Hey everyone! First post on the Hub forum, and long overdue I think!
Seeing a lot of the comments on this prop, I just wanted to take some time to discuss liquid staking reward commissions, an aspect of Stride’s tokenomics I don’t think many in the Hub community quite understand yet (totally understandable, we can’t keep track of all 65+ connected chains). This is important to understand to fully grasp the insanely lucrative value of what Stride is proposing to give to ATOM holders in exchange for joining the Economic Zone.
Stride levies a 10% tax on all staking rewards earned by its liquid staking derivatives. Here’s how this looks in practice:
- Alice liquid stakes 10 ATOM with Stride, receiving stATOM in exchange
- 90% of Staking rewards (less the validator commission) are compounded into the redemption value of Alice’s stATOM.
- The remaining 10% of staking rewards are collected by Stride
Now, here’s the cool part. Where do these 10% of Alice’s staking rewards go? Straight to STRD stakers.
That’s right, 100% of the reward share allocated to Stride is distributed directly to STRD stakers. This is the case with every chain that Stride has onboarded, meaning that STRD stakers get real yield paid in ATOM, OSMO, EVMOS, JUNO, INJ, STARS, LUNA, and every other chain’s token that is onboarded by Stride in the future. Note: These are all staked with Stride and distributed to STRD stakers as stAssets first to improve the fungibility UX and compound the rewards.
In addition to the tx fees, MEV, and inflationary rewards being offered. Stride is including 15% of these liquid staking rewards to be paid out to ATOM stakers once Stride is onboarded as a consumer chain, meaning that ATOM stakers will also receive a diversified real yield in stATOM, stOSMO, stINJ, etc. IMO, this will end up being the meat and potatoes of the value that Stride will offer to ATOM stakers under this proposal. Let’s run through some numbers:
In the time that Stride has been publicly live, Stride has paid out $1,212,008.02 in yield to STRD stakers (source: info dot stride dot zone - cant post links ). Had ICS been live that entire time, that would’ve resulted in approximately $181,801.203 paid out to ATOM stakers. That may not seem like a lot right now, but Stride’s TVL has been exploding since then, almost doubling in the last month alone. Stride is still bootstrapping and the rate of its TVL growth is accelerating rapidly. When TVL grows, so too do the liquid staking rewards paid out to STRD stakers and, under this proposal, ATOM stakers.
Stride plans to onboard every Cosmos chain it can to its liquid staking protocol, increasing TVL further and thereby also increasing rewards. Other catalysts for massive TVL growth are on the horizon, including the upcoming launch of the LSM module on the Hub (and hopefully other chains will follow suit here), as well as the proliferation of new defi usecases for liquid staked assets in the ecosystem as more and more money markets and DEXs launch.
Incentive alignment between the Hub and Stride via ICS is also a massive potential growth catalyst, as the Hub will see a benefit from accelerating DeFi growth for Stride, as indicated by the section of this proposal purporting to liquid stake about 225k ATOM and pair it with ATOM in a liquidity pool on Neutron’s Astroport outpost. Initiatives like this will increase adoption for stAssets which, again, only increases the reward share to ATOM stakers.
Frankly, were Stride to only pay out 15% of these rewards to ATOM stakers and nothing else, the potential value would already exceed anything that the Hub is likely to get from Neutron’s tx fees and MEV, even at a 25% share. However, these rewards are also being supplemented with Stride’s upcoming tx fees, MEV, and inflationary STRD rewards, leading to what may quite possibly be the most profitable consumer chain that the Hub will ever onboard.
This single integration has the potential to cause a paradigm shift in the value accrual proposal for the Hub and the ATOM token. If you think I’m exaggerating, take a look at the price performance of STRD, which has effectively 3xed in value since liquid staking rewards to STRD stakers have been enabled (source: coingecko).
As a small afternote, as a large STRD staker I almost feel that this proposal is too good for ATOM stakers to the detriment of STRD stakers in terms of the value being offered. However, I think that the value of what the ATOM Economic Zone can become with players like Neutron, Stride, and the Hub (and hopefully soon many ore chains) working together will more than make up for what STRD stakers will be giving up.
Let’s pass this thing and usher in a new era of value for both the Hub and for Stride.