⚛️ Cosmos Hub: LSM removal and replacement 

Recently, many articles have been published about the Liquid Staking Module (LSM) implemented on the Cosmos Hub in August 2023 with the Gaia v12 update. 

❓But what is the LSM?

👨‍💻 web3 nerd • blockchain explorer ⚛️

1️⃣ This module brings several improvements:
» Limiting the total amount of ATOM that can be liquid staked to 25% of all staked ATOM
» Validators need to stake a certain amount of their own ATOM
» Staked ATOM can be instantly liquid staked, without having to wait for 21 days

» Lack of transparency: Zaki Manian, one of the project's leaders, was reportedly informed of this involvement as early as March 2023 but did not share this information with the Cosmos community
» Technical complexity: The implementation of the LSM required forking the Cosmos SDK

3⃣ To address these issues, the Informal Team has just published a draft proposal on the Cosmos Hub forum to replace the existing module. This replacement could take place in several stages ⬇️

» A 1 to 2-month grace period to let users un-tokenize their LSM shares
» Update of the Cosmos Hub to remove the LSM + un-tokenize remaining tokenized delegations
» Implement a new framework similar to what EigenLayer offers

4️⃣ Benefits:
» Users will be able to subject their stake to extra conditions and slashing risks, and gain additional rights in return (ex: Hydro)
» Minimal modifications to the Cosmos SDK staking module (potential implementation as CosmWasm or as a separate Cosmos SDK module)

» Governance can be more elegantly separated from block production than is the case today (users could delegate to a certain validator for block production, but delegate their governance vote to a completely separate  entity, or could not delegate their governance vote at all)

5️⃣ As a reminder, this is a draft proposal that may evolve!

Additional links:
» X Informal : https://x.com/informalinc/status/1848751111244812609
» Draft proposal : https://forum.cosmos.network/t/lsm-removal-and-replacement-a-possible-plan/14674

2⃣ However, several issues have been raised recently: 
» Nationality of the developers: a significant portion of the LSM code was written by developers with ties to North Korea. However, the vast majority of the code has been rewritten since then.