Can ATOM War be a good way to 'raise' the price of ATOM?

Written by: Tia, Techub News

Cosmos is also going to start the ATOM War. When I first saw it, I still felt a little sad.

Sorry, although I personally think this is actually a dead end move. A good project should develop its advantages rather than change the financial situation for the sake of the status quo. Balancer, the last project that hard-integrated the ve token economic model, also After the release of the ve token economic model, there was not much splash. But you still have to have hope, right? What if it succeeds?

The narrative of Cosmos is sovereignty, and its one-click chain publishing function allows applications that are not adapted to the "native" chain environment to have the right to publish their own chains. Applications no longer need to be attached to the sovereign chain. Cosmos directly gives them the right to stand on their own. Therefore, it was once considered the most crypto-spirited habitat, and many developers also love Cosmos. The founder of Celestia also said on Interchain Travel that Cosmos is his spiritual home.

Although the Cosmos ecosystem is strong, many great projects are launched through Cosmos. However, ATOM, as the governance token of Cosmos Hub, does not seek to obtain any benefits from it (it is also a trade-off made to give economic sovereignty to chain projects on Cosmos), and was even ridiculed and reduced to a meme currency. But as a project that continues to be updated, Cosmos cannot just become an unprofitable public good. The Cosmos Hub and ATOM are the first and largest source of funding for development of IBC, Cosmos SDK, CometBFT and the rest of the Cosmos stack, while the community pool has been underfunded for years. Cosmos Hub needs to find a way to capture some of the revenue from the ecosystem to support its continued development.

ATOM War

The term "ATOM War" comes from the Curve War on Ethereum. In Curve, the incentives that liquidity providers can receive have two parts: the pool’s transaction fees and additional CRV incentives. The CRV incentive part is determined through voting. In order to allow their pool to obtain higher CRV incentives as much as possible, they will be forced to purchase the governance token CRV to lock in order to obtain higher voting rights. As the demand for locked CRV increases, the price will rise, thereby increasing the APY of the pool and attracting more liquidity providers, thus forming a flywheel effect.

ATOM War is in a sense a continuation of Universe 2.0. Since the liquidity staking module has been developed, ATOM stakers can convert the pledged ATOM into "DelegationShares" through the liquidity staking module, and then lock the "DelegationShares" to the new governance platform Hydro to obtain hATOM to enjoy voting rights. Different levels of Voting Power can be obtained with different locking periods.

Normally, the Cosmos ecosystem has a need to request liquidity from the Hub. Taking Proposal 853 as an example, pSTAKE Finance requested the Hub to allocate 600,000 ATOMs. This part of ATOMs is mainly to provide stkATOM/ATOM LP to the Cosmos Ecological DEX, of which 300,000 ATOMs are used to pledge to obtain stkATOMs, and then with The remaining 300,000 ATOMs together form stkATOM/ATOM LP. There are two places where income can be generated. One is to pledge ATOM to obtain stkATOM, and LP income. pSTAKE promises to share 15% of the revenue with the Hub and waive the 5% protocol fee.

Therefore, the Cosmos community has the idea of ​​ATOM War, which is to allow parties with financial needs for ATOM to compete to obtain funds. Of course, the initial liquidity comes from the Hub community pool. According to the proposal, the initial funding is 1 million ATOM (approximately 1/3 of the current community funding).

Projects that require liquidity support need to whitelist registration on the Hydro platform, and describe in detail the use of the funds, the revenue shared to the Hub community pool, and the bid for hATOM voters (that is, the project is for The amount that hATOM holders are willing to pay to their hATOM supporters to win the auction), hATOM holders vote based on this information, and the project with the most votes can receive liquidity from the community pool.

However, bidding can easily bring about a drawback, which is that it can easily cause voters to support "high-yield and high-risk" projects. Curve USDM stablecoin pool is a lesson learned from the past. Therefore, Hydro has added an "Incentives alignment" mechanism. If a project mismanages funds, the voting parties that support the project will be punished accordingly; and if a project party makes better use of the funds obtained, the final performance will be higher than expected. , then the voters who support the project can receive rewards.

The relationship between Cosmos Hub and the Cosmos ecological project is actually very subtle. On the one hand, Cosmos gives the ecological project the highest level of freedom - economic freedom, but on the other hand, Cosmos Hub is still responsible for the development direction of each component of Cosmos and plays a decisive role. . Hub leaves economic issues to itself. Ecological projects do not have any tax system after enjoying various convenient services of Cosmos. But the Hub should find a way, because it’s not just about finance and economics, it’s also about governance. Ecological projects are stakeholders of Cosmos. Regardless of whether the ecological project is conscious or not, as a Hub, it is obligated to allow the ecosystem to participate in governance, whether actively or passively.

Hub has been talking about enhancing ATOM’s ability to serve as a reserve currency. ATOM War can help this goal to a certain extent, but is it really a good idea to monetize governance tokens? I think that before ATOM War, finding the positioning and meaning of existence of the Hub may be more important than ATOM War itself.

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