Operate a Cosmos Validator on behalf of the ShapeShift DAO

Summary - This proposal would accomplish the following: 1. A validator will be run on the Cosmos blockchain with the intention of providing an alternate revenue stream for the DAO. 2. This proposal is scoped to one blockchain, Cosmos. This will not only strengthen the ShapeShift DAO, by providing multiple revenue streams, but also provide security to other decentralized communities through trusted validation services.

Abstract - We envision income from validating to be a core pillar of the ShapeShift DAO Tokenomics Workstream in the near future. There are many opportunities for the ShapeShift DAO to earn passive income through Proof of Stake activities on several blockchains. One such opportunity exists with the Cosmos blockchain. Cosmos is a Proof of Stake (PoS) blockchain built using the Tendermint core. A core function of the Cosmos blockchain is delegation and rewards for delegation. Delegation helps secure the network and participants earn rewards for their participation. More info can be found here: https://cosmos.network/learn/staking/. ShapeShift has been a participant in the Cosmos ecosystem since 2017. The Security and Information Technology team at ShapeShift have been securing the Cosmos network since the early days of the Cosmos blockchain and have become experts in the subject. The validator started as an R&D project and has since evolved into a steady stream of income for the business. This validator was done under an anonymous name. We believe that the DAO will benefit by continuing to support Cosmos in a more public manner.

Specification - We are proposing that the ShapeShift DAO continues to support and secure the Cosmos ecosystem by creating a FoxStaking validator. Setup and maintenance of the validator will be done by TaxiStake under the FoxStaking brand name, foxstaking.com. Rewards, in the form of ATOMS, would be distributed to the DAO to diversify the income streams of the DAO.

Last year, the Cosmos validator for ShapeShift earned about $250,000 with no marketing or branding. We are proposing that the validator commission be set at 10% and rewards from this validator will be distributed to the DAO treasury and TaxiStake in a 70%(DAO)/30%(TaxiStake) split for a 12 month period. Cosmos users who delegate to FoxStaking will be supporting the ShapeShift DAO as well as securing the Cosmos network. For the setup and overhead of this validator, TaxiStake is requesting a 50,000 FOX upfront grant and 100,000 FOX subsequent grant in a Sablier stream over 12 months. FOX in a Sablier contract would allow the DAO to “terminate” TaxiStake by canceling the stream if we are not living up to the standards of this proposal. Also, a Sablier stream incentivizes TaxiStake to send commissions to the DAO. The ShapeShift DAO treasury administrators would need to create a multi signature Cosmos vault to allow FoxStaking to deposit commission rewards to the ShapeShift DAO treasury on a monthly basis.

On successful completion of this initiative, the DAO community or TaxiStake can propose other projects for future staking activities on other blockchains under the FoxStaking.com brand with similar commission sharing incentives. There is an opportunity for TaxiStake or the DAO to purchase the existing validator from ShapeShift but it is also possible to start a new one for this proposal.

Motivation/Benefits - We have been operating validators on several chains professionally for several years. The ShapeShift validator, under our team’s supervision, secured over $60mil on the Cosmos Blockchain, at the market peak. With the opportunity to transition from ShapeShift employees to something else, we want to take on validating full time. We see this as a critical first step for the DAO to diversify and obtain an alternate revenue stream. Everyone would like to see the DAO succeed and we believe an essential pillar of its success is to have diversified revenue streams. The Tokenomics workstream is likely to be one of the largest of the DAO; we want to see validating as a crucial pillar. Right now, the DAO is 100% long FOX. A diverse portfolio of cryptocurrencies is crucial to the DAO’s long-term survival as well as meeting the values of a chain-agnostic open protocol that promotes self sovereignty.

Drawbacks - To be a validator in the top 100 requires a minimum of ~200,000 ATOMs delegated at time of writing (~$3,000,000 USD). However, we believe that the ShapeShift DAO community can easily move past this barrier.

Vote - If you vote “for” this proposal you are voting to fund a total of 150,000 FOX that will be distributed to TaxiStake for creation and maintenance of a FoxStaking validator, foxstaking.com, in the form of 50,000 FOX immediately and 100,000 FOX in a Sablier contract for a 12-month period.

If you vote “against” you are saying you do not believe this Cosmos validator should move forward. Or maybe just not in this way.

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I think this is an obvious Win/Win for the ShapeShift DAO and TaxiStake. I’m excited to get this moving and make it a success.

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I’m a big supporter of the DAO participating in this form of income creation. Big ups for putting this together Marley :raised_hands:

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I’m a big supporter of this proposal, love the idea of the DAO getting a passive income stream by investing in and helping support taxi staking/fox staking full time on this to run a cosmos validator and pulls ShapeShift even more into the cosmos ecosystem which I think is amazing.

I think it would be a great thing if the current ShapeShift validator was acquired as that would put this on the right path from day 1 as opposed to having to build up the necessary stake from scratch, but realize those details are still being worked out (but I hope this ends up being the path for this).

One thing I am unsure of is the revenue coming back to the DAO being in atoms. While I would love for the DAO to hold some atoms in its treasury it’s just not technically possible today and I would prefer we don’t spawn a new multi sig for every chain we want to hold. Preferably, taxistaking would do something like convert the atoms owed to the DAO into some sort of eth based asset the community wants its revenue paid in every 2 or 4 weeks (like eth or an erc-20 stable coin). If some new tech comes about that would let the current DAO own and control atoms I would be fine with that too, but I don’t think it should do that to start and I would prefer to see the revenues hit the gnosis safe treasury directly.

Assuming that one issue is resolved, I love everything else behind this idea and proposal and would be a strong supporter of it!

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We can probably figure out some kind of conversion. I also am unsure how to deal with “ATOMS” in a ETH DAO. I am watching Ethermint very closely. GitHub - cosmos/ethermint: Ethermint is a scalable and interoperable Ethereum, built on Proof-of-Stake wit

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Yes! I have a lot of ideas always zipping around my head, but one thing that’s always been in the back of my mind is all the new ways to make passive income. It’s crazy. This would be a great test run for other potential networks!

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For sure, once there are established eth bridges that let atoms go back and forth via ibc then it will prob become possible to hold erc-20 based atoms in the gnosis treasury which I would fully support. Also could be swapped for eth or erc-20 stables via osmosis or gravity dex at that point and then sent back over the bridge and deposited into the gnosis treasury.

My suggestion would be to add optionality to the proposal so that revenue will be paid to the DAO in eth or erc-20 stables until such time that atoms can be sent directly to the treasury via a bridge or etc. Then this would have my full support!

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Active development for Ethermint is taking place here…that’s something that I’ve been tracking for a while. tharsis/ethermint: Ethermint is a scalable and interoperable Ethereum, built on Proof-of-Stake with fast-finality using the Cosmos SDK. (github.com)

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I like this proposal, and I want to learn more about it. As far as bare mental goes…if you’re not doing a lot of experimenting with a machine and you install the dependencies that your programs running on your machines need, it simplifies things.

However, I love docker and kubernetes and isolating my programs from access to other areas in my machine. It makes managing my development environment much less of a head ache. What kind of equipment are you currently running the validator nodes on?

The thing with a validator node, at the time that I set one up for the test net, was Ethereum was experiencing a high volume of DDOS attacks on its network and it was causing a lot of transactions to sit in the que without get processed for long periods of time. I kind of expect that this same kind of coordinated attacks will happen on any chain that process a high-volume number of transactions. I do know how to circumvent or mitigate that risk, but there are unknown unknowns.

That said. I’m still interested in your proposal and also equipment being used.

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I like certus.one’s write up on using kuberneties for validators.

Blockquote We strongly recommend against the use of Kubernetes and similar technologies for your core validator operations - they solve problems validator operators don’t have. Validator core infrastructure are pets, not cattle . You can’t just deploy a cloud instance, you need to rent dedicated servers and plug HSMs into them. Even if you’re running an active-active setup like ours which tolerates full node outages, you’re unlikely to gain enough from Kubernetes to justify its costs. We recommend traditional configuration management tools like Ansible.

For sentry nodes in front of your validators: cattle, use kubernetes and kill at will
For the validator signing blocks: It’s a pet that you keep alive and maintain.

However, I agree, using Docker to manage the system daemons is nice on both to have reproduceable builds

https://kb.certus.one/systems.html

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Yea - setting up a Validator node is something I would have to invest more time into to do professionally. There were only 6-7 teams as the CosmosSDK went stable at v1.0 on the test net, and everyone that was helping with the test net were reporting on the type of equipment they were set up on (and the costs) at the time, that’s why I ask. I wasn’t so much speaking on running the validator node on Kubernetes as I was system’s engineering and design in general. That article is out of date, and it’s a space that has historically seen rapid innovation, for example: there are more secure key vaults that can be used in clouds other than Kubernetes subsystem. I wouldn’t contest a dedicated machine doing one thing isn’t still the most viable way to go about setting up a validator node. It’s not an area that I would say I have expertise, just a little experience.

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Thanks for posting this idea! I’m of course a huge fan of Cosmos, and validation as revenue stream is worth considering.

Two main points:

  1. I don’t think it’s appropriate for the DAO to pay TaxiStake, and then TaxiStake to earn 30% privately. I DO think it’d be appropriate for TaxiStake to earn 30% if DAO isn’t fronting money, and then DAO to earn 70% for providing both brand name association, and integration/favored staking provider within the platform. That feels fair. Alternatively, if DAO did fund X amount to get this going, I’d be okay with that if DAO receives 100% of revenue until X is repaid, and then we go to the 70/30 split. I’d support either option.

  2. If DAO earns revenue in ATOMs, I’d insist that ATOMs be converted to USDC or stablecoin. If we’re trying to diversify the treasury (a good goal), then treasury needs to hold uncorrelated assets. FOX and ATOMs are too correlated.

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I support the efforts of adding additional revenue streams to the DAO and using validators as a way forward in that goal, seeing value in this proposal to have a Cosmos validator is a welcome step. A few caveats I would also like to point out are similar to others who have taken the time to comment.

  1. I would prefer to have the current validator acquired with the applied stake, verse 
     any new stake having to be started from scratch. I see this most likely as prohibitive 
     at this stage of the DAO with all of the other processes and activities needed and 
     necessary to build and promote this new venture.

   2.  I also would prefer the returned revenue to be in a stable coin i.e. Dai if the 
        associated plans go forward with the ideas that have been presented to the 
        community. The importance of having an asset that can be kept and deposited in 
        the current vault is important for the DAO. I understand that this concern can be 
        alleviated with a new development which could allow for ERC-20 ATOM to be 
        deposited in the existing treasury and look forward to that ability.

   3.  Providing diversity in the treasury is great and welcome but it should be diverse, in 
        the beginning maybe more mature and dissimilar in function or what the problems 
        the coins are looking to solve or accomplish. Volatility is always a concern with a 
        new token so finding ways to help mitigate that is a net positive.
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Hey DAO community!
This proposal has been quiet for awhile but I’ve been working really hard in the background. I have a few great updates to post before I take the official vote to SnapShot on Monday.

Summary of Changes:

Since the time of the original forum post TaxiStake has purchased an existing validator, Velocity V1 (cosmosvaloper199mlc7fr6ll5t54w7tts7f4s0cvnqgc59nmuxf), from ShapeShift. Instead of renaming the validator to be foxstaking.com it will be renamed to ShapeShift (operated by TaxiStake). The rewards from the ShapeShift validator will be distributed to the DAO treasury and TaxiStake in a 70%(DAO)/30%(TaxiStake) split for a 12 month period starting Nov 1st 2021 thru and including October 31st 2022. TaxiStake will work to convert the ShapeShift DAO’s reward from ATOMs into an ETH based asset, USDC, until the Gnosis safe adds ATOMs support or some kind of synthetic ATOM on ETH exists.

Thank you for your patience and support!

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Epic update @Marley! I’m already delegating most of my ATOMs to VelocityV1 and plan to re-delegate the rest of my ATOM to ShapeShift (operated by TaxiStake) going forward.

Super excited for this initial validator and the revenues it will bring into the DAO, and hope to see you support a growing list of Cosmos Zones (and other POS networks) in the future.

So freakin excited for the upcoming day where I can stake on multiple networks with KeepKey/ShapeShift, help the DAO generate revs in a way that doesn’t cost me any extra, and hopefully earn bonus FOX from the DAO as a reward for the revenue I help generate.

Looking forward to voting yes on this on Monday!

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I am very excited too @willy . Thank you for your support.

I wanted to add we’ve picked NOV 1 to give us ample time to transition the Validator and have clear timeline in the proposal. :fox_face:

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Very cool, love the revenue generation proposals, you have my support!

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