# Zone Blog Post [text]

// The introduction is still WIP
`We propose to create a permissioned smart-contract platform for the Hub, secured by the Hub, and controlled by the Hub, to host Lido’s liquid staking for the Interchain as well as any project that requires close alignment with the Cosmos community.`

### The Hub’s Permissioned Smart-Contract Platform

Proposal 69 revealed the community’s strong preference for CosmWasm to be deployed, not on the Hub, but on a separate, to-be-built zone secured by the Hub. This aligns well with Lido’s current vision, which is why we propose to undertake the work necessary to create the zone.

In exchange for providing security to the zone, we propose to compensate the Hub via revenue share, which could be derived either from the zone’s tx fees, or from specific mechanisms to be chosen for each protocol (especially those ones that have no huge state/tx activity), as a requirement for the Hub’s permission to deploy (e.g. for Lido, a share of the revenue from liquid staking).

### Powered by CosmWasm

While it is technically possible to embed any protocol into a zone’s binary, developing the product on CosmWasm has significant benefits: smart contracts are easier to audit, deploy and upgrade, and they can be tested in more depth.

We propose to create a zone with a permissioned implementation of CosmWasm, meaning smart contracts can be deployed with the approval of the Hub’s governance.

### Governed by ATOM

In order to maximize the zone’s neutrality, Lido intended to propose releasing the zone without a governance token. The zone’s governance would fall under the purview of ATOM, which is the most widely distributed and best integrated token available on cosmos.

Nonetheless, this design would make it more difficult to compensate validators, and it would limit the ability of the zone to provide financial incentives to builders and users. It also ran the risk of flooding the Hub’s voters and validators with less important governance proposals, which is why we are proposing two alternative systems: a dual-token governance system, and a committee-based approach.

### Executive Committee Governed by ATOM

In this system, a committee is elected by ATOM stakers and validators to oversee the development of the zone. The Hub retains the right to veto or overrule the committee’s decisions, and the power to dissolve the committee.

This model is arguably the least neutral of the three, as it relies on a small, permissioned set of individuals which may have conflicts of interests within the broader cosmos ecosystem. It relies on ATOM, an already established token which minimizes overhead, but makes it harder to incentivize users, developers and validators to participate in the zone’s economy.

### Dual-Token Model: ATOM + Native token

Under the dual-token model, proposals with important, ecosystem-wide implications would be still be governed by ATOM stakers and validators. The zone would have its own governance token, which would be used to vote on less important proposals pertaining to the day-to-day operation of the zone.

`Proposals that are executable on-chain would be categorized based on the parameter changes they contain. Social signalling proposals could be voted on using the native token, and their implementation submitted to the relevant governance system once translated into executable commands.`

// The exact implementation is being discussed and will be finalized

Limiting the scope of the native token’s powers should be sufficient to preserve a reasonable degree of neutrality for the zone. At the same time, it streamlines the Hub’s validators duty by removing secondary proposals from their care. Although it would require coordinated efforts to distribute, maintain and develop the native token (liquidity, integrations, etc.), it would also allow the zone to easily incentivise users, builders and validators.

### Liquid Staking for the Interchain

Lido intends to use this zone to deploy a liquid staking protocol for the Interchain.

Interchain Security lets validators from a parent-chain produce blocks for a child-chain connected via IBC. It can be used to increase the security of the child-chain, and to help it launch quicker, without the need to bootstrap a separate validator set. By building on top of this technology, Lido will provide the security and neutrality of the Hub’s validator set to other Cosmos chains, while giving users composable liquid tokens that accrue staking yield.

Recap table

| | Governed by ATOM | Dual-token model | Exec. Committee |
| --- | --- | --- | --- |
| Governance | All proposals are voted upon by ATOM stakeholders. | ATOM governs the most important decisions, such as chain upgrades. The native token governs the rest (e.g. CosmWasm parameters) | The committee is elected, dissolved and ruled over by ATOM governance. |
| Neutrality | Maximal<br />Most cosmos chain holders are also holding tokens from other chains, and this makes them the best representation | Medium<br />Releasing a new token creates a subset of holders that might be not as neutral to the cosmos community | Minimal<br />A permissioned (elected by ATOM governance) & small set of decision makers (but the decisions can be overruled by ATOM governance) |
| Validator incentives | Validators are paid in ATOMs (== it’s their job to validate the new zone if ATOM governance decides so) + profits share (e.g., Lido staking rewards) | Validators are paid in ATOMs + new governance token | Validators are paid in ATOMs (== it’s their job to validate the new zone if ATOM governance decides so) + profits share (e.g., Lido staking rewards) |
| Token Management | None | - Someone needs to maintain the token (integrations, liquidity pools, etc.)<br />- Someone needs to figure out the distribution for the new token | None |
| Financial incentive for the zone (utility, compensation for development) | Developers can only be incentivised from community (ATOM) or foundation funds | Developers can be incentivised from community (ATOM) or foundation funds + equity | Developers can only be incentivised from community (ATOM) or foundation funds |