Some frequently asked questions about the recent Informal Systems and Hypha Coop funding proposal for the Cosmos Hub.
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The requested amount is for $5.7M + 100k in ATOM for Informal and Hypha to staff the core development of the Cosmos Hub.
The budget that Informal and Hypha has proposed is based on the teams’ experience helping to build and maintain the Hub, and is a realistic estimate of what is required to adequately serve the customers of the Cosmos Hub, maintain smooth operations of the Hub, and build ICS momentum. It is a continuation of their work in 2023.
The funding is for the Hub teams at Informal and Hypha. Informal and Hypha are larger entities that do other work, but this funding is only for their Hub teams. The Hub teams at Informal and Hypha have taken it upon themselves, as part of an effort to become more independent, to pursue this funding directly from the Cosmos Hub, in order to establish a better direct relationship between their teams and the Cosmos Hub.
Of course, these Hub teams are supported and enabled by their parent companies with additional functions like legal, HR, operations, marketing, etc, as well as their companies’ technical expertise in related areas. It would be difficult to recruit the same caliber of teams for the Hub without these resources and supports.
The proposal includes the $5.7M budget, plus a 25% buffer to hedge the risk of a drop in ATOM price during the voting period, plus a 100k ATOM potential bonus. Here’s the math, calculated at a $7 ATOM price (the price at the time the proposal was published):
$5.7M USD = 814,285.71 ATOM
25% buffer on $5.7M = 1,017,857.14 ATOM
100k ATOM bonus = 1,117,857.14 ATOM
Upon passing, $4M of ATOM (i.e., 70% of $5.7M) will be converted to USDC immediately and held in vesting accounts, in order to cover most of the dollar denominated costs of the team. The remaining $1.7M of the budget (30% of $5.7M) plus the 100k ATOM bonus will be held in ATOM in vesting accounts, ensuring the teams remain aligned with and incentivized by ATOM. Regardless of ATOM price at the time of liquidation, and excluding the 100k ATOM, the dollar value of the total budget sent to the vesting accounts is not to exceed $5.7M. Any remaining ATOM will be immediately returned to the community pool.
The bulk of the funding must be denominated in dollars to cover salaries, taxes, overhead, etc. This enables a team size of 15-20 people, which roughly corresponds to the current team. This team is enough to cover necessary improvements and R&D for Interchain Security, as well as ongoing maintenance for the Hub software and testnets. Any unused budget will be returned to the community pool.
The additional 100k ATOM are intended as performance bonuses, subject to decisions by the oversight committee. Bonuses are standard practice in high performance projects. This bonus is denominated in ATOM, to improve incentive alignment between the core dev teams and the Hub.
No. As detailed in the proposal, the cost is more like ~$325k/year, which is a standard rate for a professional software engineering contract. It is higher than you would expect for a direct employee because it’s not an employee’s salary, it’s a contractor’s rate.
It’s not possible for the Hub to employ people directly. The Hub has to engage companies. Those companies pay their employees $150-$250k/year, on top of which those companies have to pay taxes and social security (sometimes as high as 40%), as well as their own overhead. Finally, those companies face opportunity cost, and should earn a market rate profit. So the total cost reflects more than just the employee’s take home salary.
The rates quoted take all of this into account. They correspond to market rates for software contracts. Rates for software engineers commonly range from $150-$250/hr. At 40 hours a week, 47 weeks a year (accommodating vacation and holidays), and with a discount to account for it being a stable, longer term contract, we get annual rates of ~$225k-$375k/year. The rates of this proposal fall well within that, and correspond to rates the ICF has been paying.
This proposal would be one of the largest community pool spends in the Hub’s history, and would be the first time the Hub directly funds a full core development and maintenance team. This would mark a major milestone for the Cosmos Hub. At current rates of inflation and community pool tax, the pool would be replenished fully in 2-3 months. This effectively means that it's not just 20% of a fixed supply, it’s ~16-25% of the community pool’s annual potential, which is a not unreasonable percentage for the pool to spend on its core development. Further, the ICF has also pledged to cover more than half of the cost of the proposal (see below).
The ICF has been funding Hub development since inception. The 2022 report included ~$7.8M for the Hub across 7 teams. Beginning in 2023, the ICF’s funding for the Hub was greatly simplified and streamlined by consolidating into just 2 teams with a smaller budget: Informal and Hypha, for ~$5.7M. Headcount and costs were able to be reduced overall due to increased efficiency in team organization and the associated increase in focus brought by consolidation.
The numbers and structure in this proposal thus represent the recent stabilization of the Hub team in terms of cost, operations, and organizational structure. This proposal continues that structure but makes it accountable to the Hub instead of the ICF. This represents a significant organizational milestone for the Hub, which lacked coherent structure until 2023.
We believe the Hub should be able to fund itself, and that its governance processes should be mature enough to handle it. We would love to have our Hub team directly accountable to the Hub, rather than the ICF.
That said, we would still like to see the ICF contribute financially. They have already pledged $3.5M for the Hub’s core development in 2024. Ideally, this pledge would be deployed by the community pool directly. However, given that the prop is already live, and considering the legal and time constraints faced by the ICF, we’d like to see the current proposal pass and the $3.5M from the ICF be used to reimburse the community pool.
This would make the net cost to the community pool $2.2M + 100k ATOM.
The ICF only disclosed the $3.5M pledge after the proposal was already live. Until then, the core teams had no indication of how much the ICF would commit for the Hub in 2024.
No. The $5.7M budget is based on a major reorganization that stabilized the Hub team for the first time in 2023. Cutting that budget again so soon and with so little warning would seriously disrupt the teams and could compromise them altogether.
The current proposal has been on the forums for over a month now. Letting this proposal fail and getting a new proposal up means we would not have any certainty over funding until December, which is too late to plan effectively for 2024.
Proposals consume a lot of time and attention from both the community and the team. A new proposal at this stage will only serve to drag things out, create more uncertainty for the ecosystem and team, and divert the team from more valuable work on the Hub itself.
This proposal is a request by Informal and Hypha for the community to recognize and ratify Informal and Hypha’s stabilization of the Hub’s core development and to continue it into 2024, but to shift the ownership from the ICF to the Hub itself.
If the Hub is not willing to accept ownership through this proposal, we may need to start winding down our work, and the ICF and Hub will need to develop a succession plan for the Hub's core development teams.
If you want the current Hub team to continue in 2024, vote yes.