ATOM Wars: Introducing the Hydro auction platform

Hydro is a bidding & governance platform for the efficient deployment of liquidity across the Interchain. It is an important piece of the previously introduced ATOM wars strategy and a response to the biggest challenge of the ecosystem: token liquidity.

Hydro allows projects to bid for deployments of ATOM (and other tokens) liquidity under the control and for the benefit of all ATOM holders. The exact mechanics of Hydro’s auction and governance systems are specified in the following litepaper:

Hydro: An auction platform for liquidity exports

Hydro provides key features for the streamlining of liquidity access to both Interchain (Cosmos) and non-Interchain projects and chains. These features include token locking, voting rights, bidding rules, voting rules, and fund allocation rules.


Hydro is a key component of the concept of “ATOM wars” but may also facilitate the deployment of other tokens (Celestia & Stargaze are examples)

Community Pools: While the Cosmos Hub will likely be the first community pool to provide an ATOM “loan” to Hydro to coordinate exports, Hydro has been designed in a way that allows other community pools to participate and contribute liquidity into buckets.

Hydro: This is where the auctions for liquidity injections take place. Hydro manages the distribution of special voting rights through hATOMs receipts and governs the bidding, voting, and allocation processes (see attached lite paper for details)

Timewave: The covenant system may ensures that chains retain direct ownership of their liquidity. it eliminates the need for multi-sigs, reduces complexity and increases security. Hydro is still able to operate via multi-sigs in the absence of Timewave.

Vote aggregators: Third-party projects may be developed on top of Hydro. Vote aggregation projects could offer holders the benefits of long-term locking while providing them with a tradable liquid derivative and abstracting the complexities of voting away from users. Multliple aggregators may compete over maximal returns.

Status, Updates & Roadmap

Thanks to extensive community discussions, comments, and feedback, we’ve also made significant improvements to the design of the auction platform since the original ATOM wars forum post. The following changes have been integrated into the litepaper:

  • Multiple liquidity buckets, starting with stATOM
  • Two tranches for each bucket (one exclusive to ICS chains)
  • Ability to vote for a project in multiple tranches (increased earning potential)
  • Weighted distribution allocation to promote competition
  • 3 governance layers (monitoring committee, hATOM holders & Hub veto power)
  • Whitelist of assets and deployment
  • Prevention of sniping strategies with a random deadline
  • Alignment of locking periods and frequency of rounds
  • Bids submitted beforehand to prevent unfulfilled promises

In an effort to accelerate the launch of Hydro, the Informal team is planning to divide the fully-featured implementation of the product into several releases.

  • Hydro v1 is an MVP that only accepts the locking of stATOMs from the Stride protocol. The MVP also will also come without the sniping mitigation strategies and the performance incentives for voters that are described in the litepaper
  • Hydro v2 will use the LSM (Liquid Staking Module) DelegationShares instead of (or in addition to) stATOM. This would allow any ATOM staker to acquire hATOMs by directly locking their "DelegationShares’’ (obtained through LSM) into the platform.
  • Hydro v3 will include performance incentives for voters and the hATOM governance layer (prior to that, Hydro governance relies on the committee and standard Cosmos Hub governance) as well as snipping mitigation strategies (random deadline)

The purpose of this forum post is simply to introduce Hydro as a concept and provide a status update on ATOM wars. The Hydro smart-contracts are currently waiting for a third-party audit. After completion of this audit, a governance proposal will be submitted to Cosmos Hub’s on-chain governance to seed Hydro from the community pool and elect a monitoring committee.

Any project interested in receiving liquidity exports from Hydro may already reach out to the Informal Systems account on Twitter. Informal Systems also has a number of open positions to work on Hydro, including a Business Development lead and Rust engineers.

7 Likes

Great idea.

Question…can we slowly reclaim all the ATOM that has been used as POL and do it through hydro instead?

Otherwise, the chains and apps with an obscure head start would even really need to use this.

3 Likes

Yes that’s the plan. Brace for a couple of high-DPS governance props in the coming months

4 Likes

Existing atoms have many similar tokens, stATOM rATOM sqAtom qAtom stkATOM. If [re-locking] is just to obtain a governance token that cannot be traded, you can use other names, such as Hub vHUB, to avoid value confusion.

for example
hATOM > Hub

In addition, it would be better if the [Pledge] option can be changed directly, without having to go to another box to [Pledge Again], Hydro handles the bidding matters

[Pledge] More options, 4 pledge interest rate annualized options

According to Hydro rules

21 days > Get interest rate and 1 governance hub
3 months > Get interest rate and 1.5 governance hub
6 months > Get interest rate and 2 governance hub
12 > Get interest rate and 4 governance hub

Only by making governance simple and easy to understand can we get twice the result with half the effort, and at the same time, [long-term pledgers] can [maximize their benefits]

In addition, if stATOM is locked again, will it lose the liquidity and scalability of DEFI, and will it have an impact on strd? After all, stATOM is unlocked to participate in transactions and use DEFI.

1 Like

Philipp here from ERIS Protocol.

Why use stATOM for this and not either make it flexible enough to allow any ATOM LST to participate, or launching a Cosmos Hub owned LST?

Here is a proposal, why not allow ERIS to launch ampATOM (can also be whitelabeled in anyway the Hub wants - e.g. lsATOM) on the Hub using CosmWasm, with a permanent / fixed 0% commission and signing ownership to Cosmos Hub, making it a public good of the Cosmos Hub, without paying the high Stride Tax. Contracts are fully audited (multiple times) and in production with significant TVL for over 2 years.

This is hugely beneficial to cosmos hub users and keeping the Hub impartial.

Otherwise I am in big favor of using open market / bribe based approaches, especially with ERIS being the pioneer of gauge models in Cosmos. But it is not open market if you enforce a single LST to be used.

Honestly even using ATOM is better for ATOM stakers, as it reduces the staked amount and projects would need to cover the opportunity cost of bribing for liquidity, putting money where their mouth is.

TLDR:
Options to make ATOM wars more open and inclusive:

  1. Allow any ATOM LST or ATOM to be used
  2. Allow ERIS to launch a Cosmos Hub owned LST to be used (0% commission permanently, full Cosmos Hub ownership, multiple audits, no external chain risk)
  3. Allow only ATOM to be used
4 Likes

Appreciate the comment. I’m planning do a write-up on this topic, but the short answer is that we want to allow all the staked ATOM to participate in Hydro. It is still unclear if its easier to do this using LSM shares, or to update the hub staking module.

Using stATOM is a way to move forward in the meantime. Stride is the only LS protocol with a partnership agreement with the Cosmos Hub, and its an opportunity to send a clear signal that “hub alignment” is not just an empty word.

Note that Eris & others can benefit from Hydro from the get-go by bidding in the ATOM bucket and liquid-staking the allocation through their respective protocols

3 Likes