The Liquid Staking Solution rATOM Proposed By StaFiHub

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Overview

Hi Cosmos community, StaFiHub is a fully fledged project based on the Cosmos SDK developed by StaFi protocol to provide Liquid Staking Derivative SDK solutions for Cosmos Ecosystem projects. We would like to propose a liquid staking solution called rATOM (rATOM Solution) for Cosmos’s native token $ATOM, based on StaFiHub’s Liquid Staking SDK.

StaFi had previously developed the rATOM liquid staking solution on the StaFi chain which is built on Polkadot’s Substrate Infrastructure. At its peak, $7,000,000 worth of ATOM tokens were staked through the StaFi rATOM DApp in the past year. However, we have found that the rATOM solution on the StaFi chain presents some user limitations due to them being on separate ecosystems (cross chain between the StaFi chain and Cosmos Hub chain). Therefore, we propose to deploy the rATOM liquid staking solution on the StaFiHub chain, which is built on the Cosmos SDK, to serve the ATOM stakers with an improved UI/UX and low gas fees.

StaFiHub’s rATOM establishes an edge over the pStake’s stkATOM as it:

  1. Will be issued with extremely low gas fees for stakers on the StaFiHub chain;
  2. Could be transferred with no gas fee through IBC protocol to any other IBC Gang chain;
  3. Is an interest bearing token and its value will increase gradually against ATOM.

The rATOM solution is currently live on the StaFiHub Testnet, please feel free to test out its features.

What Is The rATOM Solution?

rATOM solution developed on StaFiHub’s Liquid Staking SDK will help the Cosmos community to stake their $ATOM tokens to earn the staking rewards from the Cosmos network, while still enjoying the liquidity of their staked $ATOM tokens through the voucher token called $rATOM.

The steps for users are very simple:

  1. Stake $ATOM tokens through StaFiHub;
  2. Receive $rATOM tokens which represent your staked assets and attached staking rewards.

What Is The $rATOM Token?

$rATOM token is the staking derivative issued by StaFiHub when users stake their $ATOM tokens through StaFiHub.

$rATOM token has the following features:
Staking Reward Bearing: The rToken value will increase continuously due to the staking rewards generated.
Transferable Through IBC: The rToken could be transferred at any time to any IBC chains in the Cosmos Ecosystem.
Tradable: The rToken can be traded on any Cosmos Ecosystem supported DEXes including rDEX (developed by StaFiHub) ,Osmosis or Crescent.
Redeemable: The rToken can also be redeemed back to its corresponding native tokens and staking rewards at any time without permission.

Why Does the Cosmos Community Need rATOM?

  1. For $ATOM token holders:

  • Great Liquidity: There will be no need to worry about liquidity problems caused by the 3 week unbonding period. rATOM App users could always trade rATOM tokens to gain the liquidity at any time they want.

  • Easy to get the maximized staking rewards: There will be no need to learn the Tendermint mechanism any more. Users will only need to follow a few simple steps to stake ATOM through StaFiHub, which will automatically select the best validator to delegate based on our profit maximization strategy.

  1. For The Network Security:
  • Higher Staking Ratio: rATOM solution will help solve the liquidity of staked assets, thus improving the willingness of the community to stake.
  • A higher staking ratio will also result in greater security for the Cosmos Hub.

rATOM Solution Design

The rATOM solution design is mainly based on the StaFiHub Liquid Staking SDK built by StaFi protocol to provide liquid staking solutions for Cosmos Ecosystem projects very quickly and easily. Please have a look at our introduction of SDK Integrations.

The core of the rATOM solution design includes the following elements:

1. Staking Pool
A pool is a multisig account of Cosmos Hub to gather rATOM user’s staked ATOM tokens and invoke staking related calls such as Bond, Unbond and Claim on the Cosmos Hub to earn more tokens. This multisig account will be controlled by StaFiHub, Interchain Foundation and other parties in the Cosmos community.

2. LiquidityBond
LiquidityBond is the entry point for users to obtain rATOM on StaFiHub. Users can submit their transfer voucher to mint rATOM tokens.

3. LiquidityUnbond
LiquidityUnbond is the entry point for users to redeem their ATOM tokens on StaFiHub.

4. Exchange Rate of rATOM
Exchange Rate of rATOM is used to calculate how many rATOM tokens to mint for a user’s LiquidityBond and how many ATOM tokens should be unbonded and transferred back. It is initialized to 1 and calculated as follows:

5. rATOM Circulation Circle
We have attached the following infographic to explain how the circulation of rATOM tokens under the StaFiHub technical stack works. A visualization of the interactions between ATOM staker, StaFiHub, Cosmos Hub and other IBC gang chains is presented below.

rATOM Staking Strategy

Based on the Tendermint consensus mechanism of Cosmos Hub and the influencing factors of staking rewards, the rATOM solution adopts the following staking rewards maximization strategy:

  1. Diversified delegation
    The ATOM tokens deposited by the user will be distributed to several(N) mini staking pools. N will be based on the scale of the deposit. Each staking pool will then select several (M) validators for delegation by the profit maximization strategy, so as to reduce the slashing occurrence probability of a single node;

  2. Strictly select Original Validator candidates
    The rATOM solution will evaluate the performance data of original validator candidates from the metrics including online duration, slashing record, self-bond ratio, node identity, commission ratio, etc., to ensure that excellent validators with relatively low commission are selected.

  3. An automatic delegation strategy that maximizes staking rewards
    The solution monitors OV’s on-chain data in real-time, such as commission ratio changes, commission volume ranking, slashing, off-line rate, and other indicators. This ensures that in each Era, the system selects the best OVs for delegation while simultaneously reinvesting profits.

  4. Finding a balance between maximizing staker rewards and Cosmos Hub validators’ decentralization
    StaFiHub aims to contribute positively to the Cosmos Hub’s validator ecosystem to avoid the concentration of validator’s voting power. Therefore, rATOM contracts will be constantly monitoring the top M+5 OV candidates’ staking power and re-rank the M+5 OVs according to the staking power from low to high in each epoch, followed by selecting the lowest M validators as the official OVs for delegation.

Why StaFiHub?

StaFiHub and the StaFi team have extensive knowledge and experiences in the liquid staking industry since the start of 2019. StaFi is one of the earliest projects that have been proposing the liquid staking innovations.

At the time of writing this blog, StaFi has issued 8 liquid staking derivatives with over 60 million USD in TVL for the top adopted PoS chains such as ETH2.0, Cosmos, Polkadot, Solana, etc.

Some achievements:

  1. StaFi’s rETH liquid staking solution for ETH2.0 is one of the six projects listed on the Ethereum Foundation Website.
  2. StaFi’s rETH token is also one of the few ETH staking derivatives listed on Curve.
  3. A total TVL of 100 million USD was attained in October 2021.
  4. StaFi has been awarded grants for our rMATIC solutions from Polygon Foundations and Web3 Foundation.

Suggested Grants from Cosmos Community

Based on the past experience of the StaFi team, developing the rATOM solution is not a difficult task. However, the liquidity of rATOM token is crucial for its success. Therefore, the StaFi team will need to work together with the Cosmos Community as well as the Interchain Foundation team to make the rATOM solution presented a success.

StaFiHub would like to request the following support from the Interchain Foundation:

  1. Provide $10,000.00 USD valued $ATOM tokens for StaFi Core team as the rATOM solution development grant (The Grant) to cover the related technical costs. All $ATOM tokens received from The Grant will be staked in the rATOM App;

  2. Cosmos Community or Interchain Foundation sponsors at least 1 million USD valued liquidity for rATOM and ATOM pair on Osmosis or Crescent;

  3. Provide marketing support for StaFiHub’s rATOM solution and its liquidity with the implementation of marketing activities such as videos, tutorials, social media and the like.

StaFiHub’s Work and Co-incentive Plan

With the above grant from Cosmos Community, StaFiHub will:

  1. Design and develop the rATOM solution which will be deployed on StaFiHub, a Cosmos SDK based chain developed by StaFi.

  2. Provide $FIS token incentives for the rATOM DApp testnet to incentivize the community both from StaFi and Cosmos to participate in the testing.

  3. Develop additional use cases for rATOM token holders such as lending and more DEX support.

  4. Provide marketing support through the implementation of marketing activities such as videos, tutorials, social media and the like.

  5. Take part in the marketing efforts and activities with the other projects that are a part of the cohort to amplify marketing efforts.

Timeline and Future Work

  • Phase 1: rATOM Testnet(in progress) [April - May 2022]
  • Phase 2: rATOM Incentivized Testnet [June - July 2022]
  • Phase 3: rATOM Mainnet Release and rDEX Listing [July - August 2022]
  • Phase 4: Initial DeFi Integrations on the Cosmos Ecosystem [Rest of 2022]
  • Phase 5: Ongoing Maintenance, Upgrades, and Further Work on Integrations [from 2023 onwards]

Conclusion

Cosmos Hub is the core of the entire Cosmos Ecosystem. StaFiHub hopes to work with the Cosmos community to create new use cases for the $ATOM token, as well as introduce a brand new interest bearing asset to the Cosmos community.

Please feel free to provide any feedback or suggestion you may have below or email us.

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