[Proposal] Allocate 900k ATOM for LPing in the Osmosis stATOM/ATOM pool
Allocate 900k ATOM for LPing in the Osmosis stATOM/ATOM pool The Cosmos Hub community has explicitly signalled that the growth of liquid staked Atom is a key initiative for the ecosystem. Since prop 800 , executed on June 28th, 2023, the Cosmos Hub has provisioned 450k ATOM of liquidity for liquid staked Atom. With the recent release of the LSM in Prop 821 , native staked atom is now able to become liquid staked, without waiting 2 weeks. This has caused a surge of liquid staked atom, and the community pool should now double down on its investment in bolstering stability of the staked atom peg and protocol revenue from enabling this. To recap, the reasons for the community pool adding more liquidity to Atom/stATOM is: • DeFi Collateral Asset • ATOM DeFi requires markets (Lending, Perps, Stablecoins) that enable stATOM as collateral • The high ATOM staking APY means that lending Atom is uncompetitive and lending markets need liquid staked Atom • Most on-chain liquidity is against Atom, and therefore lending markets must be able to liquidate stATOM for ATOM. • Protocol Revenue • LP’ing gives the community pool revenue based on swap fees. If volume increases with the…
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Supportive of this proposal. To echo Sunny’s comments, Osmosis is the most popular onchain venue for trading both ATOM and stATOM. In addition, ATOM and stATOM also see significant usage in Osmosis’ ecosystem of DeFi applications - Mars, Levana, Membrane, etc. Users have a clear preference for using ATOM on Osmosis, and deploying ATOM liquidity where there is the greatest demand to use it makes sense. While enabling increased onchain usage of ATOM would be the primary goal of this protocol-owned-liquidity (POL) position, let’s quickly consider the economic angle. Assuming $200,000 average daily volume in the stATOM/ATOM CL pool, and assuming the Cosmos Hub POL position captures half that volume - given the 0.3% swap fee on the pool, the position would generate $109,500 annualized. This is a very conservative figure, as it uses a low average swap volume and does not include OSMO and STRD incentives. A more realistic figure would be ~$250,000 of annual revenue. To put that figure into perspective, $250,000 is roughly the same as the current total annualized revenue from ICS payments from all partner chains combined . Taking a step back, Osmosis has always been highly…
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Alignment with the hub so enter the ICS definitly and lets go 
What if instead of the Hub owning this POL, the Osmosis community pool owned it? Now hold on Hub gov don’t start throwing things. Hear me out. In exchange for this, what if the Hub community pool owned the OSMO POL from Osmosis Proposal 641 . IMO these joint proposals are ripe for a treasury swap. One of the primary concerns with Prop 641, which may cause it to be repealed otherwise, is that OSMO holders don’t really get a ton of value from provisioning this liquidity. Swapping it for this ATOM POL would give the Osmosis treasury a yield-bearing liquidity position that would significantly diversify the assets in that treasury, reducing insolvency risk for the protocol. Similarly, I imagine that ATOM holders might have the same argument: “what’s in it for us?” With this swap, ATOM holders get closer alignment with Osmosis as well as a yield-bearing OSMO POL position. This also significantly benefits Stride, who is a consumer chain of the Hub’s security (which means more revenues for the Hub). Meanwhile, this liquidity lives on Osmosis, which naturally benefits Osmosis further as well. It’s a huge win all-around. The two positions are roughly equivalent in value, and any…
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I am in favour of the hub providing liquidity on the Osmosis ATOM/stATOM pair. I am also strongly in favour of the idea of some ATOM being deployed into a vault that: • Defends the soft peg (protecting those using stATOM as collateral) • Returns a profit in ATOM to the community pool. Based on the eth equivalent on Somm such a vault should be profitable to the hub. With that said I am not sure about the timing or quantity and if there should be any sort of fee paid by Osmosis for such liquidity. On timing: With Timewave coming very soon, I would prefer to wait for a system like that to be live that see a multisig involved. On quantity: I feel like it would be good to understand what that additional liquidity achieves in more concrete numbers. Otherwise we just end up comparing it to the provision on Neutron which seems an unfair comparison because of difference in alignment and Duality isn’t live. On a fee: Probably the most on continuous part of this. Should the hub ask for a fee for the provision of liquidity? In my view it should ask for x% for non ICS chains. I am very open minded about how exactly such a thing is designed because a good deal should be…
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Very interesting idea.
I totally agree that the Cosmos Hub and Osmosis should be closer aligned. A token swap between the two chains would definitely make sense, brings them closer together and align incentives over the long run.
Owning each others token via POL does sound compelling and should be further explored and discussed imo.
It might make sense to wait for Timewaves to launch, as @BendyOne stated, before conducting a token swap or deploying POL.
how are LSDs capital efficient if each DEX requires such large amounts of idle capital to function?
I support this prop. We need to increase liquidity on osmosis
CONTEXT: Before diving into the question of whether or not to allocate any portion of our liquid supply to a decentralized exchange (DEX), it is crucial to first contemplate the strategic implications involved. The Hub’s vision of liquidity as a service underscores the necessity of considering the strategic aspect when it comes to utilizing our liquid supply. ANALYSIS: With this strategic perspective in mind, it is prudent to assess the potential competitive landscape to determine whether the decision is advantageous for the Hub. In light of the Duality merger with Neutron, and the return of the unclaimed airdrop to the Hub’s custody by Neutron, it’s evident that a strategic partnership has been forged. Duality’s automated market maker (AMM) with an adjustable curve model is poised to offer features similar to those found in Osmosis’s concentrated liquidity. From a purely strategic standpoint, it stands to reason that deploying liquidity to stabilize LST ATOM pairs would be more economically sound for the Hub if it were done through Duality. CONCLUSION: This post is not intended to dictate that liquidity deployment must exclusively occur in Duality and not in Osmosis.…
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Fully supportive of this prop on 1 condition:
Osmosis becomes a consumer chain.
Makes no sense to continue to pick winners outside of ICS chains imo.
Why is that a requirement? They run their own validator set and do not want to switch. Osmosis is part of the AEZ in an economic sense. There is no other place to swap in and out of atom with sufficient liquidity. Forcing established chains like osmo into this box is not healthy. There are many big chains coming to IBC (dydx, celestia, berachain), and they don’t all wanna be controlled by cosmos hub validators. The focus should be on trying to promote a mutually beneficial economic system.
You may missed the point.
Why on earth why the hub give Osmosis $6m more in liquidity, when they can keep it in house on Neutron/Duality?
I’m not interested in this proposal without some additional alignment from Osmosis towards the hub.
What would be a suitable form of alignment, that doesn’t involve adopting an immature technology like ICS v1?
I second this. I get the idea, but at current rates the token needs help and cant keep gifting community pool funds to non-beneficial counterparties. I understand having deep liquidity, but foundations do not give out grants to chains that dont benefit them. OP doesnt give grants to ARB why would ATOM give grants out to OSMO?
Open to discussion if im missing something here. I could see it as beneficial since OSMO controls the volume
I don’t think I did. The reason is so you don’t fragment the liquidity. Sure, open to hearing what you might consider additional alignment.
Overall idea is good. However 900k ask is too high. Also, providing all that liquidity to a single DEX doesn’t make much sense.
My suggestion is to provide 100k each to various DEXs such as Osmosis, FIN, Duality and so on. That ensures that the Hub allocation does not favor a single DEX at the expense of others. I wouldn’t recommend a total amount bigger than 500k split across all DEXs.
Osmosis should not be the only place that has sufficient liquidity to swap ATOM.
Because Osmosis does help ATOM. As mentioned in the proposal, it is the primary driver of ATOM DeFi usage.
I get that I meant direct revenue source. I am concerned at meaningful capital generation back to the hub, I think down the road could revisit this prop. As of right now, I cant make a case for it other than it being beneficial for Osmosis.
I could see a case for STRD having an impact, im not opposed in the future. In the moment it doesnt economically make sense
That’s a stretch. The three largest users of stATOM are Umee, Shade, and Kujira, and only one of those uses Osmosis for liquidations. And the ask here of $6.3m worth of ATOM is larger than any of the actual DeFi usecases. There’s no direct link between Osmosis liquidity and more stATOM DeFi usage.
Would you support proposals to grant ATOM to both Shade and Kujira as well, since they are among the largest stATOM users and have in-house DEXs?
I will vote yes on this proposal. Good alignment with other cosmos assets (osmosis/stride) and creates revenue for the hub. This is very low risk experiment for the hub and can be returned in subsequent proposals if it is not achieving the desired goals.
I might of missed something what generates revenue for ATOM?
Hi Sunny, I think this proposal underestimates the risks and overestimates the benefits. Generally injecting liquidity by community pools will lead to removed incentives by Stride “DAO”, which will decrease real users and liquidity providers on Osmosis. Higher liquidity does not mean higher activity. It is the other way around. There is a bootstrapping phase to overcome low liquidity, but this has been reached by stATOM already. You have said yourself, with concentrated liquidity, not as much liquidity is needed for efficient trading, so I wonder why you are asking to double the current stATOM-ATOM liquidity. The risks that have been introduced by the LSM module (instantly allowing big stakers to cash out) and depeg stATOM price are due to the protocol design, not due to bad liquidity. This also has a lot more implications that are not being talked about. • Liquidity provided for ATOM/stATOM on Neutron was part of ICS and sharing 10% of the revenue to the Cosmos Hub. The proposal now asks for liquidity without a RoI for Cosmos Hub. If you think that liquidity is better deployed on Osmosis, this liquidity should be migrated to Osmosis. • Further creating dependency…
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Get liquidity that you don’t own
Provide $OSMO that the Hub own in exchange
So the Hub have an incentive to make it work, and still conserve $ATOM ownership until you accept be a provider chain or die
It’s win win for the Hub, not for Osmosis, but that’s the only way that it’s an acceptable deal
Otherwise the Hub doesn’t earn anything from it, and would better provide them on some others consumer chains
I personally think it makes more sense for the HUB to wait for the DUALITY launch and LP it on Duality/Neutron
If you look at the numbers this proposal just doesn’t make sense in comparison:
Osmo: The HUB gets trading fees, no MEV, no OSMO token exposure
Neutron: Trading fees, NTRN fees, Astroport+Duality LST pools, big exposure to NTRN
I support this Proposal.
Currently, the stAtom pool has around 10 million $. Why does it need more money? I will only support up to 450k Atom if the previous vote has expired.
No.
the reserved ATOM is used to incentive new project/protocol develop,not used to supply liquidity;
if one project couldn’t accapt by market in 1 year, u need consider your direction;
just like 90K BTC couldn’t rescue UST.
JUNO OSMO UMEE HUAHUA NTRN… they all need liquidity.
After recent twitter discussions and what “the real AEZ” is, I believe we should stay true to the spirit of credible neutrality and split the proposed 900k ATOM request between OSMO, KUJI, SCRT, and NTRN apps.
ATOM is used profusely among these chains in various ways and offers the ability for the hub to be a steward in growing the pie.
I agree, Fin/Ghost, ShadeSwap/Silk and Astroport all have proven to generate sufficient volume on their own.
I see no reason why Atom should decide on LPiung such a significant amount to just Osmosis.
If we dont do it on this particular proposale, I believe a joint proposal for multiple chains would be pretty reasonable.
why doesnt each DEX make their own ad hoc LSD?
there is 10% staking yield just sitting there,
LSD providers are just an extra step that leads to a bevy of emergent problems.
Problems that might be obvious if the community pool didnt perpetually subsidize stATOMs lack of demand to subdue its outsized risk profile.
I agree that there is a need for strong liquidity between ATOM/stATOM. However, I oppose incorporating stATOM/ATOM into the static liquidity position [1.0, 1.35]. It should be placed in the All range to allow it to move according to market logic.
After reviewing the assessments provided in our previous message, and considering that there have been no significant revisions to the economic offer presented in this proposal, we have decided to cast a NO vote. The rationale is straightforward: the hub doesn’t receive a favorable deal with this allocation.
Since the feedback to spread the funds around to various Cosmos protocols was ignored, feel like we might need to make another proposal to allocate some additional funds for this purpose. Obviously, this proposal will pass easily, which is fine, but I know i’m not the only one moderately annoyed that this couldn’t have it’s scope broadened to include other protocols.
Kujira, Shade, etc. would all benefit from deeper liquidity, though I would like the agreements to be more thorough so that, hopefully, the community pool can receive a decent return on the allocation. Open to ideas.
I will only vote YES when Osmosis starts using Shared Security from $ATOM. Otherwise NWV
With that amount of liquidity provided by ATOM the validator set has to be same/at least as robust as the ATOM validator set
Also => distribute the fees to ATOM stakers and not the Comm Pool. CP has its own funding and with the fees from Osmosis will blow up out of proportion with money grabs as result.