they dont want to sell at all. No sense.
Can we talk about the fact that the presentation started with a request for decentralization and ended with the idea to positioning themselves as a quasi monopoly for ls on cosmos?
This might be economically speaking awesome for atom-holders short-midterm-wise and a safe heaven for one of the best teams in the space as far as I can judge stuff like that. However, it is horrible for liquid staking in the ecosystem in my humble opinion. “A winner takes it all”-scenario might be inevitable when it comes to ls, but this will settle it in an instant and max out every risk related to the matter.
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I see what you’re saying, but the whole point of ICS is alignment, economically and philosophically. If other liquid staking providers want that alignment and buy-in from Hub community, they can apply to be a consumer chain. Stride is making moves, so from that perspective, I respect what they’re doing. It’s up to their and the Hub’s stakeholders to see if this makes sense.
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Basically your going to dilute the current governance holders. If I own 1% of stride token, I have 1% of the governance vote. The governance is the only real value the token actually provides.
So I want 1% of the ATOM supply to replace my 1% of Stride supply.
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1% Stride supply= ~$700k
1% ATOM supply= ~$25 million (~36x larger)
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stAtom fees this year for staked Atom have been around ~$330,000, let’s be generous and say that they increase the yield 10 times. It would take 13 years to be equivalent to HALF current Stride prices (not taking into account any type of NPV analysis.
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you can add others chains - not only Atom, dydx, acash and so on on Stride and this way you may say another idea
If increased alignment is the goal, I would much rather see a token swap between the two chains. Stride would potentially get permanent protocol owned liquidity, and the Hub increased revenue (80% of host zone rewards currently go to STRD stakers) and increased Cosmos-wide governance influence (Stride has been gaining an increased foothold in VP on chains). Can’t see any form of redemption/burning making sense here.
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Stride ATH was 2.5$ .
If the hub wants Stride , that is the number Stride hodlers should agree on.
That way , no one has to endure a forced loss.
Its a shame this is all that could be pulled together for a keynote cosmoverse announcement. It feels as though this prop was contrived to fit the place of the more obvious and mutually beneficial route of acquiring NEW relationships for ICS (stargaze, umee, osmo).
On the surface this comes off as half-baked and redundant (Stride even said this idea only came about a couple days/weeks ago) but here are a couple items to consider nonetheless.
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This is by no means a merger of equal parts. Lets at least call it what it is. Stride is proposing that the Hub ACQUIRE their entity. Calling this a “merger” is insulting to the Hub and diminishes it’s value. $ATOM holders must be protective of what has been built.
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Lets not put the cart before the horse. Devs worked for a long time to build ICS, so are we now going to sidestep that entirely for what is presumably and expensive exotic deal/transaction that sets a precedent for future ICS/acquisition candidates. Are we absolutely sure that Stride’s need for more decentralization can’t be met under the current ICS provisions? Have we already matured passed the point where ICS is not longer sufficient?
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How do we value Stride? Who will be conducting due diligence? $ATOM in this case is the acquirer therefore the chain must decide the purchase price, the mix of debt and equity in the deal, and the terms and conditions of the transaction. Who will complete this? Seeing as how the community pool is sparse in comparison to the market price of $STRD, debt will be essential for the deal if Stride holders don’t want a haircut. Who will the Hub secure funding from? Are $ATOM stakers okay will securing this debt with more funds from the community pool in the event that the country-party needs more assurances? Who will hold the seat at the negotiations table? Who will the Hub retain for legal candor? A transaction of this size without any government oversight is sure to bring light to our ecosystem. Do we want to be exposed to such regulatory risk?
The chunk of questions above are items to consider but more importantly they are all dollar signs at the end of the day. Such a transaction would be incredibly expensive and in its current form, I’m not convinced the juice is worth the squeeze. Spending so much money on ONE singular entity is a gamble and would be better spent diversifying the Hub’s revenue streams. But then again, what do I know ¯\__(ツ)_/¯
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Just a few questions:
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How is ATOM going to pay for it?
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Where is it going to be? (ICS chain to keep the hub minimal?)
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What happens to the STRD locked in LPs on other chains? Redemption at fixed price?
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Speaking of price, what is it? How do we get to a value?
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Who decides/votes on allocation of statom vote weight to atom validators? Committee? Who is on that?
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Atom can buy Stride on Osmosis if he needs Stride.
Atom can buy Stride at the Team or Whails if he need it so much.
It is my propose
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Doing this destroys Stride’s business potential & makes it an enshrined ATOM or IBC LSD protocol.
There is currently no viable competition in the LSD market so of course Stride is in the lead on top of the various community pool spends to benefit Stride. If competitiors emerge, the ATOM community is going to be avoided bc there is now clear conflict of interest. Why spend resources if the Hub is favoring 1 single solution?
On the topic of resources, Stride now has 0 way of bootstrapping new stAssets bc who is going to incentivize them? You’d be joking to think the Hub would incentivize other assets, especially when it could just use the community pool to create POL again? So boom, Stride now becomes a single LSD protocol & the LSD market is wide open again. Even if the Hub tries to now compete directly in the LSD market, it starts losing credibility by basically destroying “fair” competition in one of the largest DeFi markets.
Add this on top of the governance and funding issues, this proposal has no positive outcome imo.
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First of all, thank you for suggesting this idea and discussing it openly with the community to gather feedback. I think it’s the first time we’re officially discussing M&A deals between blockchains on a Cosmos forum, it’s exciting but of course there are still some unknown factors. This could potentially pave the way for other deals in the future and that’s why we need to think about it carefully right from the start.
I want to share some open topics that have come to mind after reading the post:
Legal Side:
- Since we’re talking about an M&A deal, it’s clear that the Hub will need lawyers who specialize in crypto and M&A. The open discussion is great, we can’t rely solely on community goodwill for something as complex as this. The Hub would need to hire lawyers to help structure the deal in collaboration with Stride’s lawyers
Stride Contributors:
- The core contributors at Stride have done a fantastic work in making Stride successful within the Cosmos ecosystem. If this deal goes through, the Hub should ensure that Stride core contributors remain committed for a defined period of time to keep developing the protocol and providing value to ATOM holders
Financials:
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Stride Labs and the Stride Foundation would have to share details about their financial situation with the ATOM community. This will help understand their financial health and determine the valuation. Cosmos Hub will need to hire M&A analysts to conduct due diligence and compute Stride’s valuation. This is important for both parties to agree on a fair valuation
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Determining how the acquisition will be financed is crucial. Stride has a Fully Diluted Valuation of 80M. The community pool clearly doesn’t have enough money to buy Stride. One option is minting tokens, but at the current price (~$7), this would require minting ~11.5M of ATOM, increasing the total supply by almost 4%. The Hub already has an issue with hyperinflation, therefore the community would need quantitative metrics to justify this additional minting
Stride Backers:
- Stride has backers with vesting schedules. Burning STRD for ATOM and returning it to backers without any vesting schedule could create a sell-pressure. Both Stride and Cosmos Hub will have to agree on a vesting schedule. This doesn’t have to be the same as the current Stride vesting schedule, some M&A deals in the traditional world have accelerated schedules as a way to reward backers for their support that led to the startup’s success
I believe it will take time to work through some of these points. If we do proceed, it will be crucial to address these points step by step, the community should vote separately on:
- The valuation
- The vesting schedule
- The minimum commitment from Stride core contributors and the allocated funds to them (salaries)
To finish, I want to share some points that I’m still questioning:
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My feeling is that Stride was primarily seen as the liquid staking solution for Cosmos chains and was perceived as a neutral party, even though it joined ICS. I’m wondering if being fully acquired by the Hub might reduce Stride’s market because it would become too Cosmos Hub-focused. This could incentivize other chains to choose a more neutral provider or build their own liquid staking solution aligned with their chains instead of relying on a solution owned by the Cosmos Hub. Therefore Stride might potentially narrow its scope from “Cosmos” to “Cosmos Hub”.
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When it comes to liquid staking, incentivizing liquidity pools is crucial to maintain deep liquidity. Currently incentives are in STRD, but with the acquisition incentives would be in ATOM. This raises the same issue of neutrality that we have above. For example, if the incentives are no longer in STRD but in ATOM, would the ATOM community be willing to spend ATOM to incentivize a dYdX / stdYdX pool?
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If an acquisition happens, would Stride still be a consumer chain? Would the name still be Stride?
Thank you again for proposing this idea, I think it’s an interesting concept worth exploring
10 Likes
L-O-FUCKING-L. Never change cosmos, never change.
Lots of really great points raised here already. I’m still processing this, but wanted to add some questions and initial thoughts that I feel are critical to consider as part of this proposed acquisition and have not even been remotely addressed yet. I don’t have any answers, but I feel that we should at least try to define and aggregate the problems as a starting point. I’m going to try to be as neutral as possible here but disclaimer, I’m far more economically and ideologically aligned with Stride.
Stride’s Alignment With the Rest of the Ecosystem
I’m starting here because I don’t feel like this has been deeply addressed in any comments so far. This proposal will effectively convert the Cosmos Hub in itself to the liquid staking hub of the ecosystem. I understand that the proposed implementation here will see Stride as a side chain to the hub, but imo this is indistinguishable given that Stride will now lack its own native governance system.
That being said, Stride will lose its credible neutrality as an independent liquid staking chain to a chain that, by its very nature, seeks to acquire additional consumer chains and build products that compete with independent appchains in the ecosystem. IMO, this will cause chains with significant value to shy away from Stride as a product in favor of in-protocol solutions that are more closely aligned with their goals (or with similarly neutral LST providers that either currently exist or will spring up in the future). This is especially true of dYdX and Celestia, which have the potential to have more LST TVL than stATOM and have in the past shied away from being too closely aligned with Cosmos politics (which Stride will now be inextricably linked with, were this to pass).
You see this playing out already in the context of Osmosis. A proposal was passed just a few minutes after this announcement came out to allocate 20M OSMO to the stOSMO / OSMO pool on Osmosis from Osmosis’s community pool. Discussions are already being had about nullifying that proposal because Stride’s interest-alignment with Osmosis and the rest of the ecosystem will sharply decline as a result of this acquisition. I expect similar instances to occur with other chains in the future if this passes. This harms Stride’s growth, and thereby makes it less economically viable for both Stride and the Hub.
TLDR: This acquisition has the potential to significantly compromise Stride’s ability to scale TVL and expand to other chains in the future, hampering its value as an acquisition target.
Merger Valuation
This is where I think the proposal’s biggest roadblock will be. Stride holders’ position will be that Stride has massive growth potential relative to the value of ATOM, and STRD is likely significantly undervalued in relation to ATOM. Because of this, a reasonable valuation for this deal should see a dollar for dollar premium in favor of STRD. What this premium should be is up for debate, but it feels like a non-starter from the Stride end to receive ATOM at par or even at a discount to par.
Now, on the other hand, and looking at this from the perspective of ATOM holders, the community pool is undercapitalized to handle this acquisition, and a number of core contributing orgs to the Hub are already requesting additional capital from the Hub community pool, reducing the available capital even further. This means minting a significant number of ATOM out of thin air to pay for this, leading to instant dilution for ATOM holders.
Given this, ATOM holders will likely push to acquire Stride at a discount. I think this factor will represent an significant barrier between the two communities. A simple conversion of STRD to ATOM will likely not suffice here. I think that this proposal will need to be bundled with additional concessions to one party or the other in order for this to work. Not quite sure what that might look like yet.
TLDR: This acquisition will be valued quite differently depending on whether you are a STRD holder or an ATOM holder.
Impact on Stride’s ability to Iterate Quickly
This tweet highlighting comments from @sunnya97 at Cosmoverse today is extremely timely and relevant. https://x.com/rosspower/status/1709579938423099753?s=20
The Hub’s governance mechanism is not designed for speed of iteration. This works for a chain like the hub that in many ways actually benefits from moving slowly, but for younger chains that are growing quickly and continuously seeking new protocol partnerships, a 2 week forum discussion plus a 2 week voting period will impede Stride’s ability to compete.
I feel like this problem is easier to solve. Some potential ideas around this could be separate voting periods for Stride-specific proposals (both parameter-change props and text props) vs Hub improvement proposals, or by simply retaining the existing governor set and allowing them to vote with delegated ATOM (disclosure, I’m a Stride governor).
Token Swap as an Alternative
As @moonz pointed out, a lot of the goals this merger proposal is seeking to accomplish (broader alignment with the Hub, decentralizing ownership, etc) could be accomplished with a treasury swap between the Cosmos Hub and Stride instead. This would resolve a lot of the issues around potential valuation discrepancies by allowing for multiple tranches to be exchanged over the course of several months on a dollar for dollar basis (which would also allow the Hub’s community pool to replenish itself organically and obviate the need to print any new ATOM).
To the extent that an important part of this acquisition is having the Stride Labs contributors contribute more to the core protocol, I’d propose an additional token vesting grant agreement for Stride Labs to do that work. These chads have already contributed a ton to the Hub and IBC, so I think this aspect of things makes sense as well.
Appreciate all the discussion so far. I’d love to see some people from Stride Labs or any of the people from the Hub contributors that were involved in some of the earlier discussions on this give some additional context. I feel that working towards a more concrete set of next steps would be helpful in dispelling some of the uncertainty that this announcement has generated.
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Interesting idea, Jae; however, I’m just not interested in converting. Thanks for offer tho! 
Thank you to the Stride team for your vision and generosity! This has many benefits
Most people only care about what happens to their Bags and not the future of the Cosmos ecosystem, but clearly this will provide the ecosystem with a way to reduce chain operating costs.
- To Cosmos: LSD is a system service and middleware of the chain itself, and may take over the ecology, just like the problem faced by Lido in ETH, so ATOM acquires Stride and then provides a kind of Public goods to maintain neutrality. Orthodoxy, the acquisition of Stride and the acquisition of Osmosis are completely different things. Osmosis is not a middleware service of the chain itself. LSD and LSM are a type of product. They should be merged and then turned into Public goods SDK.
- To Stride: With the legitimacy of Public goods SDK, LSM+Stride LSD+Communty Pool will be a good idea to solve the problem. LSD Pool will have excellent depth without any additional incentives. This idea is to reduce the operating costs of the chain. The Cosmos ecosystem is Appchain, which brings power but also costs. Therefore, this kind of service is an excellent public product like ICS.
- To Atom: There is no one more suitable than Atom to provide the service of this chain itself, and it will also increase the value capture of Atom.
Now let’s talk about the Bag issues that the community is concerned about:
- To Stride: It can be based on cash + time-limited bond interest: for example, paying a part of Atom, and additional LSD income bond Token. I believe that there can be a price that the community and VC are generally satisfied with;
- To ATOM: The current tax on the community pool is 10%. A special increase will be made. Within a certain period of time, the community pool will increase to 25% to make up for the expenditure of the community pool.
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Hard no for me obviously.
I’m against centralisation. The Hub gobbling up Stride would be a recentralisation process, and the opposite of what we’re all trying to accomplish.
It would ternish Stride, a succesfull project with a strong tokenomic and a vibrant community, by diluting it in a struggling project with a disatrous tokenomic.
The Cosmos Hub will solve its own issues by changing and reforming itself, finally, not by bringing down others with him, by buying out their success.
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This is nothing more than a bad joke from Stride team. They said that it was an idea born between drinks, so I wouldn’t take it into account.
There are a lot of people that bought Stride way above current market price, and due this absurd event, price is going even lower due fears. So why in the world should we, Stride holders, accept to be merged only being payed our market cap in the time of the deal? There is no sense to accept that if we are not paid a huge premium, and Cosmos can’t offer what we worth/want.
Buy us is for sure a huge deal for Atom, IMO would be their best move since inception. But is HORRIBLE for any stride holder.
We are a chain that can accrue the real value of all cosmos adding new and old chains and taking a big chunk of all TVL. Nobody become more decentralised merging with Atom since is a clearly centralised chain.
A lot of us bought stride because we DON’T want Atom, so I would never accept to change my precious Stride for it in any case. And in the case I want market price, I can simply dump now.
We are not charity, wont sell for Atoms at a steal/cost price. And I sincerely hope that the team makes a statement soon, apologizing and withdrawing this absurd proposition for all those who have trusted stride for what it is.
This only stating the obvious. Then exist a big load of technicals aspect to take in account that make this even worse as someone pointed before.
#FreeStride
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