockchain that sits at the center of the Cosmos blockchain ecosystem. The paper also spells out a new vision for ATOM, the Cosmos Hub’s native token.

Today, the Hub’s primary role is to serve as a template for building blockchains into the Cosmos “interchain” – a web of individual blockchains that can easily share information and assets.

The Cosmos Hub 2.0 white paper outlines a revamped role for the Hub as the heart of interchain security – meaning other chains will be able to use the Hub to secure their own networks. The white paper also proposes changes to the utility and issuance schedule of ATOM – changes that the paper’s authors think will back up its informal role as an index of the broader Cosmos family of blockchains.

ATOM was trading at $14.60 at press time, down 1.43% in the past 24 hours.

With its newly refined vision, the “Cosmos Hub is taking its place within the interchain,” says Ethan Buchman, the Cosmos co-founder and head of Cosmos research and development shop Informal Systems. “[The Hub] is still not going to dominate the interchain or own the whole interchain or bring everyone under its umbrella,” explained Buchman, but “it's trying to offer services to the larger interchain that help enable it, help support it, [and] help it thrive and grow.”

The Cosmos Hub

The Cosmos Hub has, historically, struggled with a bit of an identity crisis. People can stake the Hub’s native ATOM token to help secure the network, but the network itself isn’t really used for much.

“You would maybe just copy and paste all of the Cosmos Hub codebase, and then you would add your feature to it,” explained Billy Rennekamp, the Cosmos Hub product lead at Interchain GmbH, which helps fund the development of the wider Cosmos ecosystem.

The Hub was the only Cosmos chain when it launched in 2019, but its code has since been used as a template by dozens of other interconnected blockchains, each dedicated to a specific product or use case.

The app chain Osmosis, for example, used the Cosmos Hub’s code as a template to enable decentralized finance (DeFi) activities like exchanging between currencies. Regen, another app-chain, used the Cosmos Hub’s code as a model for its on-chain carbon credit market. Terra, the ill-fated stablecoin operator, was a Cosmos chain, too.

As the wider Cosmos ecosystem has grown, the Cosmos community has rejected changes to the Hub’s code that might sully its role as a clean template for other chains to build upon. The community has also shunned upgrades that would place the Hub on a pedestal relative to other Cosmos chains – the fear being that such upgrades could challenge the “sovereignty” of other chains in the ecosystem.

As a result of its conservative track record, if Cosmos as a whole is a neighborhood, the Hub has been relegated to the role of a model home – a cookie-cutter example of what a Cosmos chain should look like sans any real utility or inhabitants.

Rennekamp uses this analogy of a model home to describe where the Hub is headed next: “At the beginning, it's the only home in the neighborhood. And once there's a flourishing neighborhood around they might decide to convert it to a school, or a police station or something that's specifically valuable to the neighborhood, rather than just a proof of concept for other houses.”

Interchain security

The Cosmos 2.0 white paper proposes interchain security, an upcoming Cosmos feature, as a core element of the Hub’s value proposition moving forward.

All Cosmos chains use a proof-of-stake system similar to the one that Ethereum transitioned to earlier this month. Under this system, chains are secured by validators: people that stake a chain’s native token in order to help process transactions. Osmosis validators, for instance, stake OSMO tokens. Regen users stake REGEN tokens.

Chains are generally considered more secure if they have a large, diverse pool of validators. If a single attacker amasses enough of a given network’s stake, they can potentially make malicious network upgrades or meddle with how transactions are processed.

By virtue of its maturity and visibility as the first Cosmos chain, the Hub has generated a more diverse validator set than any of its Cosmos peers. With the launch of interchain security on the Cosmos Hub, other Cosmos chains will be able to borrow the Hub’s validators to secure their own networks rather than find their own.

“Interchain security is not only like a high market cap, for preventing attacks,” explained Rennekamp. “I think, actually in the long run, the real value of interchain security is [being] legally, defensibly decentralized.”

According to Rennekamp, “I think the days are numbered for [layer one blockchains] to be launched, and be legally classified as decentralized networks. And I think that the Cosmos Hub has a really great position through its integrity, history and degrees of decentralization to provide decentralization as a service.”

Increasing ATOM’s value

The white paper also introduces mechanics aimed toward accruing value to ATOM, the Cosmos Hub’s native token.

Today, speculators trade ATOM like an index of the Cosmos ecosystem as a whole, but there’s not much rhyme or reason as to why this needs to be the case. According to the new white paper, the investment narrative behind ATOM changes when the Cosmos Hub – with the ATOM token at its core – is used to secure a wider swath of the Cosmos ecosystem via interchain security.

For chains that choose to borrow the Hub’s security, said Buchman, “it gives them direct alignment with Cosmos with the ATOM. It allows them to inherit the security of the ATOM and be part of this sort of economic community being built around the Cosmos blockchain, the ATOM token, and the superior security that that chain provides.”

Another way the ATOM token will accrue more value, according to the white paper, is by leveraging liquid staking.

ATOM holders can earn interest today by staking their tokens with validators, but doing so involves locking the tokens up in an address on the blockchain where – at least for a time – they cannot be sold. Third-party apps offer “liquid staking” solutions that free up users to trade their staked assets via a derivative token representing their stake.

The Cosmos Hub will soon bake liquid staking into the core of the network’s code. “With the native liquid staking module, it provides a better [user experience] for entering one of those liquid staking providers,” explained Buchman.

“Now that the [ATOM] token can start to become more liquid, even while it's providing security, we can similarly start to offer new ways to connect the security and liquidity of the ATOM token to other tokens that are launching in the ecosystem,” he continued.

The white paper also details other changes to ATOM, including major long-term reductions to the number of tokens that are issued to the network.

UPDATE (Sept. 26, 16:33 UTC): Clarifies abbreviated comments from white paper authors.

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Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.

CoinDesk - Unknown

Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.