DOT - Inter Protocol Vaults Collateral Onboarding Discussion

Introductory Questions

  1. Name and affiliation of applicant and association with collateral
  • Name: Composable
  • Affiliation: Polkadot/Kusama Parachain
  • Association with collateral: DOT is the base asset for the Polkadot network, of which our project, Composable, is currently centered around via our Kusama parachain, Picasso, and our future Polkadot deployment, Composable.
  1. High level overview of the project with a focus on the proposed collateral
    Polkadot is a layer-1 network focused on interoperability of application specific chains named parachains. Parachains are interlinked with one another via the Polkadot relay chain, which provides security and finality for these chains. Much like the Cosmos ecosystem, parachains are able to interact with one another through asset transfers and messaging using Polkadot’s native Cross-Consensus Message (XCM).
    The team at Composable has done work to extended interoperability of the Polkadot network, and its native token DOT by implementing an IBC connection between the DotSama ecosystem and Cosmos. Centauri is the first trustless connection between DotSama and the first implementation of IBC outside of its native ecosystem. This is facilitated by both Composable’s Kusama parachain, Picasso, and the Inter-Blockchain Communication (IBC) Protocol. Resultantly, all 46+ IBC-enabled chains can interoperate with ~80 DotSama parachains, with each ecosystem’s native assets now being able to flow to the other.

  2. How old is the project and when was the genesis block or token generation event?

  • Project age: Polkadot - 6 years, beginning development in 2017
  • Genesis block or token generation event: TGE/Network Launch May 2020
  1. Provide a brief history of the project
    Polkadot is a proof-of-stake network that was designed by Gavin Wood (co-founder of Ethereum), Robert Habermeier, and Peter Czaban in 2017. The project raised nearly $150 million in its initial coin offering (ICO) in fall of that year. The project was founded on the principles of security and cross-chain interoperability. The Polkadot relay chain is its central chain, with user-created parallel chains called parachains. The relay chain provides shared security to the parachains, and Polkadot’s Cross-Chain Messaging (XCM) format enables cross-chain communications and operations between parachains as well as with the relay chain.

  2. Describe the paths (such as the specific bridges and IBC denoms) that allow users to bring the token to the Agoric chain.

  • DOT has only recently been made available to the Cosmos ecosystem, using Composable’s IBC-based bridge Centauri, trustlessly connecting Polkadot <> Kusama (collectively referred to as “DotSama”), as well as DotSama <> Cosmos for the first time. Centauri exists as an intermediary chain within the Cosmos ecosystem and sits within the path of moving assets from Polkadot/Kusama → Cosmos.
    IBC denom: ibc/6B2B19D874851F631FF0AF82C38A20D4B82F438C7A22F41EDA33568345397244

Token Cryptoeconomics

  1. Describe the uses of the token (does it have governance rights, cash-flow rights, is it staked to provide security, etc)
  • DOT is used as a utility token to secure the Polkadot network via staking. The token holds governance voting power, and is able to be locked to secure new parachain slots via parachain slot auctions.
  1. Links to the whitepaper and documentation portals for the core system(s) that interact with the proposed collateral.
  1. Have there been any significant cryptoeconomic changes to the proposed collateral token since launch or since the creation of the whitepaper?
    DOT was redenominated in Aug, 2020. All functionality of the token remained the same.

  2. List any possible oracle data sources for the proposed collateral type.

  • Chainlink

  • Band

Financial Characteristics:

  1. Is the supply of the token fixed or does it have an issuance rate?
  • DOT is an inflationary token that increased at a fixed issuance of 10% annually. New DOT enters the ecosystem every ‘era’ (24 hour period). The current circulating supply is 471.456 million DOT, and the max supply is uncapped.
  • Current: 471.46 million

  • Year 1: 518.6 million

  • Year 2: 570.46 million

  • Year 3: 627.51 million

  • Year 4: 690.26 million

  • Year 5: 759.28 million

  1. What % of the supply is current available in public markets (as opposed to locked up in vesting or reward, or controlled by a shared treasury)
  • The total DOT issuance is 1.341 billion. The circulating supply of 471.456 million DOT is 35.1% of this total issuance. Staked DOT makes up 616.486 million (45.9% of the total issuance). Other DOT (in democracy, vesting, treasury) totals 253.256 million tokens (18.8% of the total issuance).
  1. How concentrated is ownership over the token? To the best of your knowledge, how many unique users hold more than 2% of total supply (regardless of locking, staking or vesting arrangements). How many addresses hold more than hold more than 2% of total supply?
  1. How many different markets is it traded on?
  • DOT is available on 96 exchanges (as per Coincodex), encompassing most of the major exchanges in the industry, such as Binance, KuCoin, OKX, Huobi Global, and Kraken. Given the vast number and range of exchanges, users can access these markets by creating an account with the designated exchange. DOT is highly liquid on these exchanges, and is frequently ranked in the top 15-20 tokens in total volume (currently 13 at the time of writing).

  • Notably, thanks to Composable’s Centauri bridge, DOT can now be exchanged for Cosmos-native assets on both Osmosis and Composable’s Pablo DEX. DOT can also be moved over IBC transfers to and from the Agoric chain, to exchanges such as these. This makes DOT optimally positioned as an asset for addition to Inter’s vaults, subsequently positioning these vaults as an early adopter of and potential leader in the use of DOT in the interchain.

  1. Provide pricing history of the asset



Legal Characteristics:

  1. Does the project or the DAO have a legal identity in a specific legal jurisdiction? If so please provide details.
    N/A

  2. Please provide any legal documentation that the project may have commissioned.
    N/A

Portfolio Characteristics:

  1. Set out the business case for Inter Protocol accepting the asset:
  • With DOT now available in the Cosmos, DOT can be added to the Inter Protocol to mint IST; this will allow users to take advantage of DOT’s new capacity to function on Cosmos chains. Listing DOT increases use cases and provides users with additional functionality to bring their funds over into the interchain, specifically into the Inter Protocol’s vaults. DOT currently holds a fully diluted marketcap of $6,278,324,006, creating the potential to bring massive value to Agoric’s Inter-Protocol Vaults.
  1. Are there any new expected use cases of the IST that would be generated by onboarding the collateral asset?
  • IST will be mintable by holders of DotSama assets for the first time, appealing to new users. Additionally, IST collateralization will be diversified with assets outside of Cosmos for the first time. IST itself can also be bridged out of the Cosmos to DotSama, though that is not dependent upon the present proposal and instead simply requires the use of the Centauri bridge.
  1. What is the expected demand for the vaults using the proposed collateral?
  • Based on the fact that there has been significant demand for stablecoins minted off DOT and KSM in the past, we expect a significant demand for these vaults. For example, on February 9, 2022, Acala USD launched (aUSD), mintable using DOT and LCDOT as collateral on Acala, or using KSM on Karura. There was significant demand for aUSD; for example, approximately 4 months after launch, total locked collateral value for aUSD was more than $277 million.**
  1. How correlated is the asset with other assets already accepted as collateral?
  • DOT is generally correlated with broader trends across the crypto market. As such, it shows close correlation with other major L1 assets such as BTC, ETH, and ATOM.
  1. What economic/business risks would Agoric be exposed to if this asset were accepted as collateral?
  • Risks would be relatively low for accepting DOT as collateral as it maintains a top 20 marketcap and secures one of the largest base layer networks (Polkadot). As such, volatility in this asset follows most major assets in the space, and is typically less than that of mid, or small-cap tokens.
  1. Proposed parameters for collateral type
  • Debt limits: 100,000 IST

  • Minimum collateralization ratio: 250%

  • Liquidation ratio: 230%

  • Stability fee / interest rate for borrowing: 2.50%

  1. Provide any audits that have been conducted of the proposed collateral
  1. Provide any details of any ongoing security programs, bug bounties or similar programs
  1. Does the collateral have a whitelist or blacklist function? If so, detail the process by which this function is exercised.
  • DOT does not have these functions.
  1. Can the collateral or any contracts associated with the collateral be upgraded? If so detail the process by which the upgrade can occur.
    N/A
7 Likes

Hey, my name is Jacob and I’m with notional.

Since assisting in the launch of centauri, I have watched composable relentlessly pursue initiatives that bring polkadot and cosmos together.

I no precisely where this proposal will lead, but it is my opinion that linking dotsama to as many initiatives as possible in cosmos such that we have a dotcomsama is exciting and worthwhile.

1 Like

Questions regarding Polka Assembly Proposal #1871 Allocate DOT Liquidity for Use Amongst Cross-Chain DeFi within the Cosmos Ecosystem

(Link - https://polkadot.polkassembly.io/post/1871)

Questions:

  • If Centauri bridged DOT becomes an IST collateral asset, would Pablo DEX commit to incentivizing an IST:DOT, IST:KSM, and or IST:PICA paired pools on Pablo and or allowing tx fees on Pablo DEX to be paid in IST?

  • If Centauri bridged DOT becomes an IST collateral asset, would @ComposableFi_j consider amending its Request for Proposal: Canonical Stable Coin Design and Integration or making an exception so that IST could compete to be its canonical stablecoin?

Question: If Centauri bridged DOT becomes an IST collateral asset would @ComposableFi_j help raise awareness of where IST can be used (e.g. liquidity pools on Crescent, Osmosis, & Shade; lending on Umee?

Question: I think it would be helpful to keep track of the number of OSMO wallets that hold X amount or more of Centauri bridged DOT and also hold BLD, IST, and or are providing liquidity to either the BLD/OSMO and or IST/OSMO liquidity pools, and or are staking BLD to help provide an indicator of what the demand for a Centauri bridged DOT vault may be.

Questions:

Who are the members of this Osmosis multisig?

Other Questions

  • How much does it cost to bridge/relay tokens using the Centauri bridge? Axelar discloses to users the cost to bridge/relay a token from one chain to another (see image below). Will @ComposableFi_j updating the Centauri bridge app to disclose such information upfront like Axelar?

2 Likes

Hey ! Thanks for the questions and appreciate the tie into our proposal to acquire DOT from the Polkadot treasury to assist w/ some of our integrations/initiatives.

Q: If Centauri bridged DOT becomes an IST collateral asset, would Pablo DEX commit to incentivizing an IST:DOT, IST:KSM, and or IST:PICA paired pools on Pablo and or allowing tx fees on Pablo DEX to be paid in IST?

  • This is something we would 100% be open to exploring. We would mostly likely look to move on an IST/DOT pool as DOT remains the dominant ecosystem asset, and without giving away too much info on the future of Pablo DEX, we should only need one of the mentioned pools to exist to go ahead and make swaps with any other asset listed. Ideally we’d love to match PICA incentives on the pool with BLD rewards as well.
    At the moment I am unsure we have plans to allow tx fees specifically for Pablo DEX to be paid in additional asset types. A feature like this will most likely be made possible by one of our future roadmap updates but I dont have a definite we could commit to here. This is something that is currently supported and on roadmap for Centauri (bridging tx’s).

Q: If Centauri bridged DOT becomes an IST collateral asset, would @ComposableFi_j consider amending its Request for Proposal: Canonical Stable Coin Design and Integration or making an exception so that IST could compete to be its canonical stablecoin?

  • This would be something we would have to have in depth discussion on to move forward in any regard. We would need to chat in further detail upon specific amendments and partnership details, but we are always happy to try to find some way to work closer with exisiting projects.

Q: If Centauri bridged DOT becomes an IST collateral asset would @ComposableFi_j help raise awareness of where IST can be used (e.g. liquidity pools on Crescent, Osmosis, & Shade; lending on Umee?


Q: I think it would be helpful to keep track of the number of OSMO wallets that hold X amount or more of Centauri bridged DOT and also hold BLD, IST, and or are providing liquidity to either the BLD/OSMO and or IST/OSMO liquidity pools, and or are staking BLD to help provide an indicator of what the demand for a Centauri bridged DOT vault may be.

  • I think this came out as more of a comment than question above, but tracking the holder growth of these assets is definitely on our agenda / critical for some of the proposals we’ve put forward.
    At the moment we are in the final steps of completing the process to have Centauri bridged DOT available via FE on Osmosis, at which point we will look to get additional liquidity into these pools and begin to track holder growth.

Q: Who are the members of this Osmosis multisig?

  • As far as multisig once the DOT in the cited treasury proposal is moved over to Osmosis chain ? It would be the same members operating the multisig on the Polkadot side. We are exploring the possibility of having these assets managed by Timewave to reduce some of the hands needed here. Let me know if this answered your Q or if I can provide further context.

Q: How much does it cost to bridge/relay tokens using the Centauri bridge? Axelar discloses to users the cost to bridge/relay a token from one chain to another (see image below). Will @ComposableFi_j updating the Centauri bridge app to disclose such information upfront like Axelar?

  • At the moment, Centauri bridge charges a fee of 0.4% on transfers from Polkadot/Kusama → Cosmos. This is planned to be updated to a flat-fee model in the near future in an attempt to reduce user costs. We can look to have this displayed in UI for added clarity the end user.
2 Likes

Gauntlet shared a DOT analysis for community consideration and I thought it would be valuable to cross-post here. Community members are encouraged to take the time to review:

https://community.agoric.com/t/gauntlet-recommendations-inter-protocol-dot-new-asset-listing-9-20-23/

2 Likes

damn , full scale ananlysis :+1:

Minh from Notional joined us for Dev Office Hours 11 Oct to discuss testing. The discussion was fun!

The notes are scribbly so far, but they point to a full audio/video recording.