[Proposal #794] [VOTE ONCHAIN] Stride to join ATOM Economic Zone and adopt ICS

Hub Proposals Add Consumer Chain
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Wanted to raise a query about the use of liquidity in two parts.

Firstly, why is the liquidity being used on Astroport alone? This proposal is between Stride and ATOM, with Astroport seemingly only coming into this as they are deploying contracts on Neutron. Currently, ATOM, stATOM and STRD are not listed on Astroport despite the availability of the IBC connection.

Osmosis is also planning on deploying Cosmoswap, our cross-chain liquidity solution, to Neutron. If the benefit to Stride is that the quantity of stATOM increases, and the benefit to both is the ease of access to these liquidity pools then surely it makes more sense to spread this liquidity between liquidity locations in order to achieve both breadth and suitably deep cover.

This would also benefit Stride as the incentivisation of the existing stATOM/ATOM pools could potentially reduce, allowing them to be redirected to more liquid staking derivatives as more chains are onboarded - which in turn would result in higher revenue share with ATOM stakers from this agreement.

Secondly, just wondering why there is an automatic sunset clause in there rather than a minimum guarantee.

The ATOM Accelerator DAO members have agreed to steward the 450K ATOM liquidity position as described above until October 1st, 2023 at the latest. At that time, if Cosmos Hub has not passed a signaling proposal to establish a new solution for the liquidity position, then the ATOM Accelerator will begin the process of returning the funds to the Cosmos Hub community pool. This process would involve using the Stride app to unbond the stATOM side of the position, which would take approximately three weeks. Therefore, in this scenario the ATOM Accelerator would return the 450K ATOM in the liquidity position to the Cosmos Hub community pool no later than November 1st, 2023.

This seems to write you into a corner. What happens if this doesn’t happen in time or a proposal isn’t quite agreed upon when the unbonding period gets triggered? Surely would make more sense to have the liquidity guaranteed until the 1st October 2023, then inaction or indecision maintains the status quo.

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:clap: Keep :clap: Liquid Staking :clap: ENTIRELY OFF :clap: the original vision of keeping the Cosmos Hub MINIMAL

These LSD’ / LSM products can fully thrive outside $ATOM.

The security risks are still too significant at this stage. Hostile takeovers being “highly unlikely” inject the need for trust, when the first HUB, let alone the whole eco, is pushing for a TRUSTLESS system. Thankful it’s kept at 25%, the founder, Jae Kwon, initially proposed as a decent hard cap #.

Appreciate the response @JohnGalt @aidan

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The thing is, this does keep liquid staking off the Hub. The code lives on Stride, so it can’t interfere with Hub block production.

I disagree that liquid staking is bad, but let’s focus on a simpler point - liquid staking is unavoidable. It is currently offered by centralized exchanges, chains that are not accountable to the hub (that don’t use ICS), and (hopefully soon) chains that do use ICS. Even if you’re not a fan of liquid staking, wouldn’t a chain using ICS for liquid staking be the least-bad option, in your framework?

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It appears to me that Cosmos Hub wants to deploy liquidity from its community pool on chains and DEXes within the ATOM Economic Zone. If a chain could get liquidity from Cosmos Hub without joining the AEZ, then what would be the point of having an Economic Zone at all?

Look at it this way: would the Osmosis community incentivize an OSMO/USDC pool on Kujira? If the Osmosis community did this, it would certainly increase the ease of access to OSMO, and increase its breadth and coverage - but I have a feeling the Osmosis community would never do this.

By putting all the 450K liquidity on Astroport Neutron, Neutron gets more tx fees and more MEV revenue. Also, this liquidity may encourage developers to start building on Neutron, as their apps can have synchronous compossibility with the liquidity.

Moreover, I don’t understand why Osmosis would want more stATOM liquidity. There’s already over $20M in the Osmosis stATOM pool. Perhaps if the Osmosis community wants greater depth in its stATOM pool, they could contribute OSMO incentives. Currently, the pool receives no OSMO incentives, despite being the second largest pool on Osmosis.

Regarding your second point, in my opinion blockchains shouldn’t try to act like corporations, with complicated agreements and many strong clauses. Rather, I think blockchains should be structured with incentives.

According to the proposal, once Cosmos Hub puts its 450K ATOM in the pool, it can then do whatever it wants with it. But I think there would be a very strong incentive for Cosmos Hub to keep the liquidity in place, and indeed add more. This liquidity position would become foundational for Stride and Neutron. Things will be built around it. If Cosmos Hub wanted to move the liquidity position in the future, it would likely greatly damage its first two partner chains, and thereby decrease ICS revenue.

After joining the AEZ and adopting ICS, what’s good for Stride and Neutron is good for Cosmos Hub.

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what benefit does ATOM get by giving away its liquidity to Stride to put in an LP? are all LP rewards distributed back to ATOM delegators? do delegators get a substantial Astroport air drop? Why would ATOM trust Astroport DAO to act in ATOM’s best interest?

stride LSD redemption rate perpetually increases, which means that to maintain stride LSD LPs: more and more native atom must be locked up for LSDs to be liquid. I dont understand the upside for ATOM to take on so much risk given LSD’s lack of demand.

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I agree on your second point! This is why I was wondering why the clause was so restrictive with an end date/action required rather than just setting a new status quo which would require a further proposal to change.

As to the first, there is currently that liquidity because Stride is renting it. My concern is that with Stride having this liquidity at their disposal they will cease renting at all, potentially causing issues for stATOM integrations on Osmosis and elsewhere. There appears to have been a pattern of Stride incentivising stAsset pools exclusively on the home chains recently with Luna, Inj, Evmos POL and now potentially restricting this to Atom consumer chains alone if rental ceases and Astroport gets exclusive access to this liquidity.

It also seems like the main meat of this deal is the exchange of 15% of revenue etc for increased security. By itself, I question if this is really worth it to Stride since the vast majority of their inflation is not for security so the savings are far lower than the costs. However, the additional stATOM part of this proposal seems to be designed to mostly benefit Astroport rather than Stride or Atom.

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Neutron, Stride, and the Hub all benefit. Neutron and Stride benefit through increased stATOM activity (activities like lending/borrowing), the Hub benefits directly because Neutron and Stride are paying the Hub, and indirectly because ATOM is used in defi. ATOM delegators already got a large Stride airdrop, and will soon get a large Neutron airdrop.

The ATOM is owned by the Hub, not Astroport DAO. The ATOM Accelerator multisig would be used for custody at first (already trusted by the Hub to custody funds), but a smart contract is being worked on to further decentralize. https://twitter.com/ATOMAccelerator/status/1648703182586118144

Astroport’s metastable pool will solve this ARC-56: Fund Bounty to Finalize Metastable Pool Type - ARC (Astroport Request for Comments) - Astroport

There is demand for stATOM, for example, stATOM is one of the most popular collateral options on Mars and Umee.

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As to the first, there is currently that liquidity because Stride is renting it. My concern is that with Stride having this liquidity at their disposal they will cease renting at all, potentially causing issues for stATOM integrations on Osmosis and elsewhere.

Isn’t it an Osmosis issue only? It makes more sense for the AEZ to have its own deep liquidity for Atom and Atom LSDs.

There appears to have been a pattern of Stride incentivising stAsset pools exclusively on the home chains recently with Luna, Inj, Evmos POL and now potentially restricting this to Atom consumer chains alone if rental ceases and Astroport gets exclusive access to this liquidity.

Still looks to be an issue only for Osmosis. Isn’t it beneficial for the Hub if consumer chains dispose of their own liquidity, increasing economic activity directly on the AEZ?

It also seems like the main meat of this deal is the exchange of 15% of revenue etc for increased security. By itself, I question if this is really worth it to Stride since the vast majority of their inflation is not for security so the savings are far lower than the costs.

You should’ve raised your concerns for Stride interests on Stride’s forum. The prop is already voted and passed with a staggering 97% YES.

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So we are voting to commit community funds on a theoretical and untested LP type?

stATOM is the least popular collateral option on Mars…and on Umee,1/28 of the stATOM supplied is utilized.

by what metric do you label stATOM popular?

will the LP rewards go to AA?

I still dont understand why Atom would risk >$4.5mm in funds for an LP that reduces ATOM volume and use in defi by outsourcing its txns to stride.

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It’s a popular collateral token. Behind USDC, stATOM is the second-most supplied collateral token on Umee. This is visible on-chain and on Umee’s frontend UX — The Cross Chain DeFi Hub.

There is little stATOM borrowed, but that doesn’t mean it’s not utilized - it’s being utilized as collateral. Leveraging stATOM is a common use case and works like this: one can supply stATOM, borrow USDC, buy and supply stATOM, and repeat. You can see the same behavior on Ethereum, Aave has 295m wstETH supplied (second most popular collateral after ETH), and 7m wstETH borrowed.

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if the major selling point of LSDs is they can be used as collateral, Stride can only succeed to the extent that validators are willing steal from $ATOM.

$STRD’s success is not based on being innovative or having demand driven value, it’s based on the assumption that validators will vote to invent a market for LSDs with the LSM and 450k ATOM LP that doesn’t compensate the chain for the risk validators are forcing on it.

If ATOM is controlled so centrally that it jumps at a deal to provide a wrapped version of itself with >$45m of publicly funded liquidity with no compensation for the risk taken on by the chain, the hubs future looks bleak.

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I think a discussion is also important regarding potential conflicts of interests:

  1. Luke Saunders is the CTO of Delphi Digital, and he incubated projects like Astroport and Mars protocol on Terra and he is part of the reviewer committee for grants of the ATOM Accelerator DAO (AADAO)
  2. The Stride proposal to onboard as a consumer chain suggests the AADAO as the team to manage the multisig for the 450k ATOM. Also, Stride received the largest grant so far from the AADAO. In addition, Astroport is mentioned in the Stride proposal
  3. So, Delphi Digital/Astroport is involved in the AADAO, which gave the largest grant so far to Stride. And Stride, in the consumer chain proposal, are mentioning the AADAO for the multisig and Astroport for the 450k ATOM liquidity
  4. The AADAO grant given to Stride is to develop a solution for deploying ATOM from the community pool into ATOM/stATOM LP pools on Astroport built on Neutron
  5. Overall it seems that Astroport is benefitting a lot from these arrangements, and the potential conflict of interests seems to be Astroport having influence at the AADAO to give a large grant to Stride to build something that benefits Astroport and then Astroport also being mentioned in the Stride proposal to receive the 450k ATOM liquidity and also Astroport being part of the multisig for this 450k ATOM via AADAO
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It looks like you are diverging from the main purpose here, which is to discuss wether this proposal benefits the AEZ or not.

The comittee of the AA DAO consists of 6 members, which I believe each have their own distinct opinion and act in the interests of the Cosmos Hub. We could consider a potential conflict of interest if the AA DAO was managed by Luke Saunders alone. This is not the case.

There is obviously a synergy between Neutron, Stride and Astroport. This cooperation is positionned to be the backbone of the AEZ as Astroport will host Neutron launch and be the main AMM on the AEZ. Unless someone has interests in other AMMs/DEXs, picking Astroport for this liquidity is an obvious choice.

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Astroport was formally the largest DEX in the Cosmos, has battle-tested smart contracts, and highly experienced contributors. Seems like the perfect place for Cosmos Hub to provide liquidity. But the most important thing is, Astroport is the only confirmed DEX that will exist in the ATOM Economic Zone and be secured by interchain security.

As for the individual you mentioned, he is one of many ATOM Accelerator DAO members.

Finally, the grant you mentioned will benefit the Cosmos Hub, by allowing it to trustlessly deploy funds from its community pool. The tool being built can possibly be used to deploy funds to other DEXes as well.

The Cosmos is a small place, and people from different organizations often work together. Doesn’t mean there’s a massive conspiracy going on.

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duality should be secured by the hub no ?

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as Cosmic Validator pointed out, it seems like AA already made arrangements for the chain and any discussion is a formality that is largely ignored. stride was given a grant to facilitate taking funds from the ATOM community pool before it was even accepted.

If stride cant thrive and establish its own demand, requiring a market to be created for it from ATOM, how will it ever be more than a liquidity parasite and centralization risk? The LSM also introduces regulatory risk as it makes a case for validators being broker-dealers, selling unregistered securities (illiquid derivative NFTs) to stride.

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Stride: It’s 106 miles to Chicago, we’ve got a full tank of gas, half a pack of cigarettes, it is dark and we are wearing sunglasses…
Cosmos: Hit it!

(ps for ppl who are too young to have any idea what this references to: google blues brothers)

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Why you don’t stake with all the validators to support the decentralization?

You need to revist your policy.

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i like cosmic validator, they are exposing the corruption they are still attacked for. if they can expose validator and AADAO corruption and help stop the loss of another 450k in ATOM liquidity that sharing 15% of $10mm of revenue will never repay atom, i think cosmic validator is square in my book.

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This is an interesting proposal for the Stride blockchain to join the Atom Economic Zone and adopt interchain security from Cosmos Hub. Its good to hear that Stride would share its various revenues with Cosmos Hub! - overall this proposal highlights the benefits of collaboration and cooperation between different blockchain ecosystems. It will be interesting to see how this proposal is received and if it will be implemented in the future . From our side we definitely suppport this proposal. :handshake: