Polkachu Intern | 2023-01-28
CosmosHub was right. We need hubs to be the gateway and homebase for users to interact with an increasingly connected Interchain world.
Unfortunately, CosmosHub has not been able to execute on this vision beyond squatting the good names like "Cosmos" and "Hub". A few recent failed proposals (Prop 69 and Prop 82) have further handicapped CosmosHub from ever becoming a hub. Maybe the saving grace is the upcoming InterChain Security (ICS). However, it is likely that ICS will not be market competitive when it finally ships.
On the other hand, a few contenders have emerged to become more hub-like. We might have a hub war brewing in 2023.
While Cosmonauts love to discuss hub and fight over it, it is a pity that there is no clear definition of what is a hub or what represents "hub-ness". Lo and behold, this intern is going to attempt such a herculean task in order to enshrine himself into Cosmos Hall of Fame.
A crypto hub has 6 components:
CosmosHub, Osmosis and Terra are the 3 contenders of the Hub War. Here I rank-order them according to each element of "hub-ness".
CosmosHub: Unsurprisingly, CosmosHub has nothing much going on here. Yes, it is very connected in the IBC world, but it is largely due to its OG status and its high market value. Many chains connect with CosmosHub just to leverage the high market value of ATOM for their DeFi. After rejecting Prop 69 and Prop 82, CosmosHub bets its house on Interchain Security. Unfortunately, it might not be competitive against Osmosis' Mesh Security or Terra's Alliance. ICS has taken forever to conceptualize and design, its onboarding process is convoluted (see the dank meme below), and at this point I am not sure if it can ship before the two competitors.
Osmosis: Osmosis is currently the king of "hub-ness". It has the Keplr wallet, the dominant DEX in the Interchain, permissioned CosmWasm and a naming service widely promoted on Keplr wallet. Many chains connect with Osmosis directly for token liquidity. Once it launches Mesh Security, it will be the Interchain Thanos who has collected all 6 Infinity Stones of "hub-ness".
Unfortunately, Osmosis has a strategy conflict among its business units that would deprive itself from becoming a hub. Its Keplr wallet charges a heavy fee (rumored at $360k) for custom integration. Keplr's desire to monetize on wallet creates two classes of chains, preventing Osmosis from pursuing a hub strategy in a credibly neutral way. On the other hand, the existence of Osmosis the DEX has handicapped the Keplr wallet from integrating down the stack (for example, the Keplr wallet should have one-click swap and IBC transfer), thus preventing the Keplr wallet from becoming the true gateway to the Interchain.
A side node: It was a genius move for Osmosis to acquire Keplr in its early days. However, the time has come for Osmosis to spin out Keplr, because the combination is now value-destructive. I will save it for another post.
Terra: Terra is the most interesting and surprising among the three. In fact, Terra was not even on my hub radar just a month ago. After the UST collapse, I even wonder why we need Terra without a stable coin. After all, the stable coin was the backbone of Terra Classic. Now it has become increasingly clear that Terra is pursuing a hub strategy. No matter how you think about Do Kwon and his team, you have to give it up for their clear vision and speedy execution.
Terra already has the Station Wallet and permissionless Cosmwasm. It is working on a naming service aggregator to integrate any naming service. While it does not have a dominant DeFi app, it has the popular Astroport app plus a few DeFi aggregators such as TFM and Rango. According to DefiLlama, Terra's TVL is at $40M, not too shabby for a relatively young chain.
Recently, the team works with many chain projects to integrate with Station wallet free of charge. In exchange, each project opens IBC channels with Terra directly. Within a few weeks, many major chains are already supported on Station and many more will be on a rolling basis (see here). This free-of-charge integration strategy is Keplr's blind spot. Because the Station wallet does not have the strategy conflict with a downstream DEX app, it is free to integrate one-click swap and IBC transfer, thus leapfrogging Keplr as the true gateway to the Interchain.
Yet, the most interesting piece of Terra's hub ambition is its Alliance product. The details of Alliance are yet to be fully revealed. My understanding is that it is similar to Mesh Security: leveraging staked tokens to secure other chains. While it was recently conceptualized last year, TFL's Jared is already making the media tour to announce its upcoming testnet launch. Given Terra's track record of product shipping, my bet is that Alliance will launch to mainnet before Interchain Security and Mesh Security.
CosmosHub is a hub in name only and has everything to prove with the upcoming Interchain Security.
Osmosis is most hub-like, but its ambition is not becoming a hub and its wallet unit has a strategy conflict with its DEX unit.
Terra has a chip on its shoulder to prove that they are a formidable builder with or without a stable coin. It has become increasingly clear that it has a hub ambition. The strategy is right, the prize is large, and the team has been executing it almost flawlessly.
CosmosHub was right, but Terra will take the prize.