This is a signaling proposal that aims to update the instructions for the ATOM protocol owned liquidity (POL) that was deployed by Cosmos Hub in proposal 800. The liquidity is currently stewarded by the ATOM Accelerator DAO, which stewards it according to a clearly-defined set of instructions issued by Cosmos Hub governance.
Specifically, this proposal aims to extend the term of AA DAO’s stewardship by six months, to March 1st, 2024.
Prop 800 and the ATOM Accelerator DAO
According to proposal 800, which originally deployed the ATOM POL, it was established that the ATOM Accelerator DAO would steward it until October 1st, 2023. To quote from the Cosmos Hub forum post that serves as the basis for prop 800,
“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.”
Efforts are currently underway to develop a means for Cosmos Hub governance to deploy and manage treasury liquidity without an intermediary. Specifically, Timewave Labs has built a smart contract system called the Covenant system for this purpose.
It is expected that the Covenant system will be fully online within the next six months. Thus, within six months it is likely that the ATOM POL currently stewarded by the AA DAO can be transferred to the Covenant system (this would of course require a Cosmos Hub signaling proposal). But for the time being, it would make sense for the AA DAO to continue stewarding the liquidity.
Although this current proposal does not specifically involve Timewave Labs or its Covenant system, the following information may be useful for context, since in the future Cosmos Hub governance may wish to transfer the ATOM POL to Covenant.
Timewave Labs is a software development company founded in 2023 by several prominent Cosmos developers.
In the Spring of 2023, Timewave was subcontracted by Stride Labs to design and build a system of CosmWasm smart contracts called Covenant. To pay Timewave, Stride Labs used part of a $131,891 grant it received from the ATOM Accelerator DAO. Stride Labs used the remaining portion of the grant to pay for an audit of the Covenant smart contracts.
Whereas the AA DAO currently stewards Cosmos Hub’s ATOM POL, version 1 of the Covenant system would enable Cosmos Hub governance to deploy and manage POL without an intermediary. Cosmos Hub governance would be able to do anything with its treasury - send, deposit in a liquidity pool, withdraw from a liquidity pool - simply by passing executable governance proposals on the Cosmos Hub blockchain.
Covenant V1 has already been built and audited, and will soon be instantiated on Neutron.
The Github repository for Covenant can be found here: GitHub - timewave-computer/covenants
To reiterate, this proposal aims to extend the term of AA DAO’s stewardship of the ATOM POL by six months.
Sometime within the next six months, Cosmos Hub governance may wish to instruct the AA DAO to transfer the ATOM POL it currently stewards to the Covenant system. But in the meantime, it makes the most sense for the AA DAO to continue stewarding the liquidity for a little longer.
The members of the ATOM Accelerator DAO have agreed to continue stewarding the liquidity for an additional six months, until March 1st, 2024. This is likely the simplest and safest path forward for continued stewardship of this liquidity, as it would not involve creating a new multisig or moving the liquidity.
Moreover, it makes sense for the AA DAO to continue to steward the funds because they are trusted and respected by the Cosmos community, and have thus far proven to be well-suited for this responsibility.
The AA DAO’s primary responsibility is to distribute grants, and the DAO is expected to cease this responsibility on November 12th, 2023. While the AA DAO may or may not be granted an additional term by Cosmos Hub governance - regardless, AA DAO members on the current ATOM POL multisig have agreed to continue to steward the ATOM POL until March 1st, 2024.
The current set of instructions, found in prop 805, are as follows:
As soon as possible after receiving the funds, the ATOM Accelerator DAO will liquid stake 225K ATOM with Stride protocol, resulting in a certain amount of stATOM.The ATOM Accelerator DAO will then provide the certain amount of stATOM it just minted along with 225K ATOM to a liquidity pool on Astroport’s Neutron deployment.
The pool will be stATOM-ATOM. It will be the constant product pool type, with the standard swap fee of 0.3%.
By providing this liquidity, the ATOM Accelerator DAO will receive a certain amount of LP tokens from Astroport. It will hold them, and not bond them in the Astroport generator contract.
In the future, Cosmos Hub governance may or may not wish to move this liquidity to a different liquidity pool. But given the state of the ATOM Economic Zone today, it appears the most prudent and responsible option is to deploy it to a constant product pool.
This current proposal aims to update the AA DAO’s instruction to the following:
Continue to hold the 450K ATOM, in the form of LP tokens for the stATOM/ATOM pool on Astroport Neutron. Do nothing with these funds, unless instructed to via a Cosmos Hub signaling proposal.
If by March 1st, 2024 no further instructions regarding the ATOM POL have been received from Cosmos Hub, then begin the process of returning the entirety of the funds to the Cosmos Hub community pool in the form of ATOM.
If at any time Cosmos Hub issues any new instructions concerning the ATOM POL, then follow those instructions.
In summary, this proposal simply aims to maintain the status quo regarding the Cosmos Hub’s 450K ATOM liquidity position on Astroport Neutron, currently stewarded by the ATOM Accelerator DAO.
Instead of the complicated process of establishing a new multisig to steward the liquidity, it makes the most sense for the AA DAO to continue its stewardship for an additional six months, until March 1st, 2024.
Sometime before that date, it is expected that a proposal to begin the process of transferring the ATOM POL from the AA DAO to the Covenant system will be posted to the Cosmos Hub governance forum. But in the meantime, this current proposal simply aims to instruct the AA DAO to keep stewarding the liquidity.
As always, comments and questions are very welcome (: