Snow-Fall Analytics: The Free Bridge, Infinite Supply, and the Validator Myth – For a Real Economy on Cosmos

Introduction: The Time for Assessment

The Cosmos Hub is traversing a turbulent zone. The price of ATOM is wavering, and in this climate of uncertainty, voices are rising to call for “emergency measures.” The loudest proposal? Drastically reducing the number of validators to halt a supposed financial “hemorrhage.”
The argument put forth is simple: “small” validators, forced to sell their rewards to cover their infrastructure costs, would be creating unsustainable selling pressure on the market.
At Snow-Fall, we do not make decisions based on panic or ideological shortcuts. We base our analyses on verifiable data. We have delved into the blockchain’s figures. The conclusion is undeniable: targeting small validators is a fundamental miscalculation that masks ATOM’s true structural problem: the Hub’s lack of revenue, exacerbated by an unlimited supply.

1. The Mathematical Reality: The Illusion of “Sell Pressure” from Small Validators

It’s time to confront the dominant narrative with raw arithmetic reality. The idea that small validators “dump” the market does not hold up for a second against the factual analysis of the Cosmos Hub’s current Active Set.

We have extracted and analyzed the distribution of staking rewards (which directly determines the potential selling power of each validator category). Here’s what on-chain data reveals:

  • The Top 10 validators alone capture approximately 50% to 55% of all rewards issued by the network.
  • The Top 30 validators control an overwhelming share, roughly 78% to 82% of these same rewards.
  • The Top 100 validators capture almost the entirety, 96.62% of all rewards.
  • The 80 “smallest” validators (ranks 101 to 180) share a meager 3.38% of these rewards.

The finding is brutal and irrefutable:

The concentration of power and rewards is extreme at the top. Even if the bottom 80 validators in the Active Set instantly and daily liquidated every ATOM received as a reward to pay for their servers and operational costs, their cumulative impact on the market would be a drop in the ocean. In terms of potential selling volume, the ratio is overwhelming: the first 30 validators possess approximately 23 times more selling power than the 80 smallest validators combined.

Mathematically, if significant selling pressure indeed comes from staking rewards, it originates almost exclusively from the giants in the Top 30, notably from Centralized Exchanges (CEXs) and institutional funds that dominate the rankings and capture virtually all flows.

Conclusion of this initial analysis:

Reducing the number of validators for purely economic reasons (to reduce “sell pressure”) is a total deception. It is a cosmetic, even punitive, measure that will in no way resolve price dynamics, but will instead irremediably amputate the network of its operational, geographical, and philosophical diversity – its true strength of resilience. The concentration of power is already a challenge; exacerbating it in the name of a false problem would be a major strategic error.

2. The Real Problem: The “Free Bridge” Syndrome

If the problem isn’t the cost of validator remuneration, then what is it really?
The fundamental issue is that the Cosmos Hub provides military-grade security and world-class inter-chain infrastructure (IBC)… for free.
Currently, the Hub acts as a “free bridge” and a “toll-free highway.” It allows billions of dollars in value to transit freely between different zones of the Cosmos ecosystem. It secures third-party chains via Interchain Security (ICS). But in return, it demands almost nothing. It captures almost no value from this colossal activity.

  • We built the highways (the IBC protocol).
  • We provide the armed guards 24/7 (the validators).
  • But we forgot to install the tolls. We forgot to charge for security.

Concrete Figures of the “Free Bridge”: IBC Analysis (Week 50)

To underscore our point, the latest weekly IBC statistics (Week 50) offer irrefutable proof of the untapped economic potential of the Hub:

  • A total volume of $134 million transited via IBC (despite a weekly decrease of 13.2%), distributed over 222,000 transfers (up 2.3%).
  • The most active and highest volume route, between Noble (USDC issuer) and Osmosis (the ecosystem’s primary DEX), alone accounted for $18 million and 16,000 transfers. These figures highlight the importance of stablecoins and DeFi activities in IBC traffic.
  • While the total market capitalization of Cosmos chains amounts to $21.5 billion, the Hub, the heart of this interconnection, struggles to monetize its own infrastructure.

These eloquent figures confirm the scale of the “Free Bridge” problem: the Cosmos Hub facilitates economic traffic worth hundreds of millions of dollars every week, without capturing a significant share for the ATOM token. This is a colossal missed opportunity and a structural revenue shortfall.

Comparison with working models:

Let’s look at what’s happening in other successful blockchain ecosystems:

A. The Solana Model: Frenetic Activity Funds Security

On Solana, activity is massive and constant: DeFi, NFTs, Meme Coins, high-frequency trading. Every transaction generates fees. Even if individual fees are low, the volume is monstrous.

  • Revenue: Transaction fees directly feed validators, and a portion is burned to counteract inflation. Furthermore, MEV (Maximal Extractable Value – the profit validators extract by strategically ordering transactions) is colossal on Solana and constitutes a major revenue source for node operators.
  • Lesson for Cosmos: The Cosmos Hub, by comparison, is an economic desert in terms of its own activity. It serves as a transit port, a marshalling yard, but few users “reside” there or spend money daily. To emulate Solana, the Hub must become a center of real economic activity (DeFi, liquidity, native applications) to generate massive fees that could be partially burned to mechanically reduce ATOM’s supply and support its price.

B. The Bittensor (TAO) Model: Direct Utility Creates Demand

TAO doesn’t just sell block space or abstract security. It sells decentralized artificial intelligence.

  • Revenue/Utility: To participate in the Bittensor network (mining AI subnets or validating), one must necessarily buy and stake TAO. The demand for the token is thus directly linked to the perceived value of the final product (AI services provided by the subnets).
  • Lesson for Cosmos: This is precisely what Cosmos attempts with Interchain Security (ICS). The underlying idea is that ATOM validators “work” to secure other chains (Consumer Chains like Neutron, Stride, etc.), and these chains pay for this service.
    • Current Problem: On Bittensor, competition for resources is fierce, and the value produced is perceived as very high. On Cosmos, “Consumer Chains” (the Hub’s clients) are still too few, and they do not pay ATOM validators enough to truly offset inflation. The economic model of ICS is still nascent and under-monetized.
    • Feasibility for ATOM: To emulate TAO, ATOM must become the indispensable “universal collateral” for launching any secure chain in the ecosystem. These Consumer Chains must pay a substantial “rent” (in native tokens or directly in ATOM) to the Hub’s validators and stakers. The security of the Cosmos Hub must be perceived as premium and priced accordingly.

3. The Vicious Cycle of Infinite Supply – Why Deflation is Indispensable

Beyond the Hub’s lack of revenue, another fundamental factor hinders ATOM’s value: its uncapped (infinite) supply and the absence of significant deflationary mechanisms.
Currently, ATOM operates on a dynamic inflation model, adjusting its issuance to maintain a target staking rate (around 67% of the supply). Even at its lowest level (approximately 7% annually), ATOM’s supply continuously increases.

Why is this a major and fundamental problem for ATOM’s value?

  • Lack of Scarcity: A supply that can increase infinitely fundamentally undermines the perception of ATOM as a store of value. Investors struggle to justify a high price per unit if the total quantity of tokens can always grow without a predictable limit. This makes ATOM less attractive compared to limited-supply assets like Bitcoin.
  • Inevitable Dilution: Every new ATOM issued, if not offset by equivalent destruction or exponential demand, dilutes the value of existing tokens. This creates permanent structural downward pressure on the unit price.
    The solution lies not just in reducing inflation – which would, by definition, remain inflationary – but in introducing powerful “burn” mechanisms for tokens.
    This is precisely where our revenue generation proposals make perfect sense. Fees from the DeFi Hub, contributions from IBC chains, or payments for Interchain Security should not just fund security: they must serve as fuel for a significant and regular ATOM burning mechanism.
    Take Ethereum as an example: the integration of EIP-1559, which burns a portion of transaction fees, transformed ETH into a potentially deflationary asset during certain periods. This paradigm shift had a colossal impact on its valuation and its perception as “sound money” or a “digital store of value.”
    The Cosmos Hub must evolve from a purely inflationary model to a balanced, or even deflationary, model where real network activity destroys more ATOM than is created. Without this, even with perfect security and an efficient IBC bridge, ATOM will structurally struggle to appreciate to its fair value in the long term.

4. Concrete Solutions: Transforming Security into Revenue and Deflation

Rather than “laying off” our guards (the validators) because “it costs too much,” we must ensure that activity pays for security, and that these revenues fuel ATOM’s deflation. The Hub must generate real revenue and use it to reduce supply. Here are the strategic avenues Snow-Fall supports for a healthy and sustainable tokenomics:

A. The Hub as a Liquidity Center (DeFi Hub)

The Hub can no longer afford to be a mere passive transit port. It must become a dense center of economic activity.

  • The Idea: Integrate or develop a powerful and efficient native DEX (Decentralized Exchange) directly on the Cosmos Hub. This DEX could manage inter-chain swaps (IBC) in an optimized manner, or become a liquidity hub for major assets in the ecosystem.
  • Revenue & Deflation: Every swap operation, every flash loan, every DeFi interaction on the Hub would generate transaction fees. These fees, paid in ATOM or automatically converted into ATOM, would be:
    • Primarily Burned to reduce the total supply and create organic deflationary pressure, without sacrificing network security.
    • A portion could be Redistributed to ATOM stakers to increase the real staking yield (APR) beyond mere inflation.
  • Inspiring Examples: Osmosis (the reference DEX of the Cosmos ecosystem) generates considerable swap volumes. If the Cosmos Hub could capture even 10 to 20% of this activity through strategic positioning (better liquidity, native integration with Bitcoin/Ethereum, incentives for liquidity providers), it would be an economic game-changer.

B. Monetizing IBC Highways: From Free Transit to Smart Tolls

Inter-Blockchain Communication (IBC) is Cosmos’s technological jewel. It’s the highway that enables interoperability. But currently, it yields nothing directly for the ATOM token or the Hub that maintains it.

  • The Idea: Establish an economic contribution on flows passing through IBC. This can take several forms:
    • A tiny tax on IBC transfers: Each inter-chain transaction could pay a fraction of a cent in ATOM as a “transit fee.” Even if the unit amount is minuscule, the volume cumulative over millions of monthly transactions would become significant.
    • A revenue-sharing agreement with connected zones: Chains that benefit most from IBC interconnectivity and the Hub’s security (like Osmosis, Injective, Sei, etc.) could voluntarily return 1 to 2% of their own annual transaction fees to the Cosmos Hub. This “rent” would be a formal recognition of the critical infrastructure value provided by the Hub.
  • Mechanism: Funds collected through these mechanisms would be primarily burned to fuel ATOM’s deflation, and a portion could be redistributed to stakers or used to fund the development of critical infrastructure (IBC relayers, open-source tools, security audits).
  • Obstacle: Implementing such an “IBC tax” would face strong political resistance from other Cosmos chains, which have their own tokens and economies. A “soft” approach would be preferable: proposing fee reductions or incentives for zones that agree to pay in ATOM or voluntarily contribute to the Hub, rather than imposing a unilateral tax that could fracture the ecosystem.

C. Security Priced Fairly: Monetizing Interchain Security (ICS)

Interchain Security (ICS) is the premium service of the Cosmos Hub. It allows other chains to directly use ATOM validators for their own security, without having to build their own validator set. Currently, this service is largely underpriced.

  • The Idea: Require Consumer Chains (ICS client chains):
    • A substantial collateral in ATOM as a guarantee to access the service.
    • Regular revenues in native tokens from the Consumer Chain, which would be directly redistributed to ATOM stakers, or strategically used to generate even more revenue for the Hub and fuel deflation.
  • Advanced Mechanism (Your Idea): Liquidity Pools:
    • Instead of simply holding this collateral inactive in a treasury or burning it immediately, a portion of these funds (ATOM + native tokens from Consumer Chains) could be allocated to liquidity pools on ecosystem DEXs (like Osmosis, or a future native Hub DEX).
    • Benefits:
      • Yield Generation: By providing liquidity to these pools, the Hub (or its DAO) would earn recurring trading fees on every swap performed in these pools, as well as liquidity mining rewards if the DEX protocol offers them. This creates a passive, continuous, and composable revenue stream for the Hub.
      • Deepening Liquidity: This would mechanically increase the liquidity available for ATOM and for partner Consumer Chain tokens. Deep liquidity is absolutely crucial for price stability and efficient DeFi markets.
      • Volatility Reduction: Thicker and deeper liquidity pools make prices much less susceptible to large fluctuations (slippage) during significant buy or sell orders.
      • Enhanced Ecosystem Engagement: This further links the economic interests of Consumer Chains to the overall performance of the Hub and ATOM. Their tokens would be actively used to generate value within the common ecosystem, creating a virtuous cycle.
    • Conclusion for this section: The security provided by the Cosmos Hub is premium quality. It must be recognized, valued, and priced accordingly. Consumer Chains must contribute substantially and measurably to the Hub’s funding, and these contributions must be managed strategically to maximize the ATOM ecosystem’s revenues and fuel the token’s deflation.

5. The Strategic Error: Sacrificing Infrastructure for an Illusion

If the direct economic impact of “small” validators on selling pressure is proven to be minimal (3.38% of rewards), what would be the true cost of their elimination? It would be immense, but on a structural and long-term level.
Cutting the bottom of the validator rankings mechanically consolidates power and network control into the hands of a limited number of purely financial actors: CEXs (Centralized Exchanges) and investment funds (VCs) who already largely dominate the Top 20. However, these actors have a very specific operational profile and philosophy:

  • Governance: They are often absent from governance debates, or vote automatically and passively. Their participation in critical proposals is low or non-existent.
  • Infrastructure: They invest little to nothing in the development of community tools, dashboards, educational resources, or in the maintenance of non-directly profitable infrastructure like IBC Relayers.
  • Philosophy: Their approach is inherently centralized and driven by short-term profit maximization. They are far from the original Cypherpunk spirit of decentralization, censorship resistance, and individual sovereignty that has driven the Cosmos ecosystem since its inception.

Conversely, what do independent validators represent?

Independent validators (like Snow-Fall, and dozens of other similarly sized or smaller actors) are often those who:

  • Run IBC Relayers: These critical services enable fluid communication between chains. They are the vital artery of the Interchain. Many small validators maintain them at their own expense, without direct compensation, out of conviction and commitment to the ecosystem.
  • Analyze every governance proposal: They read, debate, and vote in an informed and human manner on every proposal. They are the network’s “critical conscience.”
  • Create educational content and documentation: Blog posts, tutorials, videos, technical analyses. They make the ecosystem accessible to newcomers.
  • Ensure geographical and jurisdictional diversity: Their servers are dispersed worldwide, in various jurisdictions, enhancing the network’s resilience against attacks, government censorship, or regional outages.

Conclusion:

Eliminating these actors in the name of miscalculated “economic efficiency” and alleged “sell pressure” reduction (which, as we’ve seen, doesn’t come from them) is to deeply weaken the network’s real security, censorship resistance, and decentralized innovation. It is sacrificing the future for an illusory short-term gain.

Final Conclusion: Stay the Course – Build, Don’t Destroy

The ATOM price crisis is a legitimate wake-up call. It forces us to question and re-evaluate our economic model. But the answer to this crisis must not be blind austerity and centralization.
Drastically reducing the number of validators to “save” on inflation is:

  • Centralizing the network into the hands of CEXs and institutional giants who build nothing for the ecosystem and do not share our fundamental values.
  • Destroying the operational, geographical, and philosophical diversity that is Cosmos’s true strength of resilience.
  • Sacrificing our decentralized soul for a non-existent financial gain (remember: only 3.38% of rewards).

The path to resilience is revenue generation AND supply deflation.

We must transform the “Free Bridge” into an economically viable and profitable infrastructure, whose revenues will serve to reduce ATOM’s supply. Let’s ensure that the activity and value flowing through the Cosmos Hub pay for the security they consume, and that these payments actively contribute to making ATOM an increasingly scarce and thus potentially more valued asset.
The paths are clear and feasible:

  1. Make the Hub a lucrative DeFi center that generates massive fees (swaps, liquidity) and uses them for ATOM burning.
  2. Monetize IBC usage through voluntary contributions or smart incentives, with a significant portion for deflation.
  3. Charge fairly for Interchain Security, and use these funds strategically (burn, redistribution, liquidity pools) for ATOM’s deflation.
    At Snow-Fall, even though we are new to the active set, we will tirelessly continue to defend this vision: a robust, truly decentralized blockchain, economically viable through innovation, value creation, and the deflation of its native asset.

Decentralization is our strength. Let’s protect it, and value it.

And you, reader, delegator, builder: Are you ready to pay the price of centralization for short-term financial comfort? Or do you prefer to build with us a real, sustainable economy aligned with the values that gave birth to Cosmos, an ecosystem where ATOM’s scarcity and utility are finally recognized?
Share your opinion in the comments. Governance is you.

This article is published as part of our “ATOM Wednesday” series.
Follow Snow-Fall on Twitter/X:@Snow_FalI| Delegate your ATOM: Link to your validator

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