On October 15th 2020, Confio team were happy to join the Staking Hub Telegram, Figment´s event to answer all of their questions regarding Tardigrade, our DeFi-dedicated chain, its consensus mechanism Proof of Engagement, its validator set and reward as well as its governance. Below is the transcript from that AMA session.
Gavin: I’m excited to chat about CosmWasm, or Tardigrade, or Confio 😛
Clayton: Well Gavin…it´s time! Hey there Confio team. 🙂
Misang: Hello everyone! This is Misang from Confio. I’m in charge of Business Development and Sales, glad to be here today.
Martin: Hi, Martin, here, COO and VP of Product, happy to be here too.
Orkun: Hello! This is Orkun from Confio. I help dev evangelism and smart contract development!
Gavin: Hey Martin, Misang and Orkun! I know Ethan has been working on CosmWasm for a while and now it’s either implemented or being implemented on a number of Cosmos-based chains like Terra. What made Confio decide to launch its own chain?
Martin: We are launching our own chain as we are focusing on DeFi to leverage CosmWasm and with the work on governance we are working towards the regulated markets.
Gavin: Thanks, so how will Tardigrade be compliant? I know a number of projects that have sort of been left in the lurch while awaiting approval from regulators.
Martin: We are building governance frameworks to ensure that regulated institutions can comply by creating self-sovereign groups (a form of permissioned groups). We will not be seeking regulatory compliance in the short term, but facilitate institutions to help them be compliant.
Gavin: I know Agoric is also building their platform to focus on secure smart contracts, with Agoric focusing on reusable DeFi components. Curious to know if/how Tardigrade will be fundamentally different from Agoric, but no pressure if you’re not familiar enough with Agoric.
The fundamental technical difference between CosmWasm and Agoric is that we are tightly coupled to the SDK and allow native modules to call into contracts as well as contracts call into native modules. Plus you can add support for chain-specific custom modules without forking with CosmWasm.
This means existing projects can reuse and expand their existing Cosmos SDK modules when adding CosmWasm and there is no need for a rewrite.
Beyond this critical technical difference, Tardigrade is much more than a “generic smart contract platform”, and our vision is much larger than just jumping on the DeFi train.
The fundamental business difference is our focus on self-regulation and self-governance. This goes from the Proof of Engagement whitepaper we have been working on for over a year to our business plan focusing on “Regulated DeFi”
Gavin: Is this related to the work that CosmWasm is doing for the Cosmos Hub? Permissioned governance-controlled smart contracts?
Misang: GaiaFlex testnet, permissioned governance-controlled smart contracts were built as per Cosmos community’s request, the community proposal no.25. This is different from our permissionless testnet, aka Coral. Coral’s successor would be Tardigrade.
There are many voices in the Cosmos community whether they should allow CosmWasm/governance-controlled smart contracts on the Hub, and we just provide the infrastructure so that the community can play with it, test it out before making the final decision. We won’t be operating GaiaFlex ourselves soon, happy to hand it over to others
Clayton: Besides being built for the Cosmos ecosystem, what are some of the differences of CosmWasm contracts in comparison to Solidity contracts on Ethereum?
Orkun: CosmWasm smart contract architecture is designed with lessons learned from Solidity. Attack vectors such as Reentrancy, Delegate Call, Block Timestamp Manipulation covered in CosmWasm. Plus Rust is secure by nature.😉 For more information, you can follow https://docs.cosmwasm.com/architecture/smart-contracts.html#lessons-learned-from-ethereum
Clayton: What are some of the benefits of deploying CosmWasm smart contracts on Tardigrade for DeFi? Is the experience similar to other chains that support CosmWasm?
Orkun: As built for the Cosmos ecosystem, naturally tight integration with Cosmos-SDK and interoperability with multi-chains is guaranteed with IBC integration.
Besides that, CosmWasm is designed with secure architecture to avoid all attack vectors present in Ethereum( Reentrancy issue, lesson learned from Ethereum)
Smart contracts running in CosmWasm add valuable flexibility and development speed to Cosmos-SDK chains
You can leverage the speed of WebAssembly and the power of Rust to perform any algorithm you want.
Clayton: I know that y’all are planning to launch an Automated Market Maker on Tardigrade. Will this be a similar user experience to Uniswap?
Martin: It will be based on Uniswap v2.0
Clayton: What tokens will the AMM support?
Martin: Not fully decided but we have this list so far.
Gavin: Are these governance frameworks essentially DAOs? The use-case being for making permissioned groups that can set policies to be compliant with regulations.
Martin: Not as complex as DAOs. The scenario is that Alpha Bank, verifies that Beta Bank is licenced to trade debt instruments, and joins Omega Bank, they are now a group that trade debt instruments, the instruments are linked to the group.
Gavin: How will ETH be exchanged on the AMM? Will Tardigrade use Peggy to connect to the Ethereum ecosystem?
Martin: Exactly, we are working with Althea on building Peggy and will use it on our chain.
Clayton: TDG being the native token on Tardigrade?
Misang: Yes, exactly.
Clayton: What are some of the other use cases for Tardigrade?
Martin: We have plans for financial innovation once the chain is live.
Clayton: Any reason not to support a token? Have y’all discussed any specific requirements?
Martin: We are open to supporting different tokens but it comes down to where the liquidity comes from.
Digi bytes: How and when can we get tokens?
Martin: We are not selling tokens for the moment.
Clayton: How does Tardigrade’s proof of engagement consensus differ from a more traditional proof of stake consensus?
Misang: Proof of Engagement is the best compound of Proof of Authority and Proof of Stake consensus algorithm. The incentive mechanism of the Engagement Rewards is designed to bring community wide participation, and this collaboration makes a chain much stronger. Through the combination of Stake and Engagement Rewards, you can have the case where high stake + low rewards is the same as low stake + high rewards, in addition, we use sigmoid curves as a way of disincentivizing reward through large stakes thus promoting decentralisation.
Martin: PoE is designed to incentivise the whole community around the blockchain thus creating a collaborative environment. The introduction of Engagement Rewards incentivises active participation in the chain. For validators, there is a combination of engagement rewards and stake which determine the rewards distributed. The Engagement rewards have a “half-life” meaning that in time the rewards decay, thus incentivising continuous engagement.
Orkun: One liner: Proof of Stake * engagement metric as reward multiplier = Proof of Engagement
Gavin: How do you envision this sort of thing happening? What’s the case for large institutions using Tradigrade instead of traditional markets?
Martin: It is a long road, and we begin with creating the frameworks for them to be able to use Tardigrade and comply with the regulations in their jurisdiction. The next step is for the innovation in DeFi, and build new products around the exchange of value.
Gavin: What kinds of engagement? is there a simple way to say what’s happening? What are the engagement metrics? I still don’t understand what triggers engagement rewards
Orkun: Engagement like you are doing exactly right now! You are doing a great contribution to the community holding this AMA and we believe activity like this should be rewarded for healthy blockchain networks and development. One of the engagement metric adjustment procedures: the on-chain governance decides to increase the engagement multiplier of the members that shine with contributions! Of course, it is not only this. You can read our PoE paper for more in-depth details: https://github.com/confio/ProofOfEngagement
Martin; The Engagement Rewards are distributed to the wider community, and the function for validators is to combine these rewards with their stake. We are keen for validators to be engaged as part of the wider community.
Clayton: I think we just earned some TDG, Gavin
Orkun: Not only TDG also community’s heart ❤️
Clayton: How do you determine what a quality contribution is?
Martin: The decision on contribution is off-chain and determined by humans. (the Oversight Community)
Clayton: Who represents the oversight community?
Martin: This is a self-sovereign group, which will probably start as a monarchy but will go self-sovereign as soon as practical.
Clayton: Would this, deciding who is in the oversight community, be decided through on-chain governance in the future?
Misang: With time goes on, and things get more mature, we will move from ¨monarchy¨ to self-sovereign, on-chain governance.
To add more on on-chain governance, the Constitution will be published, which is working in progress.
Short summary, oversight community (self-sovereign) who oversee the allocation of engagement rewards, a circuit breaker committee (suspend Pegs or IBC if they come under sustained attack from arbitragers) and an Arbiter Pool designed as a dispute resolution body independent of the oversight community (disputes limited to constitution and interpretations of the rules).
Clayton: You mentioned (PoE as the) combination of proof of authority and proof of stake. What is the approval process for validators?
Martin: There is no approval process. Any validator can join. The interesting route for a new validator would be to work at building both their stake and engagement rewards.
Gavin: Is there some demand for this sort of thing, or will the demand need to be created? How will you make in-roads with these institutions? We’re not seeing the “build it and they will come” idea playing out favorably in the broader space.
Martin: Agree that the “build it and they will come” is not the best approach to building a business. We are seeing small steps in tokenization and a hunger for financial institutions to make returns in an environment of negative interest rates and asset buying from central banks. One way to increase returns is to dramatically reduce costs which is what P2P trading brings.
Clayton: What is the expected reward rate for validators?
Misang: Depends on engagement, which is subjective and will be decided by the oversight committee. At this point, we cannot tell the exact reward rate as the initial validator set is not determined yet. Plus there will be 3 different categories of validator depending on their engagement.
Clayton: So positive off-chain activity will be rewarded on-chain?
Misang: Yes, correct.
Clayton: How will the TDG token capture value in the long term?
Misang: The token captures value both through the restriction of supply and the returns from fees and commissions
Gavin: Do you expect the chain’s parameters to be very different from those of the Cosmos Hub? eg. equivocation slashing 5%; downtime for 10k blocks 0.01%; inflation 7–20%
Orkun: It is very hard to answer at the moment since PoE will have different token dynamics.
Clayton: will the TDG token be used for anything else? I know y’all mentioned trading pairs on the AMM. Any benefits of using TDG on the AMM?
Misang: In addition to the rewards and fees, there are the commissions from core products such as AMM and Pegs which are paid into the reward pool for distribution.
Gavin: Will there be a community pool?
Orkun: I don’t see a reason to not have one.
Clayton: Great. We are almost out of time. What can we expect from Tardigrade in the near-term? How can folks get involved?
Misang: We are preparing the incentivized testnet which will be launched soon, Q4 2020 where folks can join and get engagement point which will be passed on to our mainnet, Tardigrade(the name could change due to Trademark issue, we are investigating at the moment) will be launched in Q1 2021.
Orkun: How can folks get involved? First step, join us on our discord: https://docs.cosmwasm.com/chat, be active in the topics that you are interested in. If you are a developer, check out CosmWasm, don’t hesitate to contact us. And most importantly, keep up the good work, will and, engagement 🙂
Misang: Thank you very much for inviting us, Figment network team and everyone!
Gavin: Thanks for joining us, Confio team, and anyone following
Clayton: Thanks for joining everyone!
Orkun: Thank you all 🙏