[Signaling Proposal][Draft]Add Liquid Staking Module to the Cosmos Hub

you don’t ask questions, you’re insinuating. as always. without any proof or any constructive question. as always.

prove i’m being paid for whatever your conspiracy theory is. or say nothing.

@zaki_iqlusion @Govmos hope anyone can guide the misguided.
How is going to be implemented? Cex validators are already working as a sort of liquid stake model?
What if any body make a LSD on another blockchain? how can we limit it to 25 % or it means something else?

There are certain risks involved with LS and in exchange they have certain benefits. What is the need to bring this to hub if anyone want to take risk let them do so?

And lastly
Let A user is using the LSD model and earning the rewards and using LS atoms to earn rewards in defi. After some time the limit is reached and hence no space for new members.
B buy Atoms and brings them on chain but since the limit is reached he can only stack without LSD. Isn’t is disadvantageous for new members.

Personally, I think that we end up in a values question .

I have a feeling that LSD can improve the development of defi in cosmos. I think. I could also be tragically wrong.

As for the liquid staking module, again, I’m really voting with my gut, my gut tells me it actually does make stuff safer by preparing the chain four liquid staking as opposed to just letting liquid staking happen without any planning or forethought.

Let’s say that I’m 75% sure that this is the safest possible path and I’m also around 75% sure that this is safer than doing nothing.

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Both Stride and Quicksilver will be paying into the cosmos hub. Not to mention LSD’s are currently being used. So this comment is not valid.

Hi @zaki_iqlusion in the online prop the link to the full prop text links to a non existing page on this forum or is private.
“see full proposal: here
Would be good to create or “un-private” the actual page with the full text of the prop where it links to i think. :+1:

Editing the title of the thread changes the links. :frowning:

Reverted the title to fix the link the governance proposal post. Thanks

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Does this affect staking rewards?

Curious to see what Quicksilver has to say about this with your second bullet in the validator bond section. Please let me know if you hear anything.

Excellent work. Thanks for this contribution. A few items to express:

  1. I think it’s really bad UX to have to unbond for 21 days in order to rebond with LSTs. So being that this module would make the process as easy as redelegating is a big plus.

  2. Will this SDK module flow downstream to the zones? Meaning that any zone would be able to become Liquid Staking ready by including the module?

  3. Looks like LSM introduces a global cap on the amount of ATOM that can be liquid staked (25%), seems that this could help reduce and moderate the downside risks of derivatives in ecosystem. It may be a good thing to implement some control here.

  4. If a problem arose, how effective would a 14 day governance vote be in mitigating a disaster? And if a vote passes to reduce the limit of total liquid atom staked, what happens to LSTs above the threshold that are already emitted?

  5. Also, how long will this run on testnet and what kinds of test scenarios will be (or have been done)? I think we should all try really hard to break this system.


Where are LSD’s being used? For them to function, they require a native LP that locks up more native liquidity than LSD’s claim to free up. LSD capital efficiency is a grift.

What happens when the LSM cap is reached? Stride volume dies because stride volume is almost entirely it compounding itself. so after it reaches the cap & it cant create more LSD’s, what happens to the ATOM? How is it distributed to stride stakers? will the cap be raised if it is reached? if that is the case, what is the point of this whole “regulation” LARP? LSM gives off Hard Scam Vibes, looking to manufacture the appearance of a market/demand where there is none.

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Hey, Vish from Quicksilver here. Apologies for my late response. The LSM is long awaited and I’m excited to see it finally come up on the Hub. I support the LSM on the Hub, we have long been extremely bullish on the capital efficiency gains the ecosystem would witness with the introduction of the LSM.

Saying that, this proposal is also used to introduce regulation on liquid staking. While one could argue that regulation might be better debated and proposed on its own, it does make sense that the best way to implement regulation would be through the LSM upgrade.

With regards to the specifics of the regulation itself, it is worth noting a few things.
The current structure of the proposed validator bond does have the potential to disproportionately favor larger validators. While we understand that the actual bond factor itself is low, it risks creating a situation where larger validators who can afford to put up large bonds will find it much easier to grow from liquid staking than smaller validators.

This means that as the LSM facilitates the widespread movement of assets into liquid staking, this validator bond structure will put that stake into the hands of a few rather than spread it around to the broader validator set.

I also fear a situation where stake is delegated away from smaller validators who are not able to compete financially to validators who can put up much larger bonds. It is important to remember that a decentralized validator set, will make the hub a much more attractive chain from the perspective of an ICS provider, so any measure that has the potential to increase centralization must be scrutinized carefully.

Given this criticism, I do understand why a validator bond exists and the fact that it is temporary. Hub governance should define the time constraints of implementing the validator bond and how we would phase out of it. At some point, we do need alternate metrics to evaluate whether a validator has “skin in the game” that do not make the entire thing a competition of the richest.

I think that the validator factor should be scaled by voting power. Thus, a smaller validator would put up a smaller amount to be eligible for a larger delegation from liquid staking providers. As this delegation increases and their voting power increases, so does their validator bond factor. This would mean that as smaller validators grow through liquid staking the “skin in the game” required would increase disproportionately. This method would abate the ‘Validator corruption risk’ mentioned in Appendix A, while giving a fair chance for validators to grow through liquid staking protocols.

Saying that, I support the LSM on the Hub. Though I would like a more nuanced approach to validator bonds that takes decentralization into account. The proposal places the onus of decentralization into the hands of a few liquid staking providers; on the contrary I suggest that we use this opportunity of regulation to enshrine decentralization in the design of the LSM.

Just made a response outlining my thoughts on the validator bond factor.

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In a way, it is already scaled by voting power. If validator A is half the size of validator B, and both would like 10% of their delegations to come from a liquid staking provider, validator A only validator bonds half as much as validator B.

Yeah. Currently its scaled linearly by voting power. I’m suggesting we scale it disproportionately by voting power. I think it’ll just make it easier for smaller validators to receive delegations from liquid staking protocols without harming security in any meaningful way / it will also not make it harder for larger validators as the base validator bond factor can be 250 with each validator being given a discount based on voting power.

But also the fact that others can post the validator bond for said validator also abates some of these concerns for sure. I see a situation where foundations and larger validators would put up a bond for smaller validators to receive delegations from liquid staking protocols.

But don’t see a security tradeoff for making it easier for smaller validators. As these validators grow (increasing the impact of potential malicious behavior) so will their skin in the game disproportionately.

I see what you mean, interesting idea. I think it would be good to gather some data on the mechanism and its effects if it goes live, before making opinionated design decisions. On the one hand, it may help decentralization to build such a mechanism, on the other, it may not be fair to large validators - seems like it requires more research. In my opinion, it would be best to start with a design that is minimally opinionated (doesn’t deviate too much from the status quo).

Can we add restaking/auto compounding of staking rewards to this?

compounding is already like 95% of stride’s volume. the only way LSDs can manufacture the appearance of success is to invent a market for LSDs by risking the stability of the chain through desperate LP funding and LSM manufactured demand.

I meant auto compounding for ATOM, not stATOM

i think everyone got the way you see Stride and the LSM. what’s the point of repeating it 10 times a week ?

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will validators have to register as broker-dealers to use the LSM?

im not as much trying to change your mind, i assume validators already realize how shit liquid staking is and dont care about voting against delegator’s interests so long as they profit from the prop. so my goal is to make it publicly known and documented that it was common knowledge how poorly designed elements of design like the LSM were for when there is a consequence for voting against the benefit of the chain and delegator’s interests and voting records count.