The Cosmos Hub recently voted through a proposal to introduce the Liquid Staking Module (LSM) to their network. This module is expected to unlock up to $700 million of staked ATOM tokens, with the purpose to driving DeFI projects to the next level. With LSM, the original 21-day unbonding period, which was established to prevent masses of validators from abruptly withdrawing tokens, is no longer needed and ATOM token holders will be able to liquid-stake their tokens immediately.

This proposal was a great success as about 87% of the voters approve the introduction of LSM, leaving very few against and abstaining votes. In order to allocate this liquidity, a 25% limit will be placed on the tokens that can be staked and delegations should be aware of the further risk management implemented with a 'validator bond' system. This means that a validator must self-bond ATOMs at a 1:250 ratio before receiving tokens from liquid staking delegations. This way, malicious validators will be at risk of seeing their self-bond slashed and delegations can delegate their ATOM to those validators that better represent their values with a higher self-bonded amount.

As a result of implement LSM, proof of stake blockchains, Cosmos included, will have an easier time locking up tokens and will be able to take part in the network while earning rewards. This could potentially lead to higher profits for validators and delegators, but will also make ATOM tokens the de facto reserve asset in the Cosmos ecosystem. The proposal is expected to be put into action later this year and will be a big boost for both the Cosmos Hub and its wider DeFI ecosystem.



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