With Mainnet 1B live and the Inter Vaults release just around the corner, I would like to start the discussion around adding liquid staked tokens, like stATOM, as a collateral type for vaults. While it presents a different risk profile than ATOM, I believe support is necessary for Inter to stay competitive with the market.
I am not sure I’ve introduced myself on this forum, but I’m a community member, developer, and ocap maxi. I’ve been using defi protocols for the past 3 years, and was a hedge fund analyst in a past life. My motivations are mainly from a builder’s perspective - I am building on the agoric stack and would like to see the project flourish. You can usually catch me at developer office hours on Wednesdays, or on discord with the same handle.
ATOM was the first asset voted in as a vault collateral type prop 32. ATOM is the largest native IBC asset by market capitalization and trades on a multitude of centralized and decentralized exchanges with relatively deep liquidity. Among other factors, these make it a great asset to have in Inter Vaults as the protocol invariants rely on robust price oracles and liquidation auctions.
At the time of writing, however, the current ATOM staking APY is 19.56% mintscan. Prospective ATOM vault holders must weigh this opportunity cost, or dilution risk, against the benefit of borrowing IST.
Luckily, several protocols like Stride, Quicksilver, and pStake offer liquid versions of staked tokens for a small commission. There are tradeoffs of course - smart contract risk, available liquidity, and quality of price feeds - but the projects and asset class seem to be garnering adoption.
I imagine folks are already discussing this topic, but it’d be great to formalize a discussion here. Some particular areas I think worth discussing are:
1. Oracle Network Data Sources
I previously posited a question along these lines in a different thread, Inter Protocol Vaults: Contract Implementations. It would be great to learn what venues will be used to aggregate quotes for stATOM, and how in general the oracle network operators and econ committee are thinking about aggregating quotes for assets that only trade on decentralized venues. I am thinking things along the line of:
Does a dex need to provide an official oracle (i.e. Osmosis TWAP), or can operators still gather quotes from a dex without one (i.e. Crescent)?
Are there specific liquidity, volume, or depth thresholds that need to be achieved in order for a venue to be quotable? (i.e. Crescent, which only has $34k in the stATOM/IST pool)
Aside from my own personal interest, I think the more transparency we can build around the oracle network and how it works the better. It will increase user confidence and trust.
This may include a dedicated web page that lists information like uptime, quotes, and other key stats like the venues quotes are sourced from. It may also be beneficial to do a write up about why agoric has its own oracle network, versus using something like Band Protocol or the newly minted Ojo Network, and the benefits this provides.
2. Documented Risk Framework
Protocols like Mars and Euler provide risk assessment frameworks to show how they think about asset selection and parameterization. Gauntlet also provides regular commentary and updates in governance forums like Aave.
Taking measures like these not only contribute to the establishment of a secure protocol but, more importantly, build user confidence and trust. If the Econ Committee or other community members have any plans along these lines under way, I think it’d be great to share them!
3. Incentives Framework
It’d be great to gather thoughts on where everyone’s heads are at with incentives - DCF, econ committee, community members. I don’t have too much of an opinion on the matter, but it’s something I’d like to see discussed. Some questions that come to mind:
What are the current incentive programs in place? I am knowledgable of ones for stATOM/IST and bCRE/IST on Crescent and OSMO/IST on Osmosis.
What are the goals of the incentives programs? (Decentralization, building dex liquidity for liquidations, IST adoption). Are there specific milestones we’re trying to achieve? ($xM liquidity on xDex)
Are there any specific marketing initiatives planned with Vaults launching?
Have we done an analysis of past BLD liquidity mining programs and their efficacy? (perhaps, maybe Gauntlet has done some analysis)