Will the DEX itself own liquidity, or rely entirely on LPers? We are a Hub validator and also happen to run a collator for https://hydradx.io on Polkadot. HydraDX is interesting because LPers contribute a single token, not a pair. Additionally, the protocol owns liquidity, so fickle liquidity providers are less of an issue. HydraDX uses a two token system though.
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Well the most commonly used curve by professional market maker models is the log normal distribution, so you’d want to add that one ! Log-normal distribution - Wikipedia
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As a smaller Hub validator we must watch our costs. We have soft opted out of consumer chains so far, to focus on profitability, and are truly grateful the Hub’s community sees the importance in that.
Once we hit the 5% voting power threshold we will need to spin up all consumer chains and our profitability will take a major hit. That’s ok as long as the consumer chains add essential functionality to the Hub and we’re just not sure another DEX is essential.
We don’t want to run infrastructure for 30 consumer chains. Most don’t realize how much money and work that entails. Many delegators just assume all validators make a killing and are part of some cartel. So, we are considering consumer chain proposals quite carefully.
It’s easy to see why smart contracts, liquid staking, and native asset issuance are essential.
Please help us understand why a DEX is essential. Why not just use Astroport? Why doesn’t Duality launch on Neutron instead of the Hub?
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Good points, but just to clarify some things :
- The liquidity on Neutron from the Community Pool is not NTRN it’s stATOM-ATOM
- Liquidity providing with LSTs is more profitable than superfluid liquidity providing, as the LPs receive the entire staking yields as opposed to some fraction determined by a discount factor. This is why Duality will be doubling down on a partnership with Stride.
- Duality should work with the allocator not against it! When the allocator is live, it’ll be possible to facilitate the collaboration. I definitely wouldn’t think of the community pool spend and interchain allocator as mutually exclusive.
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Please help us understand why a DEX is essential. Why not just use Astroport? Why doesn’t Duality launch on Neutron instead of the Hub?
Here’s a few reasons why a Hub aligned DEX is beneficial:
- Astroport takes a 15% application fee from liquidity providers and Neutron takes 75% of gas fees. Duality takes 0% of application fees and 0% of gas fees, so Cosmos Hub stakers get to retain 100% of both
- Serious decentralized financial infrastructure requires full stack control. Building a smart contract is not sufficient to building the best possible exchange that meets users needs.
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Cosmos has always worked to be seen as chain agnostic. That was the reason the Gravity dex broke off and became Crescent so the Cosmos hub could be chain agnostic. If there was a change of policy, I have not been informed.
Not sure of this proposal. 500K is a huge ask. But the revenue-sharing model actually looks good.
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Very happy to see Duality align with the Cosmos Hub. Mad props @Elijah @nicholas and team
One question I have is, since there is no token to incentivize liquidity pools on Duality, what’s the plan to attract liquidity and compete with some other DEXes who have their base token for incentives?
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Looks like Stride’s proposal for 450K ATOM will pass. Given Duality is giving 100% of the revenue back to CosmosHub, why are people considering 500K as huge? I would argue we should even have a bigger pool on Duality since it will give more revenue back to Cosmos Hub.
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What do the developers of Duality --Duality Labs from my understanding-- get from all this? How are they compensated? What incentivizes them to keep building?
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Our perspective is that at some point incentives will dry up, so we might as well bootstrap liquidity by doing our best to find organic product market fit. We have spent a lot of time looking at Ethereum data and it’s clear that incentives are not necessary to bootstrap a DEX. Uniswap is the most popular DEX by volume and they’ve never had incentives. By looking at the data in DeFi and history in tradfi we’ve isolated 4 large non-incentive based markets for LPing (dare I call them “product market fits” for DEXs)
- Sophisticated firms market making and making profit off of spreads + hedging off chain
- Long tail yield stategies (eg using LP positions as collateral for different yield strategies)
- Passive DAO treasury management
- DAOs making pools liquid for their community to swap for
We plan on building tooling on and off-chain to make Duality the best place for all four of these. As new areas of organic engagement with DEXs emerge, we will also pursue those as well!
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Totally agree, but also appreciate all of the community feedback!
In the future, one thing we could do better is be clearer on this ask and where it’s anchored this way the concerns are mitigated.
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Great proposal and the 500K number seems reasonable given comps (neutron and stride) which were also reasonable. I think Duality could do well especially as essentially the first spot CLOB app chain and being 100% aligned with cosmos hub on day 1 should be a driver of value to the hub.
Easy yes.
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Unsure how we are supposed to onboard the next chain and keep paying server costs, salaries, etc
Any more RS patnership before at least EOY would be harmful to our current validator set.
We are still waiting for data from Stride and Neutron onboardings.
On the opposite side it seems that none cares since we opened up even more our validator set.
Now some validators are asking tangible and immediate help from the community.
Soft opt out is not a solution.
The community should focus on governance and token spread.
we get this question a lot, so much so that we added it in the FAQ: ref: What’s in it for Duality Labs?
to us this direction makes perfect sense: Create as much value as possible first and everything else is secondary. this is how a lot of trad-tech companies operate too. It’s important to have revenue, but we won’t capture any value before we’ve demonstrated PMF, created a ton of value, and have the full support of the community.
These things play out over the long term, so on the short term we’re focusing on improving the tech, growing the ecosystem and trying our hardest to materialize the vision we all share for what true, open and incentive-alligned markets and DEFI can bring to the world
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Validator fixed cost were our biggest concern going into this and has been ever since Replicated Security was announced. I’ve heard a lot of approaches aimed towards mitigating this from a lot of teams working in and around cosmos.
The cosmos HUB needs to orient around long term value aligned product growth, and instead of pausing until the perfect technology is shipped, we should keep growing, demonstrate PMF and incentivize all relevant teams to solve these issues with more urgency.
Open communication and feedback like this is extremely important. we need to protect the validator set while growing the HUB. We just started an open discussion with relevant parties on telegram. Please feel free to join Telegram: Join Group Chat
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I share these concerns and they’ve arisen frequently. It’s also good to examine them from a couple of different angles.
The first part of this reply seeks to do that. It contains 1) a survey of existing discussions around the concern, 2) the problem space, and 3) the path to a meaningful outcome (which in turn illustrates the problem space).
A survey of discussions
For anyone browsing here that wants a quick survey of past discussions about this:
- @lexa 's conditional basic income essay
- @ChorusOne-Research’s problem statement
- @pupmos 's proposed changes to the replicated security model
Problem Space
All of the above conversations propose different aspects or solutions of the problem, but in short it can be summed up as:
- cosmos Hub’s winning bet is to on-board as many high quality consumer chains as it can. The protocol has a long-term time preference (in the sense that it needs time to compete and capture market share + find PMF)
- validators face fixed-cost burdens for running consumer chains. Validators have a short-term time preference (in the sense that they need to immediately sustain their businesses)
the path to a meaningful outcome
In response to this, it’s worthwhile to note that:
- solutions (if one is needed) can be worked on in parallel to expanding the shared security umbrella of the Hub
- it’s very important that validators concerns are heard and accounted for, but this design space needs to be explored from the viewpoint of a variety of stakeholders in the system (the risk is that this can turn into a political situation. Coordination must be placed as the highest priority to mitigate this and find a meaningful path forward that accounts for everyone’s diverse and sometimes contradictory concerns)
- it’s important to the Hub and its attractiveness as a security provider to have a fertile and welcoming environment for consumer-chwin onboarding. This helps it capitalize on the early mover advantage it has a shared security provider in an increasingly competitive market space over similar offerings.
- Paradoxically, despite increased short-term costs, it will be better for validators in the long run if the Hub excels and gains market share. This may be correlated with the amount of consumer chains the Hub onboards, and the Hub can keep winners and off-board those chains that aren’t succeeding as more data rolls in.
Very happy to see this initiative and will continue the convo in there
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• The liquidity on Neutron from the Community Pool is not NTRN it’s stATOM-ATOM
• Liquidity providing with LSTs is more profitable than superfluid liquidity providing, as the LPs receive the entire staking yields as opposed to some fraction determined by a discount factor. This is why Duality will be doubling down on a partnership with Stride.
• Duality should work with the allocator not against it! When the allocator is live, it’ll be possible to facilitate the collaboration. I definitely wouldn’t think of the community pool spend and interchain allocator as mutually exclusive.
You’re right on all three, I have mix things with ntrn indeed. And regarding the allocation, if you request 500k atom be staked and then deposited in LPs with stATOM/x then I see the point ! I would simply recommend to state that more clearly in the final proposal. This may sound like a tiny bit of information but to me that changes the whole economic equilibrium and therefore now I understand the vision you pursue.
I would be curious to know a bit more on the type of relationship you would see fit with the allocator. Could be very interesting indeed but I’d love to hear that from you !
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Good feedback regarding communication about the community spend proposal.
There should be a separate, more comprehensive community spend proposal coming over the next week or two.
With respect to the allocator : I actually have a call with them (Timewave Labs) today regarding that exact question ! Will get back to you with more info afterwards.
Thanks for being constructive.
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