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On April 24th, the Cosmos community released a temperature check proposal aimed at introducing ATOM liquidity pledge, and voting has now begun. The proposal proposes to replace the

Introduction

On April 24th, the Cosmos community released a temperature check proposal aimed at introducing ATOM liquidity pledge, and voting has now begun. The proposal proposes to replace the current pledge, allocation, and penalty modules of Cosmos Hub with LSM (liquid stacking module), and to mitigate liquidity pledge risks by limiting the total amount of ATOM pledged for liquidity to 25% of the total amount of ATOM pledged.

Cosmos community releases a temperature check proposal aimed at introducing ATOM liquidity pledge

On April 24th, 2021, the Cosmos community released a temperature check proposal aimed at introducing ATOM liquidity pledge, and voting has now begun. The proposal proposes to replace the current pledge, allocation, and penalty modules of Cosmos Hub with LSM (liquid stacking module), and to mitigate liquidity pledge risks by limiting the total amount of ATOM pledged for liquidity to 25% of the total amount of ATOM pledged.
# Understanding the Cosmos Hub
Cosmos Hub is a decentralized network of independent blockchains that communicate with each other using the Inter-Blockchain Communication (IBC) protocol. The Cosmos Hub operates with the help of validators, who are elected by ATOM holders through a voting process. Validators are responsible for securing the Cosmos Hub by validating transactions and blocks, and they are rewarded with ATOMs for their services.
# The Existing Liquidity Pledge System in Cosmos Hub
Liquidity provision is the process of providing liquidity to a market by holding a certain amount of tokens as collateral. In the existing liquidity pledge system in Cosmos Hub, validators can pledge their ATOMs as collateral to provide liquidity to the Hub’s markets. However, this system has some limitations and risks. One of the risks is the potential loss of ATOMs due to market volatility, which can occur when the value of the collateral falls below a certain threshold.
# The proposed ATOM Liquidity Pledge System
The temperature check proposal aims to introduce a new liquidity pledge system that replaces the existing pledge, allocation, and penalty modules with LSM. This new system is designed to mitigate liquidity pledge risks by limiting the total amount of ATOM pledged for liquidity to 25% of the total amount of ATOM pledged. This means that validators can only pledge up to 25% of their total ATOM holdings for liquidity provision.
# Benefits of the Proposed ATOM Liquidity Pledge System
The proposed ATOM liquidity pledge system has many benefits. First, it reduces the risk of potential loss of ATOMs due to market volatility. Second, it incentivizes validators to hold more ATOMs since they can earn more rewards by providing liquidity. Third, it provides more liquidity to the Hub’s markets, which improves the trading experience for users.
# How to Vote on the ATOM Liquidity Pledge Proposal
Voting on the ATOM liquidity pledge proposal is simple. ATOM holders can participate in the voting process by staking their ATOMs with their preferred validators. Validators will then cast their votes on behalf of their staked ATOM holders. The proposal needs a quorum of 40% and 50% + 1 of the total ATOMs to be in favor for it to be adopted.
# Conclusion
The temperature check proposal aimed at introducing ATOM liquidity pledge has the potential to improve the liquidity provision system in the Cosmos Hub. By limiting the total amount of ATOM pledged for liquidity, the proposed system reduces risks for validators and ensures a better trading experience for users. The proposal is currently being voted upon by the Cosmos community and we await the result.
# FAQs
1. What is Cosmos Hub?
Cosmos Hub is a decentralized network of independent blockchains that communicate with each other.
2. What is a liquidity pledge system?
Liquidity provision is the process of providing liquidity to a market by holding a certain amount of tokens as collateral.
3. How to participate in the voting process for the ATOM liquidity pledge proposal?
ATOM holders can participate in the voting process by staking their ATOMs with their preferred validators. Validators will then cast their votes on behalf of their staked ATOM holders.
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