I also think a split 50/50 stAtom, stkAtom will be great.
3 Likes
I’m all for the idea of using the ATOM Community Pool to mint IST. It’s a smart move for us in the Cosmos ecosystem, especially considering the rollercoaster history with stablecoins. It’s not just about moving forward; it’s about strengthening the entire stablecoin ecosystem in a thoughtful way. 
However, I believe we should revisit the distribution between stATOM and stkATOM. Given stkATOM’s impressive liquidity, its integration across numerous DeFi projects, and its solid team behind it, there’s a clear case for a more balanced approach. Actually, by adjusting the split, we have the opportunity to maximize our resources & benefits more broadly across the ecosystem.
Excited to see this develop and to contribute where required.
SuperEra
2 Likes
There is a strong argument for putting community pool funds to work.
The proposal is asking for 10% of the Cosmos Hub community pool ATOM?
Currently 11.3M ATOM in community pool.
As was pointed out by @Trix
SILK has 4,295,841 supply, $4,888,433 MC.
IST has 1.55M supply
Does this mean that Shade should put a prop up for 3X the amount of ATOM as Agoric to mint SILK?
If we agree that’s absurd, does the 90:10 split between Stride and pStake make sense?
If bigger players should get a bigger share, then doesn’t it follow that we also support a ~3M ATOM prop to increase SILK liquidity?
Revisiting the LST staking ratio would make sense imo.
1 Like
Disclaimer: I’m a core contributor to the pSTAKE Finance protocol through Persistence Labs. These are my personal views.
Overall, I greatly support this proposal. The rationale and benefits to the Cosmos Hub and the broader Cosmos Ecosystem are pretty evident.
- Direct opportunity for the Hub to generate revenue via LST staking rewards and DeFi yields
- Increased adoption and distribution of ATOM liquid staking
- ATOM (through LSTs) becomes the biggest collateral backing IST
- ATOM brings together multiple ecosystems in the Cosmos and ties their successes together
- Growing ATOM-aligned liquid staking providers’ pie
- Boosts decentralized stablecoins (much-needed DeFi layer in Cosmos since the Terra collapse and in comparison to something like DAI on Ethereum)
My main concern is similar to the one highlighted by fellow community members here: the proposed split between stATOM and stkATOM.
On initial thoughts, the proposed 90-10 split seems concerning, especially with limited rationale provided for the same in the first place.
I recognize that Stride currently has more adoption and liquidity for ATOM liquid staking. Hence, a 50-50 split is not warranted to minimize the risk of community pool funds put to work for DeFi-oriented usage.
With the above considerations and below highlighted differences* between the two liquid staking providers, I propose a 60-40 split stATOM and stkATOM.
| Parameter | Stride (stATOM) | pSTAKE Finance (stkATOM) |
|---|---|---|
| Liquid Staking Infra | Non-custodial using ICA | Non-custodial using ICA |
| ATOM Delegated | 4,264,056.4 ATOM | 640,239.1 ATOM |
| LST liquidity | ~$28.8M | ~$10.1M |
| Delegation Model | Hybrid ; committee decides delegations | Decentralized ; on-chain transparent data decides delegations |
| Cosmos Hub Validators supported | 32 | 94 |
| Protocol Fee | 10% | 5% |
| Cosmos Hub POLs | Prop 800 and Prop 858 | Prop 853 |
*The data included is accurate to the best of my knowledge and research. Please feel free to reach out in case of any discrepancy.
Interestingly, ~65% of liquid staked stkATOM is present as liquidity on DEXs compared to ~28% for stATOM. This indicates a more active usage of stkATOM in DeFi liquidity provisioning, an essential consideration for this IST DeFi proposal.
stkATOM’s delegation model is one of the most significant differences and USPs of the LST. The code and data-driven model promotes more inclusivity and transparency and further decentralizes the Cosmos Hub.
stkATOM also supports Flash Unstake, a unique mechanism that matches daily withdrawal requests with deposits, to give users an elevated liquid staking experience.
Besides the unique offerings and differences between stATOM and stkATOM highlighted above, it is also important to consider hedging the risks of the Cosmos Hub while achieving the original goals of this proposal.
I urge the community to share more thoughts on the proposed split and participate in this critical and highly beneficial proposal to the Hub and Cosmos Ecosystem.
6 Likes
I pretty much support Agoric Team proposal. I believe this is a great opportunity for Atom to play significant role on LSD market.
My concerns are around the split between stAtom and stkAtom. I believe we should avoid overcentralization around single lsd provider. Stride in that case.
I’m more for 50:50 split between Stride and Pstake. Stride has higher TVL, Pstake has better adoption for stkAtom on defi and is offering much better yield.
Additionally Pstake automated delegation process between all validators supports better decentralization long term and less risk for the users.
While I agree the initiative is overall positive, the proposal should be more concise about:
- Exactly how the community funds are distributed
- What amount is distributed on which DeFi Protocols
In addition to that, the split between stATOM and stkATOM should be either 50:50 or close. Each LST issuer (Stride / pSTAKE) has its advantages. Choosing Stride as the MAIN winner of the proposal here is bad for decentralization.
I believe @vandkar from pSTAKE has created a splendid reply to this discussion.
In addition to this, further discussion is crucial to determine where in DeFi should the stkATOM / stATOM be used. For instance, I propose SILK instead of IST.
2 Likes
It is funny to see that we see similar proposals popping up on multiple chains in the ecosystem.
For me it started on dYdX ([DRC] dYdX Community Staking Proposal - #56 by LeonoorsCryptoman - dYdX Chain - dYdX Community Forum - Governance, Proposals, and Chain Discussions) and finding it here now as well.
As I have propagated on more places; I am all for decentralisation of LST-providers. The winner-takes-all stuff we see on ETH is in the end bad for the ecosystem and bad for innovation. Protocols fighting for their share and winning over new users by means of the innovations they deliver is what makes us stronger in the end. The market is also big enough for that.
That being said; taking the numbers into account of stkATOM vs stATOM and the corresponding liquidity of both assets the 90:10 ratio should change. Not perse 50:50 to also do right on the position Stride has managed to achieve in the time they are live. I would also expect QuickSilver to join the discussions soon to have the biggest set of providers in the picture.
One question what pops my mind; what good will it do for IST besides having more liquidity in the IST/stable pools on various protocols? Is there an additional benefit?
1 Like
I also agree with this, while it is a great initiative to focus on stATOM and stkATOM, what is the reasoning behind the 90:10 split? I also think Stride should have the largest portion of the ATOM, but why specifically 90:10 and not 80:20 or 70:30?
About IST itself, before there was native USDC or USDT, IST was an IBC stablecoin coin but with native USDC or USDT the value add of IST is that it is overcollateralized rather that fiat-backed stablecoin? DAI is also overcollateralized but has the bridge risk, however when Ethereum and hence DAI (4.7B marketcap) connects also to IBC how will IST (1.3M marketcap) compete? What are the collateralization ratios of IST for different accepted vault assets like ATOM or stATOM?
Also, ‘The Reserve is a fund of diversified cryptocurrencies held by the Inter Protocol as Protocol Controlled Value (PCV). This provides an emergency fund that can cover a shortfall in a major liquidation or extreme market volatility.’ → crypto is highly correlated, when markets go down a lot, almost all crypto assets go down a low, meaning that if this reserve is in crypto assets only it will also go down with the overall market and likely unable to cover any shortfalls?
1 Like
Disclosure: I’m a Stride contributor
I’m thrilled to finally see a proposal aimed at fostering significant growth in decentralized stablecoin liquidity in the Cosmos ecosystem, something which I’ve seen as lacking in Cosmos defi more broadly. IST’s minting costs are quite low, but adoption (imo) has been held back by a liquidity shortfall. Fostering deeper liquidity for IST across the ecosystem will make IST a far more attractive option for DeFi integrations, increasing mint frequency using ATOM LSTs.
I do want to quickly address the points raised by @vandkar and the rest of the pstake community about the split between stATOM and stkATOM as a collateral type for minting IST. I appreciate all of the data points raised, and would like to raise a few of my own, mostly related to safety of Stride vs pStake.
While I understand the calls for fairness in allocations, when considering a proposal for deploying community funds in defi, ensuring that tokens staked with the respective protocols can be done so safely is far more important. To that end, I want to raise two main issues.
1. stkATOM is far more susceptible to price impact than stATOM
As noted by the pStake folks, Stride has about 3x the stATOM liquidity that pStake does for stkATOM, but this only tells part of the story. Because of the large proportion of stATOM liquidity on Osmosis, the deployed stATOM liquidity is, at minimum, 12x more capital efficient than existing stkATOM liquidity, meaning that larger swaps of stkATOM eat approximately 12x as much price impact for stkATOM as they do stATOM.
Why is this important? Liquidations and price manipulation. As far as liquidations go, there is insufficient liquidity to liquidate 200,000 stkATOM (an amount representative of a 50% stkATOM split form this proposal) on the open market. In fact, there’s insufficient liquidity to liquidate even 100,000 stkATOM (a 25% allocation) on the open market. The below image shows an attempt to sell 100k stkATOM on Dexter, stkATOM’s most liquid market. Insufficient liquidity to process liquidations means that in the worst-case scenario, a 25-50% allocation to stkATOM would result in bad debt for the protocol.
In contrast, a 200k stATOM sale would stay well-within 1% price impact, meaning that liquidations could be processed far more safely.
Similarly, stkATOM’s high susceptibility to price impact leaves it significantly more vulnerable to price manipulation, increasing the risk of cross-market price manipulation attacks akin to the Mango Markets exploit.
2. Persistence Chain’s TVL is nearly larger than its economic security
Economic security is one of the most common arguments raised against the appchain thesis. There’s a reason for that. As a chain’s TVL begins to outweigh the cost to attack the chain, consensus attacks become more profitable, and thus more likely to occur, which could ultimately result in a complete loss of funds for all parties providing liquidity on that chain.
This is precisely why shared security has become such a large part of the interchain thesis, and is the entire reason that ICS exists.
When comparing the Persistence chain and the Stride chain in terms of TVL / economic security ratio at the lowest point over the last 6 months, it becomes manifestly clear that there’s a significant discrepancy in safety between the two:
- Stride TVL / ES ratio: 5% (175m / 3bln)
- Persistence TVL / ES ratio: 108% (27m / 25m)
To be clear, I’m not implying that the Persistence chain is unsafe in its current state. It’s just not as safe as Stride, which consumes $3b in economic security from the Hub.
It’s clear from the two points above that @vandkar 's proposed 40/60 split would not be a safe way to deploy this liquidity, nor would a 25/75 split. The 90/10 split proposed in the original proposal text is a far safer way to deploy this liquidity.
At the end of the day, the collateral choice here should favor that which will offer the lowest likelihood of price manipulation and bad debt, and in which the economic security of the chain on which the protocol sits can’t be called into question.
1 Like
Minting IST seems a good move for Cosmos, but the split doesn’t look nice considering stkATOM’s numbers (mk share, LST liquidity…), and characteristics. Maybe something around a 70-30 would be better
A lot of people are curious about the proposed split of ATOM collateral between Stride and pStake. The current proposal calls for 90% to be liquid staked with Stride and 10% with pStake.
The simple reason is that Stride is an ICS chain, and pays fees to Cosmos Hub. The more the Hub supports Stride, the more the Hub benefits.
Stride is by far the most successful ICS chain the Hub has. Currently, Stride pays to ATOM stakers 97,807 STRD annualized plus $300K in various tokens. That’s a total of ~$700K per year, making Stride by far the biggest source of revenue for Cosmos Hub. Stride is a huge part of Cosmos Hub, so I think it makes sense for the Hub to favor Stride.
Another thing to keep in mind is that Cosmos Hub already massively supports pStake. In fact, in relative terms the Hub already supports pStake even more than Stride! Cosmos Hub currently provides pStake with ~50% of its ATOM TVL. To make a comparison, Cosmos Hub only provides ~15% of Stride’s ATOM POL.
So given the huge vested interest Cosmos Hub has in Stride’s success, and considering that Cosmos Hub already provides 50% of pStake’s ATOM TVL - the think the proposed 90:10 split makes sense.
As many people know, I’m a core contributor to Stride.
5 Likes
Jason Potts from EC here. Regarding the mint limits on collateral types and available room for growth, the ECs view on this is very much to focus on ensuring overall mint limits are set in such a way that they will not impede natural growth, and so we monitor this closely and revise, usually upwards, when we observe growth in demand and feel comfortable with the sources or causes of it, based on our own analysis. Our over-riding concern is safety of the protocol, which is why we prefer to phase these increases in, rather than just having an unlimited minting opportunities, of which our firm view is that would expose IST to certain sorts of attacks. But in seeking to provide this safety we are ever vigilant that we are not inadvertently stifling natural growth in demand for particular collateral assets and minting uses of IST. But, to be clear, our role is not to choose which assets can be minted for IST per se, as that is for the community to propose. Rather, our role is to make risk decision about those assets, and to ensure, through careful selection of CR and minting limits, that the assets the community seeks to use as collateral can be used safely (and also, there-in, to ensure that crowding out effects are absolutely minimised). Our overriding concern is to ensure that IST can thrive and grow in the long run, and therefore our focus is mostly at the protocol-wide level (taking all assets together, and also seeking to understand how they interact) and with both individual and overall liquidity and collateral value.
3 Likes
Re: “economic committee also has the ability to raise the liquidation ration…” Speaking on behalf, EC decisions about LR are based on making decisions about analysis of risk, and then changes in that risk in order to maintain a high level of safety, and therefore confidence and trust in IST. As we have been doing in the past, and changes to parameters will be fully telegraphed and explained in advance, unless responding to emergency safety situations. It is our intention everywhere and always to utterly minimise if not entirely eliminate where possible surprise or unexpected changes. A boring protocol is a good protocol. Money and finance is never the place for excitement, and the ECs role as much as possible is to make that so, or at least never to contribute to that. The problem with making a strong commitment not to change any LR params or others is that it binds our hands in ways that detract from our overall goal of delivering safety, and creates a point of possible attack. Our commitment, as a discretionary expert committee, is to evaluate all relevant available information, and to act as good fiduciaries for the benefit of the community. THat means that, as best we can, we try and anticipate possible shocks or disruptions, and build those into the ex ante parameter settings, which if done well means that we will not need to change parameters mid-course. Our goal is indeed to achieve that outcome of not needing to make adjustments to LRs, CR etc, unless conditions require this as a matter of protocol safety. Speaking on behalf of the EC, I hope this helps explain our thinking and also our understanding of our duties on this matter.
3 Likes
An X-space focused on this proposal hosted by DCF via Inter Protocol is being organized for next week. Tentatively scheduled for Thursday, April 4 at 16:00 UTC. We will hear from various individuals who were either part of framing the proposal or are operating in ecosystems mentioned within it.
Put a hold on your calendar - we expect a great conversation, including interaction with folks who attend in the audience.
I will post more here once it’s all locked down.
1 Like
Cryptocito has done a great job breaking down the proposal. Have a watch of his recent video and keep the discussion rolling.
check out his twitter for a link to the video.
2 Likes
I understand the rationale behind deviating from the 90:10 ratio, but generally, I support prioritizing projects aligned with ICS. This extends beyond just liquid staking providers to encompass various projects within AES with competitors. AES (atom economic security, feels like a more appropriate term than AEZ) should prioritize incentives towards ICS chains for onboarding, even if it means favoring its ICS chains. However, I disagree with the proposal as a whole for mainly two reasons:
-
IST adoption has been lackluster and unproven compared to SILK or USK. This proposal incentivizes the larger stablecoin protocols to request more funding relative to their proportions.
-
This is a liquidity handout for free, no fees coming back to CP. This doesn’t make sense for me unless this was a protocol that was in high demand that would in return increase demand for ATOM. This isn’t proven or tested. I don’t think relative impact it will have justifies free liquidity distribution.
2 Likes
Increased Returns, Ecosystem Benefits, Governance Token Diversification, 3x Vote Yes
1 Like
This has now been added to the Agoric forum. Thanks!
1 Like
I argue that the proposal DOES positively impact ATOM by exemplifying a use case available through Inter Protocol that allows both
- The lockup of ATOM
- Increased utility for ATOM.
More ATOM locked is undeniably good for the stability of the ecosystem. Utility of holding the asset is increased by exemplifying the use case of minting other assets, a stabletoken in this case, which can be used composable throughout the rest of the ecosystem.
2 Likes
On behalf of the PRO Delegators’ validator team, we want to draw everyone’s attention to the current discussions within the hub regarding the future implementation of a Protocol Own Liquidity (PoL) system, commonly referred to as “ATOM Wars”. If you’re not already familiar with it, we strongly encourage you to read the following post for a thorough overview:
This proposition aims to allocate ATOMs from the community pool through liquid staking to mint some IST stablecoin, in order to improve DEX liquidity for the latter. Our stance on this matter is as follows: regarding community funds expenditure related to liquidity, we advocate for processing these exclusively via the ATOM Wars. This approach will ensure the most efficient allocation of funds through a bidding and voting system.
Of course this new PoL system is still under construction at the present time and therefore we will support this proposal during the interim period only. Once the ATOM Wars protocol is deployed, we will endorse a gradual clawback of all previously deployed community funds, inviting beneficiaries to migrate to this new system if they wish to renew their allocation. Therefore, we advise proposers to consider this, noting that the proposed 365-day allocation may fall short if the PoL system is deployed before that date. We envision a scenario where the sole method to claim community funds for liquidity allocations will be through this system, ensuring fair distribution among bidders.
To summarize, we will vote YES to this proposition but we will also support an preemptive claw-back once the ATOM Wars goes live, inviting Agoric to position themselves among the bidders to renew this allocation.
Thank you for your attention.
Govmos
5 Likes