Why Was Cosmos Hub’s ATOM 2.0 Proposal Rejected?

The ATOM 2.0 proposal has rejected by the Cosmos Hub community in a hotly contested vote; the proposal failed despite gaining support from the majority of voters.

ATOM 2.0 Fails to Pass

After weeks of debate and a tense two-week voting period, the Cosmos Hub community decided earlier this morning to reject Proposal #82, “ATOM 2.0: A new vision for Cosmos Hub.” 

Based on a whitepaper penned by Cosmos co-founder Ethan Buchman and eleven others, the proposal was marketed as the next step in Cosmos Hub’s evolution. Among other things, the whitepaper suggested drastically changing ATOM’s tokenomics and building two new tools, the Interchain Allocator and the Interchain Scheduler, which they argued would help cement Cosmos Hub as one of the most important appchains in the broader Cosmos ecosystem.

The proposal, now considered by some in the community as the most controversial in the history of Cosmos, saw an unusually high turnout of 73.41% of all ATOM tokens, with the vote remaining tight until the very end. Ultimately, 47.51% of coins were pledged in favor, 37.39% voted “NoWithVeto,” 13.27% abstained, and 1.82% simply voted no. 

While most tokens were indeed pledged in favor, Cosmos Hub’s governance mechanics ensure that a proposal cannot pass if more than 33.4% of voters opt for “NoWithVeto”—a system that prevents the Hub from falling prey to 51% attacks. “NoWithVeto” is, therefore, a strong signal community members use to communicate their belief that a proposal is actively harmful to Cosmos Hub’s interests.

Buchman acknowledged the strong reaction against the proposal in a tweet storm: “To those that voted NoWithVeto, I respect your decision and hear you loud and clear: the proposal in its current form is untenable. Even if it passed, amendments would be necessary!”

Why Was It Rejected?

ATOM 2.0 was an ambitious and exciting proposal, and that may have been part of its problem.

The 26-page whitepaper didn’t limit itself to modifying one or two aspects of the ATOM token, as the community initially expected, but set out to fundamentally transform the way the Cosmos Hub functioned by introducing three new major tools in addition to revamping tokenomics. The Interchain Scheduler, for example, aims to be an on-chain MEV marketplace, while the Interchain Allocator’s role would be to enable mutual stakeholding across different IBC chains; these are two very different, very complex topics, and ATOM stakers may have ended up voting against the proposal because of one of the tools despite liking the other one.

Another vivid issue in the ATOM 2.0 proposal had to do with the revamped tokenomics. The whitepaper argued in favor of greatly increasing the issuance of ATOM tokens for a short while in order to subsidize the Hub, and then decreasing emissions over a period of 36 months. Critics argued that the change in monetary policy was unwarranted and that details were lacking with regard to how the Hub would use the accumulated ATOM. Others were unconvinced that ATOM emissions could be successfully replaced by other sources of revenue by the time emissions waned. 

Most likely, the various components of the ATOM 2.0 whitepaper will end up being resubmitted to the community for voting as their own individual projects, just like how a detailed proposal for Interchain Security—another ambitious initiative to position Cosmos Hub as a central component of the Cosmos ecosystem—was passed in March. 

Disclaimer: At the time of writing, the author of this piece owned ATOM, BTC, ETH, and several other cryptocurrencies.