Convert entire STRD supply to ATOM

Hub Proposals
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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:

forum.cosmos.network/t/should-aez-chains-have-their-own-tokens

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My first impression is that would be potentially incredible for the Cosmos Hub…

and I don’t see how it could be fair for current STRD holders (I am one of them). Myself and others like it because we see a powerhouse in the making. Getting ATOMs at the current STRD price would be really unsatisfactory. I see IBC as being the de-facto blockchain communication protocol and I see stride as the de-facto IBC staking protocol.

And even at current prices, according to Osmosis Info, Stride has a marketcap of $74m, way more than the current Hub community pool owns ($33m). The only way the Hub could pull this is by forking and inflating the supply ? I’d be even more against that. And the Community pool is too precious to spend on one bet.

TLDR imo this would remove tremendous upside to strd holders and potentially remove integrity from the atom token (which already has a bad reputation) depending on how the acquisition is financed.

I’ll add that I’m a proponent of the Hub fully owning protocols to create more value, but this isn’t it. A good counter-example would be Duality DEX before they found a deal with Neutron.

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What does your community think of this?

Also…

Whose idea was it to buy a token that has 80% of its value derived from ATOM? Can we the Cosmos community vote to remove them and to please never represent the Hub in any capacity?

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Agree with WillB. The economics of STRD are really good with a big upside, and the economics of ATOM are let’s just say a work in progress. Stride annualized revenue is 10x ATOM’s, and I think most of ATOM revenue is from Stride at the moment. I’m all for lots of collaboration with the hub - STRD value at least right now depends on ATOM doing well, but I don’t see a merger and swapping the token for ATOM getting a lot of support from STRD holders. There should be multiple ways of working with the hub where the value created is shared between the two communities.

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First thing that came to me was:

How will governance work for other derivatives than stATOM.

If all Governance was done by STRD then other networks and protocols have at least bribery options or a fair chance to acquire STRD as a protocol and use that for voting.

If ATOM gets the governance than the Hub starts controlling stake decentralisation and more on other cosmos networks - a big sovereignty risk.

This doesnt go into the tokenomics part of the conversation whatsoever, with Stride being one of the more clearly valued Tokens i think it would be a big loss to the wider community of STRD holders at this moment in time. Will need more time to fletch out details though. The fact that Stride could now pay more directly to Cosmos validators and Stakers would be good though for solidifying the ICS economic bond.

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Very intriguing.

The economics of this conversion are going to be very contentious, but it’s a no-brainer from a product standpoint for the hub, and the Stride team is top notch, so the prospect of them being essentially hub devs is :ok_hand:

STRD holders who bought the top are probably not going to like this, though, if the conversion is conservative.

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A lot of people invested into Stride how do you plan to compensate this? Current market cap on CoinGecko is 68 million. Fully dilluated is about 78 million.

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Nobody has thought this through. ATOM would need to print (inflate by) $80M to buy out all stride holders at current prices, nobody with 2 brain cells would agree to sell for less.

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Hello, I am holder of STRIDE and now I think it is the worst idea I have ever dream - I value STRIDE 40 x or even more now and dont understand why I need more Atom with 2-3 x potential???
What is for STRIDE holders and community ??
What is the profit for Stride holders ?
I am upset and destroyed …

the truth is that I will convert my best token in a trash inflationary one (Atom) with no pourpose and full of cartel. I dont want that to happen …

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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…

Stride is decentralized already ! And no need to decentralized it again.

STRD supply could be converted to ATOM…

Atom price can be 2 $ tomorrow … we loose everything.

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You can increase the yields for stATOM and Stride, so you could finance it with the ATOM staking yield over a longer time period + the additional buys with free liquidity

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The idea of enshrining Liquid Staking (LS) into the Cosmos Hub, as mentioned by notable figures like Vitalik Buterin, is understandable. However, the transition to a new token system, as proposed here by Stride, raises concerns. This proposal would essentially strip existing Stride token holders of their rights and tokens, which they have acquired and staked in anticipation of governance participation (among other benefits). If changing ETH from PoW to PoS was like changing the engines of a plane mid flight, this could be seen as forcing the passengers to change a plane mid flight! Even though validators are the same for both chains, the underlying belief systems are different.

The community’s past reaction to ATOM 2.0 clearly showcased a strong aversion towards minting new tokens. In this light, the proposal’s requirement of a hefty $80 million investment to acquire Stride appears to be a high-stakes gamble from the viewpoint of an ATOM holder. This proposed financial allocation not only risks market stability but also tests community trust.

Moreover, Thyborg’s suggestion of initiating chains without tokens, although theoretically compelling, has shown practical shortcomings as seen with Gravity DEX. The absence of token incentives led to a stark lack of user engagement, evidencing that users prefer straightforward staking of ATOMs over navigating through multiple protocols.

Cosmos has a quite smaller community compared to Ethereum, we need better ways to attract builders to build ATOM dApps as consumer/sovereign chains, but changing the supply of ATOMs is a hard NO. Using the community pool as liquidity on various protocols to generate yield should be the way we create the foundation for builders to use ATOM as the fee token. I had hopes Thyborg would have learned something from previous community feedback, but it seems he’s only pushing his own vision for the Hub which is really hurting the reputation and Cosmos brand.

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Thanks for sharing this idea. Some initial thoughts about this, currently Stride inflation and revenues go to STRD stakers and governors, except the % for the Cosmos Hub as a consumer chain. Let’s say all this STRD is converted to ATOM, it would be liquid ATOM. Will this ATOM be staked/liquid staked and to which validators? Or would it be used as STRD currently with governors not being staked?
If the Cosmos Hub would then collect all Stride revenue what will happen with current STRD stakers and governors? Is the plan like swapping all STRD for ATOM with vesting so STRD holders become ATOM holders? But then those who buy the STRD what happens since now all Stride revenues go to ATOM holders? Also, part of the current Stride consumer chain revenue is from inflation, if all STRD tokens are converted to ATOM and STRD dissapears, then no inflation revenue as consumer chain, but only the other revenue sources?

Edit: it seems the governance of Stride will then be the total staked ATOM? So given that the current market cap of STRD compared to staked ATOM is small, mostly then the governance of Stride will be given to current staked ATOM with a % for current STRD holders? But then this means the ATOM swapped for the entire STRD supply would need to be staked to be able to participate in governance. Would current STRD holders be able to choose whether stake or not the vesting ATOM to participate in governance and choose themselves to which validators to stake or if they want to liquid stake?

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As a small investor in both atom and stride I don’t see any benefit in the proposal.

Now I have the possibility to invest in both coins and split my portfolio between the two as I wish. If I wanted to go all ATOM I could simply swap all my STRD for ATOM at Osmosis.

The proposal removes this option. Investing in Atom would mean investing in the stride protocol automatically. Also my share of the profits in liquid staking would get very diluted, since cosmos hub is the larger partner in this merge. If I wanted to weight my portfolio more towards liquid staking I’d have to look at other protocols.

In short, not a big fan of the idea.

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In general a really interesting proposal, the problem is that Stride already launched a token and there are too many vested interests involved. People chose STRD for a specific reason (different tokenomics etc.) In general I think ATOM and STRD token holders are complementary, if you merge both now, you risk losing a part of the communities.

I don’t think it is the best thing for the STRD team to decentralize too early, I don’t know how far the devs are with the roadmap and what things they are planning, but at this stage it is better to have a more centralized structure and get things done fast.

So to sum it up, I really like the idea, but I think it is too late.

As an alternative the HUB could invest a substantial amount in the STRD token (maybe 25%), so you can decentralize governance, but the HUB doesn’t control governance. OFC we need to think about how we use these 25% in the governance process (delegate these tokens to validators and stakers, similar to the OP system and they can vote with their allocation?)

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This is a good idea to consider. The Hub could simply buy STRD on the market - gives holders the option of selling if they want to.

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I don’t think the ATOM would be vesting ATOM. IMO it should be fully liquid so that Stride stakers that want to opt out can sell their ATOM.

Nobody that currently holds STRD should want to exchange fully unlocked STRD for another token that is subject to a vesting period.

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Oh I just mentioned vesting because I read it in the proposal:

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Ah, yeah so I see this as Stride contributors (i.e., Stride Labs / founders) would have tokens subject to a vesting schedule, not the community at large.

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This is a very difficult subject. I can see the benefits for the Hub with a native liquid staking solution where ATOM is the value-accrueing asset.

However, it again brings a sole reliance on one protocol, which I already expressed multiple times that I don’t like it. We have a local saying “One is none”
In IT infrastructure it is quite common to work with failovers and parallel backups to ensure that if one thing goes wrong the service is not hurt. And currently in the Cosmoverse we are exactly doing just that. We see how the downfall of OSMO value hurts the value of all coins in the ecosystem. We have seen how the fall of UST has damaged the complete ecosystem. And now we are doing this for the 3rd time with Stride? Come on…

Disclaimer; I have STRD in my portfolio and am a governator on the network. But I also look at the bigger picture what is good for Stride and the ecosystem for the long run. And this is not it.

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