Cosmos ⚛️ January 2020 Network Analysis

Key Metrics

  • New key metrics: economics; community pool; cartel watch stats
  • Jan 29 Community Pool balance ~285k ATOM (~5k spent in January)
  • Jan 20 inflation 7.12% and rewards rate ~9.43% (know the difference!)
  • Jan 20 – Top 10 validators have lost a further 2% of voting power

Quick Takes

You can find December’s network analysis here, with links to each analysis of 2019.

Key Metrics

I’ve revised the key metrics section. In future, I’ll take a snapshot for these metrics on the 20th day of each month, but there are some metrics that have not yet been standardized (as indicated by eg. ’21 days’ and ’32 days’).

There are more ATOM staked this month than last, though the ratio of ATOM staked has decreased. The number of newly-minted ATOMs is in keeping with the monthly average of ~1.4M on Cosmos.

Inflation has decreased, as expected. Since the Cosmos Hub’s bond ratio is ~74%, inflation will continue decreasing (at a rate of 13% per year) toward a minimum of 7.00%.

Even though inflation has decreased, staking rewards have gone up slightly.

The Community Pool has a balance of ~285k ATOM as of Jan 29, 2020. Between Dec 19 and Jan 20, the pool increased by nearly 29k ATOM. 5,250 ATOM were sent to cosmos1hjct6q7npsspsg3dgvzk3sdf89spmlpfg8wwf7 (an address controlled by Figment) on January 29, 2020 via governance Proposal 23.

Voting power amongst validators hasn’t changed a great deal, except that the power of the bottom 90% of validators has increased by 2%.

What’s the importance of validator voting power? Validators can work together to form a cartel to make changes to the Cosmos Hub. As of Jan 20, 2020, the top 7 validators could halt the chain and veto a proposal. The top 12 validators can pass a governance proposal unless delegators override or unless over 1/3 of the voting power vetoes. The top 21 validators would need to work together to take control of governance or to defraud other chains (once IBC is enabled).

Prop23 is the Cosmos Hub’s first successful community-spend proposal

The validator operator Figment introduced a draft governance proposal in December, which launched on Jan 15 and concluded on Jan 29, 2020. Once Prop23 passed, the network decreased the balance Community Pool by 5250 ATOM and increased the balance of Figment’ account by 5250 ATOM. Since it was an internal transaction, there is no on-chain information detailing this transfer.

In terms of network participation by stake weight, nearly 80% of all staked ATOM was represented in this vote. Sixty-two validators and 33 delegators voted. Though 4.66% of the total vote backing came from delegators, 95% of that backing come from one single delegator account holding nearly 6.5M ATOMs. You can look closer at the voting statistics here.

This community-spend proposal is intended to fund governance work and the initiation of a Cosmos governance working group (GWG). You can read about the status of the Cosmos GWG and the deliverables in this Month 1 update here.

IBC will likely follow Game of Zones. When is GoZ coming?

You may have noticed that we don’t yet have a date for the Game of Zones competition. What’s Game of Zones? It’s an incentivized testnet environment that’s being designed to 1) prepare IBC relay operators and 2) test the functionality and security of IBC. Curious to learn more about Game of Zones? We hosted an AMA with Dean and Zaki, which inspired this article. You can learn more about IBC here.

Zaki (All in Bits) recently revealed that the stages of release will be:

  1. New demo
  2. Developer on-boarding
  3. Game of Zones

Zaki and team are reportedly working hard on #1. He expects that registration for GoZ will last at least 2-3 weeks, and each team may range from two to infinity in size. Jack (All in Bits) explained that developer on-boarding will take the form of a couple of initial IBC testnets to ensure that functionality and user interface is sufficient to roll out the code to a larger number of people. According to Jack, you can track this progress here.

Staking Derivatives & The Liquid Staking Working Group

In traditional finance, “a derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset (like a security) or set of assets (like an index),” according to Investopedia. What are staking derivatives?

In cryptocurrency, we’re not yet sure what staking derivatives will be, but essentially they will enable the transfer of ownership of staked assets. I wrote a bit about what you can do with ATOMs here, but you cannot currently transfer staked ATOMs to another account. There are a number of possible implementations for staking derivatives, each with its own benefits and risks.

After consulting with Chorus One, Sunny (All in Bits; Sikka) initiated a ‘staking derivatives’ discussion on the Cosmos forum in July 2019. Sunny believes that “it is necessary to allow trustless derivatives to be created for staked atoms on any validator, not only custodial validators like Poloniex and Coinbase, in order to allow non-custodial validators to remain competitive.”

Chorus One has received a grant from the Interchain Foundation to explore the concept of Liquid Staking (also referred to as Programmable Staking or Staking Derivatives). During the four month project, they will explore the different ways staked assets will be tokenized and the implications on the sustainability of the Internet of Blockchains. Read more about this initiative here.

As part of this research, Chorus One hosted the second Liquid Staking Working Group call on Jan 29, 2020, and you can review that call here and/or read the notes from the call here. Curious to learn more about staking derivatives? Chorus One is collecting related resources here, and you should check out this intro to staking derivatives by Nicola (Lemniscap). Feel free to join the staking derivatives discussion in the Liquid Staking Working Group Telegram channel.

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.