In the past, I’ve stayed out of Cosmos politics. But, given where I perceive the ecosystem to be and some of the stuff I found out at Cosmoverse, I feel it’s important to share some thoughts and spur some discussion amongst the community.
At Cosmoverse, I learned that the Interchain Foundation (ICF) spent $50M in 2022. For reference, this is more than the Ethereum Foundation (EF) spent during the same time period.
Given the state of Cosmos right now, it seems to me this was an ineffective use of capital. Most of the funding was distributed to a small number of development orgs who each focus on different parts of the stack, building out whatever they think is interesting with no clear, centrally coordinated ecosystem vision or strategy that I can discern. I believe the capital allocation strategy is fundamentally flawed and will continue to lead to bad outcomes for the ecosystem.
Given the ICF has ~$250M left and proposes to spend another $40M this year in much the same way, I thought it’s important to outline:
- where Cosmos is rn and what I think it needs to do to win
- why I think the current ICF strategy is flawed
- how I’d allocate capital to achieve these goals if I were the ICF
Before I begin, just a few disclaimers:
- These are my own thoughts and don’t represent Delphi
- I’m an outsider to the ICF and to Cosmos politics generally and probably lack important context
- None of what I say should be interpreted as a personal criticism of the people are the ICF or any of the funding recipients. These are the people responsible for bringing Cosmos to where it is today and we owe them much
Where Cosmos is right now and what it needs to do to win
Fundamentally, Cosmos has great tech but terrible distribution, with little project funding, liquidity, devs and users. It’s important to realise that a blockchain’s customer is the app developer, who builds applications that in turn, bring in users.
Cosmos succeeds if the stack attracts devs, and it’s USP for devs is the customisability and sovereignty offered by the app-chain stack. Crucially, this stack must enable applications that could not be built using smart contracts on an existing blockchain. These apps can’t just be a little better, they have to be so much better that they compensate for the opportunity costs of deploying a Cosmos app-chain (bootstrapping validator set, coding in Go, wallet support, etc.) and Cosmos’s lack of distribution, compared to alternatives.
Cosmos was early to the app-chain thesis, but this has now been co-opted by many other ecosystems with OP Stack, Polygon, Avalanche, and many others all adopting and building towards this narrative.
Based on our research, Cosmos tech is still a few years ahead both in terms of the customisability it enables and the maturity of its interoperability stack. However, others are catching up quickly on the tech side, and even more quickly in terms of market share. Many projects that should be app-chain users are picking other tech stacks, largely because they don’t perceive the advantages of Cosmos tech to outweigh its costs and lack of distribution.
History shows us that good tech doesn’t always win, and I see this emerging trend as an existential threat to Cosmos’s relevancy as an ecosystem. I believe we should call this out and treat it as such.
In my opinion, the ICF’s primary focus should be on fixing this by attracting ambitious developers to come and build interesting new applications that aren’t possible elsewhere.
ICF Current Strategy
Right now, ICF’s funding is largely distributed to a small handful of entities (Interchain Gmbh/Informal/Strangelove). As far as I can tell, there is no centrally determined strategy/roadmap, and these organisations mostly end up building whatever they think is most interesting. While these are highly intelligent/skilled devs to whom we owe much, what devs find interesting to build (i.e. hard technical problems) doesn’t necessarily overlap with what end-users want. There are many examples of this which I won’t get into here.
How I would allocate the capital if I were at the ICF
How do you build what users want? To put it simply: you have to identify them, listen to them, prioritise their needs. Then repeat this process over and over again.
Firstly, the ICF desperately needs to develop a strong BD function. This is key not just to identify and attract talented builders to the Cosmos, but more importantly to get direct feedback from the market on Cosmos as a product, and what it needs in order for it to be an attractive place for builders. This market feedback should then serve to inform the ICF’s strategy, roadmap and prioritisation. While the ICF was early and modelled after the EF, which is a very tech-focused org and doesn’t directly do BD, the Eth ecosystem has always had Consensys to take up this role. Every other successful L1 ecosystem since has succeeded on the back of strong BD.
Secondly, the ICF should establish a council of prominent application builders (e.g. @sunnya97, @BPIV400, @0xSpaydh, @AntonioMJuliano, @chris_amani, @jayendra_jog, etc. ) empowered to give out sizeable grants to ambitious teams sourced by the BD function. Grant sizing should be competitive with other ecosystems (i.e. up to $1M per grant), and contingent on the tech being open-sourced and, if applicable, upstreamed to Cosmos SDK to the entire ecosystem’s benefit. The grants could be partly given out in credits to spend with the ecosystem dev orgs, subsidising project dev costs and audits. Crucially, the power to allocate budget and determine what is build should be held by application devs who are closest to users rather than development orgs.
Thirdly, the ICF should continue to fund core public good such as IBC, Cosmos SDK, Cosmwasm, etc. However, the relative importance of each of these and the development roadmap should not be determined by the ecosystem orgs. Instead, they should be determined by the builder council since, as users, they are much more likely to be able to identify what’s important for the ecosystem and what should be prioritised. This council could also serve to keep the dev teams accountable on spending/timelines.
Finally, the lack of VC interest in Cosmos also represents an existential threat to the ecosystem. While I believe executing on the above 3 points would help kickstart VC interest, the ICF could also consider spinning up an ecosystem fund to invest in promising projects directly.