Neutron to acquire 25% of CosmWasm developer Confio

The foundation supporting Cosmos-based cross-chain smart contract platform Neutron will acquire 25% of Confio, the software development company behind CosmWasm, the default virtual machine in the Cosmos ecosystem.

This acquisition is intended to drive technological improvements to the CosmWasm virtual machine and improve its performance, security and interoperability. 

Confio, a German GmbH corporation, will sell 25% equity of its shares in this strategic investment. 

According to Avril Dutheil, a core contributor of Neutron, the investment is being made by the Neutron Foundation in cash as part of its mandate to ensure the long-term growth and development of the network. It did not require a vote from NTRN token holders.

Mergers and acquisitions in the Cosmos

The announcement of Neutron’s acquisition of Confio comes just a day after other Cosmos chains, Osmosis and Umee, revealed that they would be merging, and only weeks after staking network Stride had shared plans that it wanted to become part of the Cosmos Hub. 

Although Stride’s plans did not ultimately come to fruition, it is evident that there has been a growing uptick of mergers and acquisitions in the Cosmos ecosystem, which Dutheil believes is “a period of consolidation.”

Dutheil notes that the Cosmos ecosystem has grown “far and wide, with perhaps not enough thought given to the cost of running a full app chain at scale, long term.”

He draws on examples of tokenomic inflation, where app chains pay for security provided by validators through token emissions, inflating the supply, and poor user experiences such as asynchrony and bridging, as examples of repercussions of the current model.

The Cosmos Hub community recently passed a proposal to limit ATOM inflation by adjusting the maximum inflation rate from 14% to 10%, which may encourage chains linked to the Cosmos Hub to take a fresh look at their tokenomics as well. 

“Projects are looking to consolidate with partners that share their vision to pool resources and focus and support deep integrations to take their projects to the next stages of growth and adoption,” Dutheil said.

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