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

[waqarmmirza]

@pandeymikhil

Being a supporter of free-market and fair competition I would support this proposal. I see trusted people in the multi-sig. But my only concern is the subset of Hub active set pStake delegates to. What would it take to increase the set from the current 70 to ~All (excluding 100% commission and exchange validators)?

[Cosmic_Validator]

@waqarmmirza

But my only concern is the subset of Hub active set pStake delegates to.

I think the demanding eligibility requirements that Stride or pStake have in terms of governance participation, uptime and more it is actually positive. It encourages more active governance participation and better uptime and performance. It is fair that validators with great uptime or governance participation are rewarded, while those who never/rarely vote, never participate in the forum or have bad uptime are not eligible. All the validators can choose to participate in governance, improve their uptime and work hard with community or engineering contributions. If some validators choose to rarely vote, have bad uptime and don’t contribute to the Cosmos hub neither with community or engineering contributions, it is normal that they are not eligible/selected by Stride, pStake or other staking providers. Furthemore, by selecting validators in this way with such demanding requirements, the slashing risks for liquid staking providers are minimized and hence they are perceived as less risky and can attract more ATOM to be liquid staked.

[jacksteroo]

Allocating funds to be LPs in a pool makes sense to bootstrap liquidity and generate enough trust in the pool for the ecosystem to be an accepted form of DEX. This is key to help any DEX succeed

Timeline

We are wondering what happens after x+365 days? Will withdrawal be initiated immediately there after to return the funds back to the community pool alongside all the profits minus impermanent losses (if any)?

@pandeymikhil

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.

Operational Execution

What’s the reptuation of Timewaves Lab in managing the fund to ensure the rebalancings happen properly?

@pandeymikhil

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

And how far along is Convenant v3 @maximus ?

@maximus

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

[maximus]

@jacksteroo

And how far along is Convenant v3 @maximus ?

We are in the design phase with v3 where we are collecting feedback from the community and turning that feedback into specs. We plan on beginning the engineering effort on it Q1 2024.

v2 will be sufficient for this proposal. v2 is on track to be production ready by Q1 2024.

[pandeymikhil]

@wassie

We see all the reputed liquid staking providers equally, and if we have given chance to Stride we should give the chance to pStake too, but can you elaborate more how do you chose the validator set you stake with?

Thank you for sharing your thoughts @wassie

pSTAKE’s validator set is driven by the PSTAKE governance.

pSTAKE contributors believe in progressive decentralization. At launch, the delegation strategy was kept simple to implement while keeping decentralization in mind. A criteria that involved filtering the top 100 Cosmos Hub validators with on-chain parameters like uptime, commission, not an exchange validator, slashing history, governance participation was suggested and passed by governance. This resulted in the current 62 validator active set.

Stake delegation was set to be evenly distributed across these 62 validators. So although a smaller validator received the same amount of stake as a bigger validator, the % increase in stake for a smaller validator was much higher.

pSTAKE contributors are also working on how to improve the validator selection mechanism and increase the number of validators pSTAKE supports (thus increasing decentralisation of the Cosmos Hub).

[pandeymikhil]

Addressing two points from above:

@iwbinb

You only know we can stake ATOM to get stATOM.(pSTAKE and Stride both support)
You don’t know CosmosHub already support the LSM with that already delegate ATOM with validators.
For example, I already delegate 100ATOM to a validator(who already self-bond), I can make this 100ATOM directly to stATOM on Stride but not avaliable on pSTAKE.

@waqarmmirza

Being a supporter of free-market and fair competition I would support this proposal. I see trusted people in the multi-sig. But my only concern is the subset of Hub active set pStake delegates to. What would it take to increase the set from the current 70 to ~All (excluding 100% commission and exchange validators)?

Hey @waqarmmirza @iwbinb

pSTAKE launched support for the LSM on the day it went live on the Cosmos Hub. pSTAKE’s LSM implementation also supports Ledger and was audited by Halborn Security before release. Sharing some LSM usage stats (as of 21 November 2023):

• 71,127 natively staked ATOM has been liquid staked into stkATOM
• 339 LSM liquid staking txns by 138 unique users

On the point of validators and self-bod, please allow me to clarify an important aspect here.

Liquid Staking Providers (LSPs) like pSTAKE and Stride have a fixed subset of the Cosmos Hub validators (active set) that they delegate to (coded into the protocol). The method and criteria for defining this set depends on individual LSPs. pSTAKE currently delegates to 62 validators evenly based on on-chain parameters selected at launch.

pSTAKE contributors are also working on a new pSTAKE Chain Decentralization Strategy that involves automated validator selection and delegation based on on-chain parameters in real time.

[pandeymikhil]

@jacksteroo

We are wondering what happens after x+365 days? Will withdrawal be initiated immediately there after to return the funds back to the community pool alongside all the profits minus impermanent losses (if any)?

Hey Jack,

You are absolutely right here. Funds will be pulled out and returned back to the community pool when the duration agreed upon ends.

@jacksteroo

What’s the reptuation of Timewaves Lab in managing the fund to ensure the rebalancings happen properly?

Timewave’s solution is yet to go live but the decision to migrate custody of assets to Timewave is also dependent on Hub governance. Once the v2 is ready, a proposal will be raised to discuss the migration of funds and Timewave’s solution will be explained in more detail then.

[StakeLab]

Our current view on proposal that should allocate $ATOM outside consumers chains and how it should be proposed:

Get liquidity that you don’t own.
Provide $XPRT that the Hub own in exchange.

So the hub have an incentive to make it work, and still conserve $ATOM ownership until you accept be a provider chain or die.
It’s win win for the Hub, not for Persistence, but that’s the only way that it’s an acceptable deal.

Otherwise the Hub doesn’t earn anything from it, and would better provide them on some others consumer chains.

Zdeadex | 🇲🇫 ⚛

[iwbinb]

Hi @pandeymikhil
Looks like you had a misunderstanding of Native Staked Atom to stkATOM.
If it is a general ATOM staked into a stkATOM, LSPs can choose a fixed subset validators. That is the freedom of the Liquid Staking Providers (LSPs).

However, if it is Natively Staked Atom to stkATOM, then this is a different feature.(forum.cosmos.network/t/signaling-proposal-draft-add-liquid-staking-module-to-the-cosmos-hub/10368)
This feature was implemented after the v12 upgrade.
Whenever a validator has a self validator bond, delegators can convert Natively Staked Atom to stkATOM. The upper limit is that if a validator self bond is 100ATOM, then the value of converting Natively Staked Atom to stkATOM is 25000stkATOM.
Again, this is a feature available to any validator with self bond, not a subset of validators chosen by the LSPs. Stride is already supported for all validators.

I hope my explanation makes sense to you.
If you understand my explanation but feel it is not right, please get an answer fromthe cosmoshub team.

[pandeymikhil]

Hey @iwbinb

I get your question and thanks again for going into more details.

pSTAKE supports LSM delegations for validators that are a part of its subset and does not support LSM based delegations for validators that aren’t in its set.

But as far as I know, Stride works in a similar way except it may seem like it accepts all LSM based delegations. With Stride, you are nudged to redelegate to one of Stride’s 32 validators on the dApp itself and the underlying stake is transferred from a validator that is not a part of Stride’s active set to a validator in the active set.

Should you wish to continue to liquid stake, the stake is then distributed across the 32 validators that the Stide governance chooses.

While it may seem like Stride supports all validators, it doesn’t in reality. It takes in all the ATOMs that it can and redelegates to its subset.

As for pSTAKE, the protocol just accepts already staked assets if you re-delegate LSM based delegations to a validator pSTAKE supports. I don’t see much difference in this approach. I hope that clarifies your doubt

[VforCosmos]

Persistence has always been a project with a questionable marketing strategy. During the bull maket they had an army of influencers hyping their projects, like Pstake or Assetmantle. And yet they failed to reach any adoption. I strongly don’t want the Cosmos Hub associated with a vaporwave. Persistence doesn’t have any of Cosmos values. They are clearly desperate for liquidity, and the Cosmos Hub is not a charity, the Hub has to partenr with promising projects, not projects that failed and keep showing that don’t have what it takes to build in the ecosystem.

[waqarmmirza]

Thank you for the detailed reply. It is great to hear that pStake is working on a decentralized way of choosing the subset. Any ETA on this? I believe we won’t have any problems when this solution is implemented, until ten, will pStake delegate these 600 K atoms with the existing subset?

I strongly believe pStake needs to increase the subset for now.

[wassie]

Thanks for the answer. Hopefully we will see further improvements in the validator set and soon.