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

[aidan]

@Vish_Modali

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.

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.

[Vish_Modali]

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.

[aidan]

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).

[BlocksUnited]

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

[common_spelling]

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.

[BlocksUnited]

I meant auto compounding for ATOM, not stATOM

[tom]

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

[common_spelling]

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.