Important Topics for Defi on Cosmos

  1. Priority for Cosmos Defi for next 6 months

We need to choose several most important feature for Cosmos Defi from below options.
Please share your choice and reasoning.
(We consider IBC is operational, after Stargate update, which will happen in 6 months)

  • Options
    • DeX and liquidity: primal usecase of IBC protocol and Defi to attract users
    • ETH peg (peggy) : many kinds of assets can be transfered into Cosmos for Defi activities
    • BTC peg : one of the most trusted crypto with biggest marketcap and potential users to invite
    • staking derivative : to utilize the bonded capital for dPoS security among Cosmos blockchains
      • drawback : concentration of bonded capital in one or several staking derivatives might cause point of failure for dPoS mechanism
    • collataralized lending and stable coin : another primal Defi utility to attract users
    • CosmWasm : to allow ecosystem to build Defi utilities with natural hub-level-security
      • complexity and untested CosmWasm module can cause fatal security failure for the Hub
    • shared security(cross chain validation) : to provide hub-level-security to most important zones
      • there exists no spec design or prototype, so it will take a long time to build
    • web extension wallet : signing interface for various Defi utilities on the web
      • we have Keplr but the team only has one dev who also is implementing interchain account
  1. DeX and Liquidity

There exists various choices and considerations when we build and operate DeX and liquidity utility on Cosmos. Here are the discussion topics

  • Hub vs Zone

    • Hub
      • direct implementation as a module on the Hub
        • quickest solution without any necessary prerequisites
        • represetitative DeX on the Hub will gain maximum security and reputation for user attraction
        • the DeX module needs careful security review to be included in the Hub
        • who will build the module?
      • CosmWasm smart contract DeX
        • barrier : stability and security of CosmWasm needs more test period for adoption to the Hub
        • who will build CosmWasm module and smart contract DeX : CosmWasm team
    • Zone
      • Zone with shared security from the Hub
        • shared security module is prerequisite
        • how shared security contract from the Hub can be continued?
        • who will build shared security and DeX module for the zone?
        • how will the economic model of the zone be? solely possessed by atom? a new native token?
      • Zone supported by rollup technology
        • zk-rollup
          • zkrollup module on the Hub is the prerequisite of this approach
          • it needs relatively extensive technological building process
          • who will build zkrollup and DeX zone?
        • optimistic rollup
          • optimistic rollup has relatively less implementation difficulties compared to zkrollup
          • but it needs security assumption : fraud proof
          • who will build optimistic rollup and DeX zone?
  • AMM vs orderbook

    • AMM
      • AMM allows anybody without any professional technic can provide liquidity
      • AMM simplifies trading execution to minimize overhead on blockchain
      • AMM provides unstressful simple interface for users
      • AMM provides better interconnection ability to other Defi utilities because of its simple structure
      • AMM liquidities can be combined to provide most effective swap utility experience
      • AMM does not require very low latency : 6 seconds is an enough figure
    • Orderbook
      • orderbook exchange provides professional traders better freedom at trading strategies
      • orderbook exchange is better for significantly larger trades
      • orderbook exchange requires very low latency to prevent arbitrage traders to constantly consume liquidity from the exchange : overconsumption of liquidity(limit orders) result in poor orderbook liquidity causing larger slippage costs
      • orderbook exchange is more difficult to operate because of low latency constraint
  1. ETH Peggy
  • PoC implementation

    • Peggy Master Branch
      • it has the entire cycle of peg utility for Ethereum blockchain
        • if someone confirmed that it is not adaquate for production level upgrade, please let us know.
    • Peggy Althea Branch
      • it has better gas-optimized relaying algorithm
      • it needs quite a large work to build the complete peg flow
    • Combination
      • two branches should be combined to build complete peg flow with practical gas cost
      • becuase two approaches are quite different, integration work will be not very easy
  • Hub vs Zone

    • same as DeX

Hey! Thanks for sharing this detailed information on Defi.