Cosmos is a scalable ecosystem of connected blockchains. Blockdaemon supports staking on the Cosmos network. Stake for free on our public validator or run your dedicated validator node. A core feature of Cosmos is its governance function. In this blog post, we’ll explore how governance in Cosmos works and why it is important.

The Cosmos network is not only a Proof of Stake blockchain network but also one that utilizes on-chain governance. For the blockchain to continually upgrade and improve over time, community members will coordinate formally on-chain and informally off-chain to participate in discussions and debates surrounding the trade-offs of specific changes. As some networks like Ethereum do not offer any on-chain governance features, on-chain governance blockchains like Cosmos offer a lot of exciting potential and differentiation around participatory engagement from all stakeholders involved.

Cosmos Changes Made Via On-Chain Governance

Right now, text-based signaling proposals are when a text-based description of a change is shared with the network to describe the problem and potential solution the proposer suggests. This could be a poll or announcement.

Secondly, parameter changes or software upgrade proposals are technical changes to how the network runs, ideally, that will not halt or disrupt the network significantly in terms of downtime.

Examples include but are not limited to:

• the inflation rate of the network
• how slashing parameters are applied
• how rewards are distributed
• levels of quorum required
• how long is the unbonding period

To understand how Cosmos governance works process-wise, it’s best to think of these network upgrades in the following stages, which are enforced on the protocol level. It is also important to note that delegators (you) inherit the vote of the validators they delegated to unless they cast their vote, which will overwrite validator decisions.

Deposit Stage

Anyone can submit a proposal on the Cosmos network for others to view. The only cost associated with submitting a proposal is the transaction fee of as little as 0.000001 ATOM. However, over the course of the voting period, a proposal must have at least 512 ATOM deposited to it for it to proceed to a vote. This period lasts at most 2 weeks, but if the minimum amount of 512 ATOM is reached sooner, the proposal will pass to voting immediately. There is no penalty for delegators and validators who do not participate in governance. However, there is a risk to individuals who deposit ATOM to a proposal if the proposal does not pass the voting stage.

Voting Stage

The next stage in the governance process is the voting stage, which also lasts 2 weeks. Rather than depositing ATOM, participants in this governance stage vote Yes, No, No(With Veto), or Abstain. If a proposal reaches a quorum, or the minimum threshold defined by the protocol of votes, it will pass to the next stage for tallying. Only staked tokens are eligible to be used for governance voting. The amount of voting power is measured in terms of stake. The number of ATOM a person or group has determined how much influence your vote will have on the outcome of a proposal. Voters can also change their vote right up until the closing period.

Tallying Stage

After two weeks, the proposal voting will end, and the following conditions will be taken into consideration to determine if it passes or not:

• Quorum: more than 40% of the total staked tokens at the end of the voting period need to have participated in the voting.
• Threshold: More than 50% or a majority of the tokens that participated in the vote, excluding “Abstain” votes, must have voted “Yes”.
• Veto: Less than 33.4% of the tokens that participated in the vote, not counting “Abstain” votes, have vetoed the decision “No (With Veto)”.

If these conditions are not met, the deposit associated with the denied proposal will not be refunded. These funds will be sent to the community pool.

Once a parameter change or software upgrade proposal is voted on and passes all conditions, it will need to be integrated into a new version of the Cosmos network software by validators. In contrast, the previous working version continues to run. This is signaling that a switch will occur. Once more than 2/3 of the validators download this new version and signal they are ready to make the switch, the rest of the network is expected to do the same.

And this is how you would have seen the Cosmos Network's first versions get upgraded to the current version today!

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