Cosmos and Terra liquidity alliance Arbitrage

Conversation
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The Cosmos ATOM community can tactically take advantage of Terra’s Liquidity Alliance (through Eris Protocol) to optimize returns by encouraging cross-chain cooperation

Opportunity Overview:

  • Whitelisted Cosmos Assets:

ATOM and other Cosmos ecosystem tokens are whitelisted for Terra’s Liquidity Alliance rewards, allowing high-yield farming on Eris Protocol.

  • Current Rewards: $6.2M/yearly rewards from LUNA chain inflation if LUNA is stable at $0.33. If it moves to higher then the rewards are reciprocated and increased with it.

  • Upside Potential: Up to $62M / annually if LUNA hits $3.3 (10x multiplier).

  • 0-Day Unbonding: Their is no lockup time period in terra liquidity alliance so, we can get access to liquidity immediately. we can built many strategies around it to reap the most benefits from it.

1.Strategy: Playing the Spread

  • Borrow Low Rates (<5%): We can simply use decentralized lending platforms (e.g. Mars Protocol ,etc) on Terra/Cosmos to borrow stablecoins or LUNA against ATOM collateral.

  • Kava or Umee (Cosmos-native) platforms needs to consider when borrowing they might offer competitive rates.

Farm High Yields (300%+ APY):

  • Deposit borrowed funds into Eris Protocol’s Terra liquidity pools and earn rewards in LUNA or stablecoins.

  • Example: Take $100K at $5k cost, farm $300K returns (net $295K profit prior to fees/volatility).

Arbitrage the Difference:

  • Earn from spread between borrowing fees and yield rewards.

  • Reinvest rewards or close positions immediately owing to 0-day unbonding.

  1. Advantages to the Cosmos Community

  • Increase ATOM Utility: Create additional demand for ATOM as collateral, boosting its value and staking security.

  • Cross-Chain Synergy: Increase interoperability between Cosmos and Terra, migrating developers and users to both chains.

  • Liquidity Growth: Provide more liquidity for Cosmos assets on Terra, making trading more efficient and promoting DeFi adoption.

  • Community Incentives: Re-invest earned LUNA rewards into Cosmos projects (e.g., staking, governance, NFT platforms).

  1. Steps to Participate

  • Bridge ATOM to Terra: Their are many methods from which we can bridge ATOM to LUNA but the most common is to Utilize Cosmos IBC or Terra Bridge (e.g. via Axelar) to bridge ATOM to Terra.

  • Collateralize & Borrow: Deposit ATOM on a Terra/Cosmos lending protocol (e.g., Mars Protocol , etc) to borrow stablecoins/LUNA loans.

  • Stake in Liquidity alliance Eris Protocol: Stake liquidity on Astroport terra network and use these LP to stake on Eris pools (e.g., ATOM-LUNA, ATOM-stATOM, ATOM-dATOM) to reap rewards. Their are many pools on TLA which we can take advantage of or simply build your own custom strategies around it.

  • Monitor & Optimize: Monitor LUNA price, rewards, and borrow fees. Rebalance positions as necessary.

  1. Persuasive Case for Participation

  • Short-Term Return: Leverage the present 300%+ APY before possible rate cuts.

  • Long-Term Growth: Solidify Cosmos’ position in cross-chain DeFi, making ATOM a multi-ecosystem asset.

  • Community DAO Proposals: Distribute a share of rewards to support Cosmos ecosystem initiatives (e.g., grants, liquidity pools).

Conclusion

The Terra Liquidity Alliance provides a unique high-reward window for Cosmos users, blending on-demand access to liquidity with incentive scalability. Well-executed strategic involvement can highly reward ATOM holders and increase the presence of Cosmos in the interoperable DeFi space. DeFi. The community must move decisively yet responsibly making the most of arbitrage.