As a preamble to this post, we’d like to clarify that this proposal is still in the idea stage. No specific details have been decided. We intend for this post to be the beginning of a community discussion, out of which a formal proposal with concrete details might emerge.
Since its launch one year ago, the mission of Stride protocol has been to unlock Cosmos liquidity. Liquid staking activates idle staked liquidity, increasing onchain economic activity. To date, Stride has unlocked over $35M of liquidity for Cosmos DeFi.
Considering its role as a liquid staking chain, Stride’s security and decentralization is especially important - since Stride stTokens are exported widely across the Cosmos and integrated into the DeFi ecosystems of many chains. So roughly speaking, the more secure and decentralized Stride gets, the more people are willing to liquid stake, and the more liquidity is unlocked for Cosmos DeFi. In June of 2023, Stride took a major step to bolster its security and decentralization by joining interchain security (ICS).
As a chain secured through ICS, Stride is the most secure and decentralized liquid staking protocol in Cosmos. But in order to continue to scale Stride, its contributors aspire to enhance Stride’s decentralization even further.
To help make Stride protocol as decentralized as possible, the entire STRD supply could be converted to ATOM, making ATOM the governance token for Stride.
What would this look like, and why might it be a good idea?
Cosmos Hub would provision an amount of ATOM, which would be used for the conversion. Thereafter, ATOM would serve as the sole governance token for Stride protocol, and would collect all Stride rewards. The Stride blockchain would become a satellite chain of Cosmos Hub. Stride contributors would continue working on Stride protocol, as well as helping out with Cosmos Hub. Their ATOM allocation would be subject to a vesting schedule.
From Stride’s perspective, this would be a good idea because it would greatly increase the decentralization of Stride protocol, which should in turn increase confidence and lead to more liquid staking. A Cosmos chain is only as decentralized as its governance token - and the ATOM token is one of the most decentralized in crypto. Given the decentralization, maturity, and neutrality of ATOM, it would be a more trusted governance token for Stride protocol, likely leading to an increased adoption of liquid staking.
From Cosmos Hub’s perspective, there would be numerous benefits. First, Stride Labs would become a dedicated Cosmos Hub development unit, focusing mainly on the Stride satellite chain. Having another independent development team would make Cosmos Hub itself more decentralized. Second, Cosmos Hub would gain a new reward stream. Stride protocol currently generates $700,000 annualized, and has significant growth potential. Third, ATOM would gain full governance control over Stride protocol, diffusing anxieties about the control of Stride.
Ultimately, this would help Stride in its continuing mission to unlock Cosmos liquidity. The greater the decentralization and security of Stride, the greater the confidence, the greater the liquidity unlocked for Cosmos DeFi.
Should this token conversion happen? That’s up to you - the Cosmos Hub and Stride communities.
This idea is still in its early stages, with no details yet arranged. In the spirit of transparency, it makes sense to broadcast this idea now - so that everyone can participate in the decision-making process. Depending on the community discourse, a formal proposal may be forthcoming.
Whatever your opinion on this idea, you are warmly invited to speak up and join the conversation! Either here, or on Twitter, or wherever you like (:
What to read more on this topic? For a comprehensive discussion of token conversions in the context of Cosmos, see this comprehensive post by @Thyborg from Informal Systems: