The draft Cosmos Hub 2.0 white paper has been officially announced at the Governance Forum, describing the new ecological role of Cosmos Hub and the new token economics of ATOM. The white paper will be on-chain and subject to community voting on October 3. Previously, Delphi Digital, a well-known investment institution in the industry, announced that its protocol research and development department, Delphi Labs, would turn to research and development of the Cosmos ecosystem, and released a research report on choosing Cosmos after comparing different public chains. ATOM saw a 23% increase that day. With the new token economics of ATOM proposed in the Cosmos Hub 2.0 white paper, does ATOM have the power to continue to rise under the new token economy? This article will interpret the white paper in depth and use the token supply and demand relationship to analyze the impact of Cosmos 2.0’s new token economy on ATOM currency prices.
Changes in ATOM Token Supply
First, in terms of token supply, the issuance of ATOM is gradually decreasing. Cosmos 2.0 proposes new ATOM issuance rules. The issuance of ATOM will be adjusted into a transition phase and a stabilization phase. The transition period lasts for 36 months. It will initially issue 10 million ATOM per month. If it is approved immediately, the inflation rate will surge rapidly in the short term, briefly reaching 40%, and then steadily decrease until it reaches 300,000 ATOM per month. issuance, thereby effectively reducing ATOM’s inflation rate to 0.1%.
Liquidity weakens
With the arrival of ATOM liquidity staking, more and more ATOM will be pledged, and the supply of ATOM in the market will decrease. Cosmos core developer Buchman said Cosmos Hub will soon incorporate liquidity staking into the core of the network’s code. ATOM holders can earn interest by staking their tokens to validators, but doing so involves locking the tokens to an address on the blockchain, where they cannot be sold, at least for a period of time. It is simply third-party applications that offer “Liquid staking” solutions that enable users to trade their staked assets for derivative tokens representing their staked shares.
Increased demand for ATOM
The changes in the supply and liquidity of ATOM have been mentioned previously. Next, we will introduce the changes in demand for ATOM. In Cosmos 2.0, some networks in Cosmos use ATOM to settle gas, which will increase the demand for ATOM. In order to lower the development and operation threshold of blockchain in Cosmos, Cosmos launched the interchain security (Interchain Security) solution. That is, other chains can share security with the Cosmos Hub. Simply put, with Cosmos Hub, developers can focus on product development without having to design complex token mechanisms themselves, while sharing security with Cosmos Hub (ATOM has a market value of US$4 billion and the cost of evil is approximately US$2.6 billion. USD), but the price is to use ATOM to settle Gas. It should be added that the custom consumer chain allows the project party to create its own Gas tokens, and Cosmos Hub will receive the project party’s customized Gas tokens.
treasury revenue
The white paper introduces two application-specific features, the InterChain Scheduler and the InterChain Allocator. InterChain Scheduler is a cross-chain block space market in Cosmos. The cross-chain MEV revenue generated is collected by InterChain Allocator to promote inter-chain collaboration, thus expanding the potential market of Scheduler. Simply put, Scheduler is the block market on Cosmos. Chains with idle blocks can sell their blocks to chains in need, and the price difference is collected by Allocator as revenue for Cosmos Hub. Currently, Cosmos Hub states that it will incorporate this part of the revenue into the Cosmos Hub’s treasury and may set up an ecological fund to promote ecological development on Cosmos and further increase ATOM usage scenarios (Gas settlement). On the other hand, the possibility of distributing income to ATOM holders cannot be ruled out.
community governance
ATOM also has governance rights. For example, the Cosmos Hub community launched a proposal on September 20 to spend 20,000 ATOM tokens from the community fund pool to incentivize the inter-chain secure public test network, of which 10,000 ATOM tokens will be awarded to those who complete the test network Milestone Cosmos Hub validator. In addition, since ATOM is also a Gas settlement token, ATOM may also be used in governance proposals to modify Gas rates in the future.
Summary: In summary, with the release of the Cosmos 2.0 white paper, new token economics have affected the supply and demand relationship of ATOM. On the supply side, ATOM issuance and liquidity are gradually decreasing; on the demand side, the demand for Gas settlement and network governance will further increase. Therefore, we can expect that ATOM may become in short supply in the future and prices will rise accordingly.