Hydro: Pilot rounds
Edit 18-Oct: After consultations with a number of Cosmos contributors & security experts, the launch of Hydro, initially planned for 16-Oct, is temporarily paused. This follows the news that North Korea has infiltrated a number of crypto projects and that NK developers have contributed to the LSM module. Informal had no knowledge of this prior to the Coindesk article and Hydro currently uses LSM shares. The team is now working on a replacement solution and facilitating audits . We hope to provide an update on a new launch timeline next week Hydro’s initial rounds will be “pilot rounds.” Users will be able to lock their staked ATOMs to get voting power and projects will be able to bid to receive a share of a single liquidity bucket seeded with 200,000 ATOMs. The goal of the pilot rounds is to identify and fix bugs, gather user feedback, refine the auction process and establish a baseline. It is a learning opportunity for projects, users, the Hydro committee and the Informal team. In this post, we explain the pilot rounds, the Hydro committee guidelines, the exact launch sequence, the status of the Prop955 claw-backs , why Hydro v1 is launching on Neutron (instead of directly…
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Babe wake up
New post from @Thyborg
If a user has LSM module disabled for security purposes @Thyborg, does that mean they wont be able to participate in HYDRO auction bids?
I have personally disabled the LSM module through @cosmosrescue, but made me think now that I might not be able to participate in HYDRO anymore…
Correct, the current version of Hydro uses the LSM, so you’d have to re-enable that to participate.
Damn! It takes 21 days, so i guess im out of first weeks of Hydro.
Missed out i guess…
Thyborg:Integrations: Wallets like Keplr & Leap do not yet display tokenized staked ATOM nicely. Although locked LSM shares do accrue staking rewards, this is not made obvious in the wallet interfaces and users may wonder where the staked ATOMs went. In addition, it is still unclear how airdrops scripts will treat LSM shareholders.
FYI, this shortcoming of LSTs is currently being solved for - working with Numia, we are building a self-service snapshot for projects, helping them easily include ATOM LST holders in their airdrops. Currently, potential leads for this service include Nillion, Landslide, and roll-ups on Celestia.
Thyborg:The Informal Hub team has found a solution to the LSM shortcomings. In short, the user would give the Hydro contract permission to withdraw their staked ATOM on their behalf. This is similar to the way Eigenlayer is designed, but it would require significant updates to the Cosmos Hub’s SDK staking module.
Does this mean Hydro is doing away with LSM entirely? We as ATOM holders directly lock up with the Hydro contract?
Note that offering only ATOM-LST ATOM liquidity (Public Goods), and at that only 33% of a pool, which means it has to be crowdfunded/sourced anyways, almost entirely nullifies the use of this liquidity for a DEX, and also forces a concentration of liquidity on more established DEXes.
There’s so much that Astrovault would like to do with Hydro. Like use our Time Flux Pools to offer high APR and be the best place to trade ATOM, and collateralizing other assets to back potential losses.
As a potential user for Hydro, this sucks. I really fear that we’re wasting a ton of time and energy to pay money to get marginal amounts of nearly useless liquidity, but on top of that that any request for USEFUL liquidity to the community pool will get shut down because its expected that Hydro can handle ‘liquidity’. There seems to be a gap between perceived utility of Hydro and actual utility of Hydro, and it’s a problem.
I would have preferred to keep my ATOM natively stake and just do a proof of ownership and lock mechanism without having to rely on LSM
Snapshots: Nice, very useful!
LSM: We’re planning to keep the integration at least for the duration of the pilot rounds. After that we’ll need a new prop to confirm that the Hub wants to integrate Hydro further into the chain, and part of that prop may include doing away with the LSM (our solution above still needs more careful consideration)
Hydro is taking a conservative approach for the pilot rounds. There’s also a lot more we’d like to do and I hope it 'll be moving to the right of the risk curve consistently over the next few months.
Pilot rounds are just an opportunity for the Hydro committee and projects (hopefully Astrovault) to get a sense of the process & bidding dynamics (and for Informal to squash any remaining bugs)
Very much agree on that, - if its stATOM, then its not ATOM! Done. LSM or whatnot, the best practice would be POO - Proof of ownership or whatever and we lock up our atoms natively instead of LSM
I absolutely appreciate this mindset, and think that’s totally fair.
Just note that if shipping takes some time, the burdens of growth could cripple deal flow in the intermediate time. Want to make sure all perspectives are understood, as we all want this to work, but working under the assumption that it will may create a significant dependency for network dealflow.
In view of these findings from AiB, and presuming the findings are accurate, Hydro should be paused.
- “Majority of LSM code written by North Korean agents”
- “Alarmingly, the same North Korean developers who had contributed the majority of the original code were tasked with addressing the findings raised by the audit.”
- 'LSM is not a standalone module but rather a series of modifications and extensions built on top of the existing Cosmos staking modules. The term “module” is more of a conceptual shorthand, used to describe the liquid staking features added to the core Cosmos SDK staking functionality. Consequently, any vulnerability in Iqlusion’s LSM that impacts these core modules could potentially put all staked ATOM at risk, as liquid staking interacts directly with staked assets."
The ICF also bears responsibility here for lack of oversight wrt to development it funds.
I also don’t understand why Informal didn’t push for an audit prior to integration with Gaia in Sept 2023.