[Prop #853] [Voting] Allocate 600k ATOM to pSTAKE for growth of ATOM liquid staking

[pandeymikhil]

Proposal

Allocate 600k ATOM to pSTAKE Finance for liquid staking and building liquidity for stkATOM across various Cosmos DeFi protocols.

Change Log

• October 24th, 2023 - Started this discussion by publishing the initial proposal
• November 16th, 2023 - Made the following edits:

Added

Implementation details

Changed

TL;DR
Proposed use of Funds

TL;DR

• pSTAKE Finance requests 600k ATOM from the Cosmos Hub Community Pool for the growth of ATOM liquid staking with stkATOM across Cosmos DeFi protocols. Of this 600k ATOM, 300k ATOM will be liquid staked with pSTAKE and the remaining 300k ATOM will be paired with stkATOM for LPing on DEXes.

The split of liquid-staked ATOM to be used in Cosmos DeFi is proposed to be as follows:

1. LP on stkATOM/ATOM pool on Astroport (Neutron): 175k ATOM and equivalent stkATOM
2. LP on stkATOM/ATOM pool on Dexter (Persistence): 125k ATOM and equivalent stkATOM

• pSTAKE Finance will waive any fees (5% fees) for the Community Pool on the 300k ATOM that will be liquid staked with pSTAKE. Furthermore, pSTAKE Finance will share 15% of its total revenue generated from ATOM liquid staking with the Cosmos Hub Community Pool as approved by $PSTAKE governance (for the duration until which the Community Pool provides liquidity to pSTAKE Finance).

• It is suggested that the allocated funds remain within the proposed protocols for an initial duration of one year. However, it’s important to emphasize that the allocation can be re-evaluated through $ATOM governance, allowing for potential withdrawal in the future. It’s worth noting that once the funds are unbonded, the return process may take 21-25 days following the approval of the proposal.

• This proposal highlights the potential of ATOM as Interchain Money to stimulate growth across the Cosmos ecosystem and harmonise incentives among protocols within and beyond AEZ.

• This strategic allocation benefits the Cosmos Hub by promoting Liquid Staking adoption while accruing significant value across the Cosmos LSTfi ecosystem. The proposed strategy yields the Community Pool with a variety of assets, mitigates the risk of a single point of failure, and enhances ATOM’s influence over other protocols like pSTAKE, thereby contributing to the overall health and vitality of the Cosmos ecosystem by diversification and decentralisation of capital.

• The requested 600k ATOM represents ~12.5% of the ATOM presently dormant in the Community Pool. Liquid staking this amount (approximately 300k ATOM) is expected to yield roughly 59,280 ATOM rewards annually, factoring in a 19.76% pSTAKE LS yield.

Additional yield is anticipated from swap fees generated on Dexter and Astroport.

Background

Persistence and pSTAKE teams have been one of the earliest supporters of Cosmos and have provided value to ATOM stakers in more ways than one. The Persistence team conducted one of the first stakedrop campaigns in Cosmos, distributing 1% of the total supply of $XPRT i.e. 1M $XPRT for the stakers in Cosmos and 200k $XPRT, just for $ATOM stakers. Additionally, 14.5M $PSTAKE tokens (~2.9% of the total supply) were allocated for $ATOM stakers as an airdrop.

The Persistence chain is an app-chain for LSTfi. As the LST issuance protocol, pSTAKE is a critical part of the Persistence ecosystem in building a capital efficient LST-based economy. pSTAKE is a Liquid Staking Provider for the Cosmos Hub and has been providing ATOM LS service since mid-2021. The early version, stkATOM v1(which was also one of the first ATOM liquid staking solutions), was developed under unique constraints, including the absence of IBC in the early days of the Cosmos network and the lack of a well-established decentralised exchange (DEX). Despite such constraints and a complex solution, pSTAKE, at its peak, captured ~$40M stkATOM (ERC-20) TVL and served over 6,400 users.

Post the advent of IBC, a DEX such as Osmosis, and IBC v3 (introducing ICA), a non-custodial Liquid Staking solution could be built.

pSTAKE deprecated its v1 solution last year and launched stkATOM as an IBC-enabled, fully non-custodial asset on the Persistence Core-1 chain earlier this year (January 2023). pSTAKE’s stkATOM v2 solution is entirely non-custodial and similar to other Liquid Staking solutions in Cosmos.

One can learn more about current stkATOM stats, features, usage, and security considerations here.

Proposed Use of Funds

The pSTAKE team proposes the following allocation for the requested 600k ATOM:

1. Liquid Stake 300k ATOM with pSTAKE to mint stkATOM
2. Use 300k ATOM for LPing on Dexes paired with the liquid staked ATOM (stkATOM)

Split of the Liquid Staked ATOM:

1. LP on stkATOM/ATOM pool on Astroport (Neutron): 175k ATOM and equivalent stkATOM.

This is strategically crafted to establish a robust stkATOM liquidity pool within the Neutron ecosystem, catalysing a substantial surge in trading activity as stkATOM gains adoption and becomes a widely used asset in the Neutron ecosystem. As a result, LPs and the Community Pool will receive swap fees and yields based on the adoption of stkATOM within the Neutron ecosystem. This, in turn, contributes to collective growth in protocol revenue for Neutron, thereby amplifying the revenue for the Hub since Neutron serves as the DeFi hub for Cosmos Hub.

This liquidity base could potentially enable the use of stkATOM as collateral on Red Bank, Mars Protocol. Furthermore, the availability of stkATOM liquidity on Neutron cements pSTAKE’s relationship with the AEZ.

2. LP on stkATOM/ATOM pool on Dexter (Persistence): 125k ATOM and equivalent stkATOM

Dexter is currently serving as the liquidity and trading base for the stkATOM/ATOM pair, with ~$950k in liquidity and ~$3.2M+ cumulative volume. This will help to enhance stkATOM’s liquidity and increase stkATOM <> ATOM trading efficiency and peg maintenance.

It is suggested that the allocated funds remain within the proposed protocols for an initial duration of one year. However, it’s important to emphasize that the allocation’s future can be re-evaluated and decided through the $ATOM governance, allowing for potential withdrawal. It’s worth noting that once the funds are unbonded, the return process may take 21-25 days following the approval of the proposal. It’s important to note that these funds will always remain under the custodianship of the Cosmos Hub, ensuring that no individual protocol has direct control over them.

In return for this allocation, the pSTAKE Finance will waive any fees for the Community Pool on the 300k ATOM that will be liquid staked with pSTAKE. Furthermore, pSTAKE is open to sharing 15% of its total revenue generated from ATOM liquid staking with the Cosmos Community Pool, 3. approved by $PSTAKE governance.

** Important Update on Liquidity Provision Strategy: Allocation Adjustment

In the initial post, the proposal suggested utilising 100k ATOM equivalent stkATOM for minting IST on Inter Protocol and creating its liquidity paired with stkATOM on Dexter. The original plan was as follows:

LP on stkATOM/IST pool on Dexter (Persistence): ~60k ATOM equivalent IST (minted using stkATOM collateral), paired with equivalent stkATOM (subject to Inter Protocol’s and XPRT governance approval)

However, acknowledging the community’s feedback, we recognise a lack of sufficient interest and receptiveness, attributed to perceived risks, limited traction, and a clear preference for other stablecoins such as USDC. Considering this valuable feedback from contributors, we have made the decision not to proceed with the initial proposal of pairing stkATOM with IST.

To simplify and maintain focus on the growth of ATOM liquid staking, we have reallocated the 100k ATOM funds initially designated for IST. The updated allocation now designates 175k ATOM and equivalent stkATOM for providing liquidity on Astropor (Neutron) and 125k ATOM and equivalent ATOM for providing liquidity on Dexter. This adjustment aims to align with community preferences and streamline efforts toward the key objective of fostering the growth of ATOM liquid staking.

Exploring the Rationale for Allocating Community Pool Funds to pSTAKE

1. Strengthens ATOM as the centre of the Cosmos LSTfi ecosystem

We strongly believe that the best way to achieve alignment is through Capital. Capital serves as the binding force that unites teams, protocols, and builders, steering them toward a shared long-term vision. While AEZ represents a significant initial step in aligning ATOM with the Hub’s consumer chains, the potential for capital alignment extends far beyond this.

ATOM, the native asset of the Cosmos Hub, possesses the potential to act as a dynamic catalyst for the growth of the entire ecosystem. It can foster alignment not only with AEZ chains but also harmonize incentives for protocols both within and outside AEZ. This results in a mutually beneficial scenario for the entire ecosystem, creating a win-win situation (the suggested capital distribution mechanics will aid in achieving this objective).

Additionally, with LSM’s support now live and the latest Comsos Hub discussions, ATOM inflation is expected to reduce significantly over time. A lower inflation rate would benefit ATOM’s economic value. A major hindrance to using Liquid Staking today is the lack of liquidity for LSTs in Cosmos. With the CP ATOM being used to supply liquidity to a stkATOM-ATOM pool, the demand for stkATOM increases (thus increasing the demand for ATOM liquid staking) and, in return, increasing the dominance of ATOM in the Cosmos DeFi ecosystem.

2. Decentralises and Diversifies CP’s exposure to ATOM LS

The Community Pool (CP) previously allocated 450,000 ATOM in liquidity on the stATOM/ATOM pool on Neutron to support Stride’s stATOM growth as part of the AEZ proposal. Recently, another proposal went live on Cosmos Hub’s forum to supply 900k ATOM liquidity to the stATOM/ATOM pool on Osmosis, increasing the initial 450k ATOM liquidity by a factor of 3. While we respect the communities’ earlier allocation decisions, we hold the view that CP funds could be put to even more effective use by promoting diversified and decentralized capital investment, as opposed to solely contributing to the growth and liquidity of a single LST’s growth.

The proposed strategy yields CP with a variety of assets, mitigates the risk of a single point of failure, and enhances ATOM’s indirect influence over other protocols like pSTAKE, thereby contributing to the overall health and vitality of the Cosmos ecosystem and yielding a positive impact on the demand for ATOM and stkATOM (ATOM LST) within Cosmos DeFi.

3. Generates more revenue for the Cosmos Community Pool

The requested 600k ATOM represents ~12.5% of the ATOM presently dormant in the Community Pool. Liquid staking this amount (approximately 350k ATOM) is expected to yield roughly 59,280 ATOM rewards annually, factoring in a 19.76% pSTAKE LS yield. The 5% protocol fee charged here will be waived off and sent back to the Community pool in addition to the 15% revenue.

Additional yield is anticipated from LP rewards and swap fees on Dexter and Astroport.

Implementation Details

Multisig for Fund Management

While we are actively in discussions with Timewaves Lab to establish a trustless fund management solution using Covenant for managing our funds, we acknowledge that production is still underway. To bridge this interim period, we propose the creation of a 3/5 multisig to steward the funds securely. This multisig will serve as custodian for the funds until Covenant v3 is fully operational. Subsequently, upon the operational readiness of Covalent, the funds and operations can be seamlessly handed over to Timewave’s smart contracts… After extensive consultation with pSTAKE contributors and stakeholders and keeping in mind that AADAO’s elections are around the corner, we propose the inclusion of the following active and trusted contributors from the Cosmos ecosystem for the multisig:

Spaydh - Avril Dutheil (Neutron)
Clemens Scarpatetti (Cryptocrew)
Michael NG (Stake With Us)
Sanjeev Rao (Leap Wallet)
Mikhil Pandey (Persistence Labs)

Please note: The funds under the multisig will be deployed based on decisions made by the Cosmos Hub governance. Multisig participants will act as stewards, utilising the funds in accordance with governance directives.

Fund Utilization Period

It is proposed that the allocated funds remain within the proposed protocols for an initial duration of one year. This implies that the funds will be held within the proposed protocols for a period of x+365 days, where x represents the days until the funds are transferred to the multisig.

However, it is crucial to emphasise that the allocation can be re-evaluated through $ATOM governance, allowing for potential withdrawal at any time in the future. It’s worth noting that once the funds are unbonded, the return process may take 21-25 days following the approval of the proposal.

Liquidity Provisioning on Astroport & Dexter

Liquidity providers can earn rewards through two mechanisms: LP yield, generated from swap fees within the underlying liquidity pair, and additional incentives that often require bonding liquidity for a specified period.

We recommend keeping the liquidity positions on both Astroport and Neutron unbonded to facilitate swift withdrawal in response to governance decisions or market volatility. Additionally, this approach ensures fair incentive sharing for the rest of the LP positions.

Revenue and Yield Distribution

The pSTAKE community, through governance, has committed to sharing 15% of its revenue and waiving any fees currently set at 5% with the Hub. This proposal suggests that the allocated revenue and waived fees be returned to the Cosmos Hub Community Pool either at the end of one year or if/when the Cosmos community decides to withdraw liquidity based on governance—whichever occurs first.

Provide Final Feedback

The discussion on the Cosmos Hub Forum has been active for over three weeks, and we are grateful for the invaluable feedback received from many contributors. Taking into account all the insights shared, we have diligently updated the proposal with relevant considerations.

As we move closer to consolidating this discussion and preparing a governance proposal, we invite everyone to share their final thoughts. Your continued feedback and input are crucial in shaping the final version of the proposal.

Thank you for your active participation, and we look forward to the final stages of this collaborative process.

[ll1ldur]

Totally agree whith this proposal, ATOM needs to nourish their app base in order to thrive, STRD as part of ICS has become the bigger receiver of stimulus, but Stride isn’t the only LS provider, that’s why as a comunity we should incentivize also other solutions, Competition and diversity is required not only in LS but in life in general that’s why a merge with STRD has many aversion. If we as a community keep resisting change things will remain the same, here are answers to your questions of how cosmos would become sutainable.

@pandeymikhil

It’s important to note that these funds will always remain under the custodianship of the Cosmos Hub, ensuring that no individual protocol has direct control over them.

@pandeymikhil

In return for this allocation, the pSTAKE protocol commits to waiving any fees for the Community Pool on the 350k ATOM that will be liquid staked with pSTAKE. Furthermore, pSTAKE is open to sharing 15% of its total revenue generated from ATOM liquid staking with the Cosmos Community Pool, contingent upon the 15% fee-sharing proposal being approved by $PSTAKE governance.

Win win solution to me.

[SuperEraSa]

I’m fully behind this idea. ATOM needs to branch out and support a variety of projects for its long-term success. This plan is a smart move that not only benefits Cosmos and Persistence but also positively impacts other platforms like Neutron and Dexter. By allocating ATOM to pSTAKE for liquid staking, we’re doing more than just increasing rewards for the Cosmos Community Pool. We’re diversifying our investments, which is a strong strategy to boost ATOM’s role, particularly in the DeFi sector.

Let’s also not overlook the advantages this brings to Persistence, a project deeply rooted in the Cosmos ecosystem. As Persistence grows, it aligns its goals with those of the broader Cosmos community. This mutual growth leads to a more stable and feature-rich environment for all users, enriching the Cosmos network as a whole.

Having a range of options is not just intelligent; it enriches our entire network. This is where Neutron and Dexter come into the picture. They stand to benefit from this proposal, which in turn solidifies ATOM’s standing in the DeFi landscape within Cosmos.

[tknox35]

This has my support, too. I’m a daily user of Stride, but I want to see Atom used in every protocol in Cosmos.

[SpaceMonster]

Would it be out of place or unreasonable to ask that the Community Pool also receive some amount of up-front $XPRT to help offset the allocation of the “dormant” Atom & to better align the Fund’s continued viability & growth with the growth & success of Persistence?

[jtremback]

I’m opposed to this, as I am also opposed to the Osmosis PoL proposal.

The Stride-Neutron PoL makes a lot of sense because it strengthens two consumer chains at once. This proposal does involve Neutron in a small way, which is nice, but it seems to be mostly intended to promote a competitor to Stride.

Any proposal to boost someone’s TVL with free ATOM can be justified by the “ATOM moneyness” concepts first introduced in ATOM 2.0.

But right now, we do not have a clear theory of what the criteria for these deals is and we don’t have a framework for doing them. We don’t have any way for projects to collateralize the ATOM they are leant. We don’t have automation around this process.

I think we can make exceptions in the case of deals involving consumer chains, because collateralization is not as much of concern given the control of the validator set over consumer chains through ICS, and value accrual for the Hub is not as big of a concern given that it benefits consumer chains.

But until we have have the economic and code frameworks figured out with Timewave or something else, to allow these PoL deals to be an “onboarding to the AEZ platform” instead of a bunch of one-offs, I don’t think we should do them with non-consumer chains.

[ABJAZ]

I got few contributions/feedback to share.

Firstly, I must commend pSTAKE/Persistence team for initiating this idea and it’s absolutely an epic one.

600k Atom is absolutely a great way to initiate more growth amongst Atom users, LST and Boosting the liquidity strength across these dApps.

Hope to see all aspirations come to reality, can’t wait to have a proposal go live after this forum.

[Kamikaza731]

I think spreading liquid staked assets to more than 1 LSD chain provider is a good idea. But like jtremback said it doesn’t include that much benefit to AEZ or Cosmos hub so I am kind of split on this idea.

If all asets were to be placed on Neutron on Astroport (and hopefully soon Mars Bank) it would have more benefit for the hub while still keeping intrest for pstake by earning commission from LSD assets.

[Pawel_PK]

I agree to the proposal. We should have diversified LS providers in Cosmos. Persistence shall be supported to the same extend as Stride was.
The inititative will help to grow the whole environment organically.

Persistence is on the mission to become crosschain LS HUB and represents Cosmos externally in front of other blokchains as BNB and Eth.

Within Cosmos Persistance had been actively supporting the comminuty from the beginning I personally dont get why its left behind and only Stride is considered to support.

[ll1ldur]

@jtremback

This proposal does involve Neutron in a small way,

The majority of funds will be allocate in Neutron.

@jtremback

Any proposal to boost someone’s TVL with free ATOM

Isn´t free ATOM in fact PSTAKE will be waiving fees for the Community Pool and sharing 15% of its total revenue with C.P.

@jtremback

But right now, we do not have a clear theory of what the criteria for these deals is and we don’t have a framework for doing them. We don’t have any way for projects to collateralize the ATOM they are leant. We don’t have automation around this process.

But that nevermind if STRD is the beneficiary.

@jtremback

but it seems to be mostly intended to promote a competitor to Stride.

In free markets needs to be competition otherwise is monopoly.

@jtremback

I think we can make exceptions in the case of deals involving consumer chains, because collateralization is not as much of concern given the control of the validator set over consumer chains through ICS, and value accrual for the Hub is not as big of a concern given that it benefits consumer chains.

So every dapp out of ICS can’t acrue value to the HUB and is excluded from economy? what collateralization are you refering to? its an allocation of funds with no risk to ATOM side.

@pandeymikhil

It’s important to note that these funds will always remain under the custodianship of the Cosmos Hub, ensuring that no individual protocol has direct control over them.

@jtremback

But until we have have the economic and code frameworks figured out with Timewave or something else, to allow these PoL deals to be an “onboarding to the AEZ platform” instead of a bunch of one-offs, I don’t think we should do them with non-consumer chains.

= Maybe never.

[CosmonautStakes]

Currently, most of the Liquid Staked ATOM is on Stride. For some reason, people forget other Liquid Staking alternatives exist, and prefer to use the most popular ones, creating a systemic risk.

Also, for some reason, the major players of the Cosmos Ecosystem want to only see Stride succeed (observe how the big voices never mention or talk about QuickSilver or pSTAKE). Look at how Sunny proposed to allocate 900k ATOM for LPing in the Osmosis stATOM/ATOM pool. No mention of other protocols. I understand Stride is in the AEZ while its competitors aren’t, but you can’t use this argument to provoke a systemic risk.

Here, Mikhil from pSTAKE comes up with a valid way that’s a win-win for all the involved parties. All assets remain in Cosmos Hub’s custodianship, all fees for the 350K ATOM are waived, and 15% of the fees generated by pSTAKE go into the Cosmos Community Pool.

Let’s not put all our eggs in one basket, frens.

[Allcosmos]

I agree with this proposal. It will simply be beneficial for out network, and support the growth for the entire cosmos ecosystem.

[maximus]

Multisig as Interim Solution

Hey everyone, I’m chiming in on behalf of Timewave. To preface, I am not posting in favor or against this draft proposal. Timewave is a neutral provider of infrastructure that enables interchain agreements. Blockchains, DAOs, dApps, protocols, and other internet-native entities can use Timewave infrastructure to enter into economic agreements with the Hub, thereby onboarding onto the AEZ platform. Whatever terms the Hub and Persistence ultimately reach with one another, if any, we at Timewave will work towards building the infra necessary to initiate and manage that agreement trustlessly (i.e. without the need for a trusted multisig).

With all that said, I encourage the Hub to move forward with strategically valuable liquidity sharing agreements without waiting for Timewave. Similar to how Stride started with a multisig with the intention to move to a trustless option once the trustless option is production ready, the Hub could enter into a liquidity sharing agreement with novel deal terms and use a multisig to manage the deal until the trustless infrastructure is audited and able to handle the novel deal terms. Timewave will prioritize any deals that the Hub is involved in that require multisigs and we will do our best to proactively build the features that the Hub will likely want in the future. We have been proactively building Covenant v2 and it will be ready for audit by the end of November (see below for details).

To be clear, multisigs should be used IF AND ONLY IF the infrastructure to handle novel features is not yet production ready. If the infrastructure to handle the deal terms is ready, the Hub should always opt for trustless infrastructure, not a multisig.

Timewave Status and Roadmap

Covenant v1

Together with Stride, we have finished building Covenant v1, which is the infrastructure that will enable the 450K ATOM POL from Hub Prop 800 to move off of the AADAO multisig and onto trustless smart contracts that are directly managed by the Hub. Covenant v1 was audited by Informal and is ready for use today. Migration to v1 by the Hub currently requires 2 governance props. Once the Hub adopts its ICA controller, migration would only require 1 prop. We plan to wait for the ICA controller before putting migration to vote to reduce governance load.

Covenant v2

AADAO recently announced that it will support Timewave’s buildout of Covenant v2. Covenant v1 only works for the specific path between the Hub, Stride, and Neutron to create the ATOM-stATOM pool on Astroport. Covenant v2 is a more generalized and feature-rich version of v1 that will enable interchain agreements that include the following features:

1. liquid-stake tokens
2. swap tokens
3. LP tokens
4. commit to minimum lockup/LP durations
5. ragequit fees

Covenant v2 is currently scheduled to be production ready by Q1 2024.

Covenant v3

We are exploring where to take the Covenant system from here. Ideas on the table include:

1. collateralization: borrower of liquidity can put up collateral to secure better liquidity borrowing terms (e.g., lower interest rate, higher borrowing limit)

2. liquidity as a service: create a competitive market for ATOM liquidity where fees paid for ATOM liquidity are a function of aggregate demand for the liquidity

3. integrations with Osmosis, Persistence, and Inter Protocol

If you have any recommendations for features to add into v3, let us know! DMs open: @TimewaveLabs

[pandeymikhil]

Hey @jtremback, first and foremost, thank you for sharing your thoughts here. We really appreciate you bringing up your concerns.

I agree with some of the things you have brought up. In particular, I am aligned with your thoughts around having an economic and code framework for doing liquidity deals with chains. I also agree with you that it would be ideal to have Automation around the entire process of making the deal and putting the CP ATOM to use.

As per our conversations with Timewave labs, they are already working on tooling around these problems and I think it would make a ton of sense to leverage those tools once they are ready. As highlighted by @maximus, once these solutions are built out and ready, we would be more than happy to migrate assets from a multisig to Covenant v2/v3.

In the meantime, I would propose having a 4/7 multisig custody the assets. The people on this multisig should be defined by governance. The reason we did not propose who should custody these funds is primarily to avoid any situation where ATOM stakeholders feel that pSTAKE will be favoured by the multisig participants (or they probably are already favouring pSTAKE, which is why they are on the multisig).

Where I disagree with you is primarily around your understanding of the output of the proposal. The aim is not just to boost pSTAKE’s TVL without any cost to pSTAKE. As you can see above, unlike Osmosis’ proposal, we propose that the ATOM CP get 15% of all pSTAKE’s ATOM LS revenue throughout the duration of this deal. This is a significant percentage of pSTAKE’s ATOM LS revenue and I believe this to be a fair number.

I think we can make exceptions in the case of deals involving consumer chains, because collateralization is not as much of concern given the control of the validator set over consumer chains through ICS, and value accrual for the Hub is not as big of a concern given that it benefits consumer chains.

I am not advocating for neutrality when I say this, but I believe ATOM stakers should not be overlooking additional revenue sources for the Community Pool when a good opportunity presents itself.

[dhc]

If stride cannot be acquired by the hub, we should promote other LST protocols and have them join the AEZ.

[Ruslan_Stakewolle]

This proposal represents a well-thought-out, strategic, and holistic approach to the growth of the Cosmos ecosystem. Stakewolle believes this initiative will yield both immediate benefits and long-term growth, and we urge community members to extend their support for Persistence.

[Vishal]

This is really well thought proposal.

It really highlights the potential of ATOM as Interchain Money to stimulate growth across the Cosmos ecosystem.

Using Dormant tokens in community fund to help cosmos ecosystem to grow and provide more options for users to provide liquid staking is best thought process.

Couldn’t agree more with this proposal.

This strategic allocation benefits the Cosmos Hub by promoting Liquid Staking adoption while accruing significant value across the Cosmos LSTfi ecosystem.

Cant wait for this to go voting.

[BlocksUnited]

@pandeymikhil

The requested 600k ATOM represents 11.76% of the ATOM presently dormant in the Community Pool. Liquid staking this amount (approximately 350k ATOM) is expected to yield roughly 69,160 ATOM rewards annually, factoring in a 19.76% pSTAKE LS yield. The 5% protocol fee charged here will be waived off and sent back to the Community pool in addition to the 15% revenue.

Additional yield is anticipated from LP rewards and swap fees on Dexter and Astroport.

Enjoyed reading this proposal and all the comments. A couple things from our perspective… we agree that supporting app chains that aren’t consumer chains makes sense when the Hub maintains control of the funds and when 15% or more of the revenue comes back to the community pool.

Doesn’t the LS yield come from issuance of new tokens so the CP is robbing Peter to pay Paul? The choice is between not inflating and calling the CP tokens dormant/unproductive, or increasing supply and depressing price? Also, the numbers in the above quotation assume current inflation/yield and theres ongoing discussion to set max inflation at 10%, so it makes sense to include the deceased revenue numbers too.

If the ATOM the CP lends out is swapped into other tokens so that the CP gobbles up the inflation of other tokens, doesn’t that make more sense? So that ATOM isn’t cannibalizing itself in the name of POL profit? Kinda like printing dollars to buy hard assets makes more sense than printing dollars to pay ourselves more interest in dollars. Maybe the CP should use ATOM to buy nBTC, but that’s a whole other discussion.

With all that said, we agree with the sentiment of this discussion of diversified CP investment and supporting app chains that aren’t consumer chains. Supporting more than one LST for ATOM makes sense to us too, and avoiding a single point of failure.

It seems clear that Cosmos OGs have chosen Stride as the winner, but Stride’s platform is easy to use, the team moves quickly, their marketing muscle is top notch, etc. With all due respect to pSTAKE, their platform is cumbersome and their marketing muscles are weak. I’ve never even heard of Dexter. Supporting Cosmos for years does not equal deserving of CP funds.

We’d love to see both pSTAKE and Quicksilver succeed and help to diversify Cosmos liquid staking, but both teams have a lot of ground to cover and it’s a race. We’re not convinced the CP investment will pay off, but would love to be wrong. God speed!

[pandeymikhil]

Hey @BlocksUnited, thank you very much for your comment and the candidness in your response to the proposal.

You have made some really great observations here and I want to start off with the first question.

Doesn’t the LS yield come from issuance of new tokens so the CP is robbing Peter to pay Paul?

This is a great observation. I have also fought with this idea quite a bit. Especially because I keep thinking that any LS provider charging a fee on ATOM liquid staking from consumers and sending a portion of this revenue to the hub, is doing exactly what you described - Robbing Peter to pay Paul.
Peter in this case is the consumer and Paul is the Community Pool. I believe any LS protocol sharing revenue with the hub is doing pretty much the same thing.

However, if you take a step back and ask yourself (which is what I did) - who is benefitting from this? I believe it is both, ATOM stakers (Paul) , and Peter as per your example. Peter values liquidity of his staked assets more than the revenue share he would receive if he was in the same boat as Paul. Peter is willing to pay a fee for his assets to have liquidity while Paul is not too keen on having his assets Liquid Staked. Paul receives some portion of Peter’s staking rewards because Paul is okay with giving up some rewards to the Liquid Staking Provider in return for an ATOM LST.

The choice is between not inflating and calling the CP tokens dormant/unproductive, or increasing supply and depressing price? Also, the numbers in the above quotation assume current inflation/yield and theres ongoing discussion to set max inflation at 10%, so it makes sense to include the deceased revenue numbers too.

Sorry, I don’t really understand what you mean by this. Could you please expand more on this?

My understanding is that ATOM inflation happens on the total supply of ATOM (so regardless of whether the CP ATOM is staked or not, more ATOM emissions occur). The difference however is, with CP ATOMs being bonded, the total staking/bonding ratio of the hub increases which results in lower inflation.

As for the max ATOM inflation being reduced to 10%. You are right that it impacts the revenue that pSTAKE can share with the CP but the benefits still outweigh the reduced revenue aspect. My personal opinion is that with a reduced max inflation parameter, ATOM bonding ratio might take a short term hit, but the unbonded ATOMs should flow into DeFi - either directly or in the form of Liquid Staked ATOM. The chances of ATOM flowing into DeFi through LSTs is much greater than the former case mentioned above. With pSTAKE also supporting LSM based staking, going from staked ATOM to Liquid Staked ATOM is even easier and should encourage people to convert ATOM or staked ATOM into stkATOM. With increased demand for LSTs and stkATOM, pSTAKE’s revenue share would potentially increase (and could be the same or even higher than if ATOM inflation remains the same as it is today).

If the ATOM the CP lends out is swapped into other tokens so that the CP gobbles up the inflation of other tokens, doesn’t that make more sense? So that ATOM isn’t cannibalizing itself in the name of POL profit? Kinda like printing dollars to buy hard assets makes more sense than printing dollars to pay ourselves more interest in dollars. Maybe the CP should use ATOM to buy nBTC, but that’s a whole other discussion.

This is a very important point but I think falls under the ATOM treasury diversification discussion (although I agree that the CP should hold different assets - including stablecoins, (n)BTC, etc).

It seems clear that Cosmos OGs have chosen Stride as the winner, but Stride’s platform is easy to use, the team moves quickly, their marketing muscle is top notch, etc. With all due respect to pSTAKE, their platform is cumbersome and their marketing muscles are weak. I’ve never even heard of Dexter. Supporting Cosmos for years does not equal deserving of CP funds.

I acknowledge this sentiment and totally understand where you are coming from. I agree that we haven’t done a good enough job on marketing pSTAKE and Persistence. This is something we intend to change. On the quality of the product, I believe we now have a very strong group of developers who are just as good as (if not better than) the best Cosmos devs. It took us longer than we would have wanted to have a strong product team but I believe we can ship just as fast (and we have been doing so over the last 6-8 months) as anyone else (keeping security in mind).

We take UX very seriously and I respectfully disagree with the comment that the product is cumbersome, I do however understand that there is a long way to go in building a world class product and we will not stop until we get there. Supporting Cosmos for years definitely doesn’t imply that pSTAKE deserves CP funds. However, long term alignment in vision and the ability to build is just as important as anything else.

We will work on making pSTAKE and Persistence successful and would love your support. Thanks again for the comment and I really appreciate you taking the time to share your thoughts and feedback.

[yanfei_zhao]

No.
the reserved ATOM is used to incentive new project/protocol develop,not used to supply liquidity;
if one project couldn’t accapt by market 2 years, u need consider your direction;
just like 90K BTC couldn’t rescue UST.