Can we fill in a bit more context/motivation/assumptions behind these designs? I think it would help others getting up to speed. My understanding is that the two token design is motivated by the existing reward pool structure, which makes delegations non fungible, so the two tokens are about ways to extract fungibility.
I wonder if we could get the desired fungibility through an overall simplification of the staking system. Ie rather than the reward pool which can collect any kind of token, we convert all rewards/fees to atoms with an onchain AMM, and autobond them. Then I think the existing validator pool shares could become the fungible (per validator) staking derivative. This also has the potential added benefit of creating constant upwards price pressure on the atoms.
The downside to converting all tokens to Atoms is that folks might genuinely want to built exposure to these tokens, but they can still do so by trading out for them, or possibly through mechanisms on their zones to reward the bonded atom holders for cross-chain staking directly on the zones (?)
While the two token design is interesting, and potentially appealing to more financialized use cases, I question whether it’s necessary in the base layer and whether it might create undue risks. My understanding is that our primary motivation is to defend against the centralization risk of exchanges that are offering effective staking derivates already. That’s not that high a bar (though we do have to make better UI/UX, accounting tools, etc., it’s not just about the raw on-chain ability to trade staked Atoms). There are other motivations, like improving capital efficiency and preparing staked Atoms for DeFi, and while important, it does feel like even a first order simple solution to the primary motivation can still support these secondary motivations, and more complex derivatives can be built on top later as the Cosmos DeFi system starts to mature and demand it.
So basically I’d be proposing, at least for consideration to clarify the design space here:
- convert all rewards/fees into Atoms with on chain AMM
- autobond all rewards/fees
- tokenize the existing validator pool share as the staking derivative, fungible per validator
- consider building more complex multi token designs (ie separating collateral from cash flows) in future iterations, either through VMs on the hub or on zones, or in the base layer on the hub once there’s more confidence/demand
Come to think of it, if we do want to stick with two derivatives tokens, does converting to Atom and autobonding simplify the design of perpetual yTokens (ie. without needing to worry about maturity?!)