Plan: Software upgrade deploy LSM on the Cosmos Hub

Motivation The LSM is best understood as a form of regulation on liquid staking providers. It enacts a safety framework and associated governance-controlled parameters to regulate the adoption of liquid staking. The LSM mitigates liquid staking risks by limiting the total amount of ATOM that can be liquid staked to 25% of all staked ATOM. As an additional risk-mitigation feature, the LSM introduces a requirement that validators self-bond ATOM to be eligible for delegations from liquid staking providers or to be eligible to mint LSM tokens. At the same time, the LSM introduces the ability for staked ATOM to be instantly liquid staked, without having to wait for the twenty-one day unbonding period. Finally, stakers have an option to lock their stake to prevent it from being instantly tokenized without an unlocking period. This is designed as a security mechanism to enable coordinating recovery in the case of wallet compromise. In sum, the liquid staking module equips the Cosmos Hub to thrive in a world with increasing demand for liquid staked ATOM. It proposes a safe, regulated path towards increasing capital efficiency. ETH liquid staking has over 30% adoption, but…

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wont the LSM further centralize validator voting power?

zaki_iqlusion:

the LSM introduces a requirement that validators self-bond ATOM to be eligible for delegations from liquid staking providers

doesn’t this mean that validators can buy (self-bond) the rights to LSD delegations at 250:1?

This will result in a centralization flywheel where the validators with the most voting power are incentivized to self-bond as quickly as possible to claim delegation rights, increasing their already oversized voting power, and once 25% is reached those same oversized validators are incentivized to pass a prop to increase the cap.

Seems to make the claim that the LSM mitigates LSD risk by limiting it to 25% of staked supply entirely moot.

I think that there’s a double edged sword to the 25% requirement but that’s how we passed it and it’s not a bunk requirement.

On one hand, we keep the level of mobile stake below the 33% threshold that could crash the hub.

On another hand, we are for the first time creating different classes of stake and I don’t know what results will look like there.

As for concerns about centralization, this is really not my largest concern here.

I expect that the protocols and teams are well served by having steak well distributed.

jacobgadikian: I think that there’s a double edged sword to the 25% requirement but that’s how we passed it and it’s not a bunk requirement. On one hand, we keep the level of mobile stake below the 33% threshold that could crash the hub. No, it is a bunk requirement because it is entirely arbitrary and doesn’t align with the interests of stakers. is it surprising that validators almost unanimously agreed to award themselves very attractive incentives despite the LSMs inescapably centralizing effect? what reason would anyone have to believe validators would not vote a 2nd time to benefit themselves and raise the cap to 30%…because its not 33%… who cares about mobile stake below 33%? LSD delegations aren’t equally distributed between everyone in the active set, & governance is decided by <2/3 of staked supply anyway. that was the point of bringing these things up: common_spelling: validators can buy (self-bond) the rights to LSD delegations at 250:1? This will result in a centralization flywheel where the validators with the most voting power are incentivized to self-bond as quickly as possible to claim delegation rights, increasing their already…

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Sir, could you give more detail on how lsm centralization benefits myself or notional?