Cosmos Validator Update
It’s been eight months since the TaxiStake proposal to create a Cosmos validator for the DAO was passed. As such, it seems like an appropriate time to look at some data and numbers to see how it’s going. 269b 1f695
Here is a quick summary of last year’s proposal: TaxiStake would operate a Cosmos validator on behalf of the ShapeShift DAO and use the ShapeShift brand name to attract delegators, charging commission on delegations to earn revenue for both ShapeShift and TaxiStake. In return for use of the ShapeShift brand, TaxiStake would forward 70% of all revenues to the ShapeShift DAO, and keep only 30% of revenues for itself. While this 70/30 split of revenue was heavily weighted in the ShapeShift DAO’s favor, both parties believed the well-recognized brand name of ShapeShift would attract many more delegates than TaxiStake’s own name, which should more than make up for the unequal division of profit.
What went well:
- The revenue generated from the Cosmos validator in November 2021 was the first non-FOX revenue stream earned by the Tokenomic workstream.
The total revenue generated from the Cosmos validator from inception in 2021 is $214,627 in stable coins, which represents 11% of the total DAO Revenue. (DAO_revenue_stream_DV_MVP_PY - Google Sheets
Delegations through the ShapeShift platform became available around April 27th, 2022. (ShapeShift Integrates Cosmos Functionality for Native Wallet Users
- The initial excitement and success of the proposal led to the creation of four additional ShapeShift branded Cosmos ecosystem validators: Osmosis, Umee, Juno, and Terra2.
- The Cosmos Hub validator remained in the top 45th rank throughout the eight-month period.
TaxiStake cumulative expenses to the DAO, for all validators, represents only 1% of the total workstream expenses since the DAO launched in July 2021, while generating 12.7%
- of the DAO’s all-time revenue.
What didn’t go well:
- The total number of ATOMs delegated to the Cosmos Hub validator hasn’t increased at the rate that was expected. In fact, the total number of ATOMs delegated has actually consistently decreased to its lowest level since TaxiStake began using the ShapeShift name on its validator. Delegations to the Cosmos validator are down 30% (in ATOMs) from December.
- Amongst all of TaxiStake’s validator systems, the Cosmos validator is worth the most. However, unlike the other validators, which are mostly experiencing an increase in delegations, the Cosmos validator is consistently losing delegations.
- The price of ATOMs dropped approximately 75% since the inception of the ShapeShift branded DAO validator in this current bear market.
Delegations through the ShapeShift platform didn’t become available until April 27th, 2022–which was six months after the validator was rebranded with the ShapeShift DAO moniker.
- ShapeShift Integrates Cosmos Functionality for Native Wallet Users
- The marketing or promotion done by the ShapeShift DAO to promote ShapeShift DAO validators to attract delegations has been minimal.
- (Dec 6th 2021)
- (April 27th, 2022)
- The ShapeShift DAO has not delegated any native tokens to their own validators. This would not only help ensure the validators place in the active set but also increase the revenue earned from the validators. In addition, ShapeShift DAO is starting to garner a negative reputation from other validators because its commission is converted into stable coins weekly. While we agree it is up to the organization to decide how to use its commission, there are valid arguments that it doesn’t show support for the long-term success of the projects to dump earned tokens every week.
UST - Terra’s UST was working great as a fully decentralized bridge from the Cosmos ecosystem to ETH. For several months, the wormhole bridge was the only fully decentralized way to move value from the Cosmos ecosystem to ETH to be stored in the DAO’s Gnosis safe. While this method worked great until the death spiral, the fall of UST is still having ripple effects through the crypto ecosystem and was entirely out of the DAO and TaxiStake’s control. UST collapsing removed a good deal of liquidity from the Cosmos ecosystem. More information on what happened can be found here:
- The Fall of Terra: A Timeline of the Meteoric Rise and Crash of UST and LUNA
- 81.8% of the current delegations to the ShapeShift branded Cosmos validator come from 10 addresses. Over the last eight months, TaxiStake has developed relationships with these large accounts through its public Discord and Telegram channels. While these delegators support the use of the ShapeShift name for a portion of the revenue split, they have indicated that the biggest reason they delegate to TaxiStake’s validators is not because of the ShapeShift brand or support of the DAO, but because of the availability and the security standards put in place by the TaxiStake team. Looking at the smallest cohort of delegators with fewer than 100 ATOMs, most of them have delegations of less than 0.1 ATOM.
- The bear market, in conjunction with the 30% commission split, is putting financial pressure on TaxiStake’s ability to maintain operations and growth. Put plainly — TaxiStake needs more money to support its existing systems and enable growth on new blockchains.
- Market changes led to TaxiStake’s one-year Sablier stream of 100,000 FOX losing 85%+ of its USD value.
- ($0.41 NOV 20221 to ~$0.060 July 2022)
- ~$41,000 to ~$6,000
- Same dollar amount today would be over 600,000 FOX
We want to note that many of these things that “didn’t go that well” were beyond both TaxiStake’s and ShapeShift DAO’s control. That being said, all of these events contributed to the current environment that we all must navigate.
TaxiStake is a huge supporter of the DAO. We take pride in the fact that we were the first revenue source for the DAO, and have provided over 11% of the DAO’s revenue with the Cosmos validator alone at a relatively minimal expense (1% of the DAO’s total expenses, all in FOX) — all the while maintaining the highest level of security and availability on our validators.
TaxiStake has made considerable financial contributions and sacrifices to try to provide a win/win situation for both TaxiStake and the ShapeShift DAO. However, in reviewing the data, we unfortunately have not seen the increases in delegations that both organizations expected from use of the ShapeShift brand. Further, the ShapeShift DAO has not undertaken actions that could have strengthened the validator’s performance. The DAO has not delegated any native tokens to its own validators, hasn’t staked any rewards it earns back onto its own branded validator, and has not used its platform to drive delegations to the validator. Finally, the Cosmos validator’s largest account holders have indicated that they will continue delegating to TaxiStake’s validators regardless of whether TaxiStake shares its revenues with the ShapeShift DAO. Given these circumstances, along with the current market financial pressure, TaxiStake will not seek to renew its validator proposal at the end of October with its current terms. This may change if the ShapeShift DAO proposes a plan to drive delegations to TaxiStake validators with a new commission split arrangement that can help both parties earn more revenue.
TaxiStake is still a strong supporter of the DAO and its mission, and will continue to be an active member and continue to support the DAO in as many ways as possible. We look forward to hearing options that could drive more delegations and more revenue to both TaxiStake and the DAO, and we hope that one of these options results in a renewed proposal and success for everyone. All comments and suggestions are very welcome. Lets DAO the damn thing!!