# Cosmos Hub Proposal 72: FAQ *See [proposal text](https://forum.cosmos.network/t/proposal-bringing-liquid-staking-and-defi-to-the-cosmos-hub-with-interchain-security/6623) and [vote results](https://www.mintscan.io/cosmos/proposals/72) so far.* *this work is a combined effort between [jelena](https://twitter.com/jelenaaa____), [udit](https://twitter.com/UditVira), and [sacha](https://twitter.com/ssaintleger)* ### How many funds have been requested, and what will they be used for? This proposal requests **150,000 ATOM** from the Cosmos Hub community pool. These are valued at approximately USD $1.2 million given current rates of $8 USD/ATOM. The funds will be put towards **3 projects** that are looking to leverage Interchain Security and the liquid staking feature of Cosmos Hub. The funds will be managed by a 3/4 multisig committee, which will lead the business development efforts to bring "blue chip" projects to the hub. You can think of this initiative as a business accelerator that is supporting the launch of three projects relevant to two important Cosmos Hub capabilities in 2022: Interchain Security and liquid staking. ### What proportion of the funds requested are earmarked for P2P validator? **50,000 ATOM** or one third of the total 150,000 are earmarked for the P2P team who are launching an Interchain secured, CosmWasm-enabled chain. The purpose of this chain to serve as a "DeFi hub" for the Interchain. The proposal requests funding for up to three projects. The DeFi hub is one of these three. This allows for two more projects to be funded with the remaining 100,000 ATOM. Since the proposal went up to vote, P2P have annouced that the DeFi hub will be named [Neutron](https://twitter.com/P2Pvalidator/status/1541480411402051584). ### Isn’t 50k ATOM a lot? Why can’t P2P fund itself? 50k ATOM (~$400k at current prices) may sound like a lot, but it is a small amount compared to the overall cost of bringing a platform such as Neutron to market. While P2P will bear the brunt of the go-to-market costs, the ATOM grant remains important; it is an indication of the community’s support for the project. ### How aligned is P2P with Cosmos? P2P were genesis validators on the Hub, [Game of Stakes](https://github.com/cosmos/game-of-stakes) winners, [Game of Zones](https://v1.cosmos.network/goz) participants. They are about [as](https://twitter.com/jack_zampolin/status/1541587848477913088) [OG](https://twitter.com/Lomashuk/status/1541508522885713924) Cosmos as it gets. ### What are the two other projects (aside from the P2P DeFi hub) that this project will support? The two remaining projects are still to be determined. It is up to the multisig committee to carry out business development efforts to attract blue chip projects. As per the proposal, the remaining 100K ATOM will be used to fund development teams that are building either: 1. A smart contract application on top of the DeFi Hub 2. An independent consumer chain. Proposers estimate that these funds are able to give development teams 2-3 months of runway before launching their project. ### What will happen to any unused funds? Any unused funds will be returned to the community pool. ### Does this proposal offer preferential treatment to Lido over Quicksilver? [Lido](https://lido.fi/) and [Quicksilver](https://quicksilver.zone/) are both liquid staking protocols planning to launch as interchain secured Hub zones. This proposal earmarks 50K ATOM of the total 150K ATOM for P2P validator, who are core contributors to Lido, for support in setting up an interchain secured CosmWasm chain called Neutron. **It's important to note here that the funds will not be used for Lido.** Lido will be funded separately by the Lido DAO. While Lido wants to deploy on Neutron, if for some reason it doesn't deploy or dies, the zone will remain. The funds are to be used specifically for the development of an Interchain secured smart contract zone. Since this zone will be permissionless, nothing is stopping another liquidity staking provider from deploying there. Furthermore, we can expect many of the dapps built on top of Neutron to be broadly useful to all LS providers, including Quicksilver. ### Why do we need more than one liquid staking provider on the Hub? A plural and competitive liquid staking ecosystem is needed to prevent a monopoly provider from extracting fees and creating an existential risk for Cosmos, while also promoting a diverse validator set. Some smart people believe that the game theory behind [liquid staking](https://research.paradigm.xyz/staking) can lead to winner-takes-most outcomes. Lido’s dominance on Ethereum adds weight to this hypothesis so far. While there is reason to believe that Cosmos' architecture protects better against such an outcome, if a single liquid staking token were to dominate the market on Cosmos this would have less than desirable consequences. For example, in a winner-takes-most scenario in which one liquid staking contract ends up with a majority of ATOM under management, there's a sense in which the DAO responsible for the upgradeability of this contract would be the largest ATOM shareholder; if this happens, the holders of the liquid staking goverance token would be able to effectively determine the Hub validator set. *For more on liquid staking, you can check out Sacha's previous answers to the following questions in context of prop 69:* * [What is liquid staking?](https://hackmd.io/@ssaintleger/swiss-booklet#What-is-liquid-staking) * [What are the potential upsides to liquid staking?](https://hackmd.io/@ssaintleger/swiss-booklet#What-are-the-potential-upsides-to-liquid-staking) * [Is liquid staking inevitable?](https://hackmd.io/@ssaintleger/swiss-booklet#Is-liquid-staking-inevitable) ### Can we be more granular about which projects might benefit from the P2P funds? Launching projects on P2P's proposed Neutron chain will be permissionless. Permissionless here means that any DeFi project which wants to deploy CosmWasm contract on Neutron, can do so without a governance vote. The projects that will most benefit from Neutron are likely DeFi projects that need proximity to ATOM. Apps of this nature have the potential to be valuable to users of all liquid staking protocols: Lido, Quicksilver, and beyond. ### Is this a legitimate use of community pool funding? ATOM holders have never voted on what the community pool should be used for and as a result there is no canonical, widely accepted view of what is a "legitimate" community spend proposal. Cosmonauts may submit proposals for community pool spending as they like. Successful community pool spend proposals in the past have included marketing and development initiatives including: - Proposal 44 which requested 100,000 ATOM to advance the Ethermint project that led to the launch of the [Evmos chain](https://www.mintscan.io/cosmos/proposals/44) - Proposal 34 in which 129,208 ATOM were requested to fund [marketing efforts](https://www.mintscan.io/cosmos/proposals/34) - Proposal 25 in which 25,000 ATOM were requested to fund [CosmWasm development](https://www.mintscan.io/cosmos/proposals/25) ### Does this set a precedent for every consumer chain to ask for $ from the Hub? With the coming launch of Interchain Security, we can expect many more chains to lease security from Cosmos Hub. While this proposal opens the door for other such consumer chains to request funding from the Hub, it should be understood as a go-to-market strategy rather than a long-term strategy. ### How does this proposal benefit the Hub? Interchain Security has the potential to be the Hub's killer app, but to ensure sufficient momentum from the start gate we need to incentivise a handful of blue chip projects to commit. 25% of the gas fees from every Interchain secured zone will be sent to Cosmos Hub stakers (via the Hub's validators). So you can think of it as the Hub receiving 25% of the value of a chain for $400k (50k ATOM at $8 an ATOM) in exchange for providing security. In the case of Neutron, it will likely take less than 6 months for the Hub to recuperate its initial investment. This assumes that: → 25% of Neutron's gas fees (the Interchain Security default) are sent back to Hub stakers. → Activity on Neutron over the next 9 months is similar to that of Juno (a popular Cosmos permissionless smart contract chain) over the last 9 months. ### What is the relationship between this proposal and the value of ATOM? In addition to offerering an alternative, and complementary, liquid staking solution to Quicksilver (through their work on Lido), we believe the P2P team have the right combination of talent and execution to build a flourishing DeFi ecosystem around ATOM. Apart from the fees sent back to Hub stakers, such an ecosystem has the potential to seriously increase both ATOM's utility (and therefore value), which in turn increases the appeal of Interchain Security. ### Has the scope of the proposal changed? No. The plan was always to fund up to three app chains. However, the proposal was updated to clarify that one of these slots had been filled by Neutron. It was also edited to address the community feedback that occurred as part of the [forum discussion](https://forum.cosmos.network/t/proposal-bringing-liquid-staking-and-defi-to-the-cosmos-hub-with-interchain-security/6623). You can click the pencil symbol at the top of [the post](https://forum.cosmos.network/t/proposal-bringing-liquid-staking-and-defi-to-the-cosmos-hub-with-interchain-security/6623) for the full edit history / changelog. ### What do we gain from having a committee manage these funds on behalf of the community? The ability to move quickly and give potential partners the assurances they need to start committing resources immediately. Interchain Security is a couple of months away, and development needs to start as soon as possible if projects are to be ready at launch. ### Why should we trust this particular committee given the Gravity bridge and Dex failures? This committee has nothing to do with the Gravity bridge episode. It consists of trusted Cosmos OGs [Jack](https://twitter.com/jack_zampolin), [Zaki](https://twitter.com/zmanian), and [Jelena](https://twitter.com/jelenaaa____), as well as David Feiock of [Galileo](https://twitter.com/Galileo_xyz) (an early-stage crypto venture firm focused on expanding the Cosmos ecoystem). Each signer's reputation is tied to the continued success of the Cosmos ecosystem. ### How can the community keep the committee in check? Even if Proposal 72 passes there is still a need for a Hub governance vote to add any Interchain secured zone. This requirement is baked into Interchain Security. This allows the community to keep the committee's decisions in check, even if it does give them discretionary power over the 150k ATOM.