Liquid Staking Token Vaults (stATOM, stkATOM, qATOM, etc.)

Inter Protocol Discussion
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Thanks for your thoughts @RedRabbit, the case for stkATOM is definitely interesting. I imagine Inter will support multiple issuers over time, so I am interested to hear thoughts on this from others. Perhaps from a community alignment perspective it may make most sense to support several issuers in one go with different caps. A risk framework really helps with these decisions, and communication around them.

Related to all of this, but not spelled out directly in Incentives Framework, is thoughts on Exchange Liquidity Strategy for $IST. This is probably more important to discuss than the incentives themselves.

  • What is the ideal mix of liquidity for IST?

    • Stableswap pairs vs vault collateral type pairs. Liquidity at many venues vs deep liquidity at strategic venues.
    • The large level of liquidity on ATOM/OSMO provides ATOM/IST at 2 hops for 0.20%. stATOM/IST trades require 3 hops and a 0.70% fee (see screenshots below). IST/OSMO LP’s most likely suffered ~25% IL unless they were able to hedge OSMO exposure, but incentives have seemed to keep many around. Osmosis is definitely a strategic venue, but it’s interesting to watch the progression of dex design coverge towards more capital efficient mechanisms.
    • Aside from the pools listed in OP, there is a DAI/CMST/IST stableswap pool on Osmosis with ~$250k of liquidity and a SILK/IST stableswap pool on ShadeSwap with a similar level of liquidity ($280k). Shadeswap has a 0.31% fee on the stATOM/IST path and a 0.36% fee on the ATOM/IST path and provides slightly deeper quotes than Osmosis. It’s great to see stableswap pools as they provide deeper quotes with less liquidity, but these pools need to build significantly more liquidity to be meaningful. Below are some screenshots showing the max amounts tradeable at ~0.30% and ~3% slippage.
    • Inter’s PSM currently provides the deepest $IST liquidity for stable pairs. Liquidators can bring 1 of 6 stablecoins and swap an amount >1M IST for 4 issuers Inter Protocol Stats. This is very efficient, but currently doesn’t provide much liquidity going the other way (selling IST).

  • Strategic Partnerships and Launches

    • Astroport dex plans to launch on Neutron, an ICS network in the ATOM economic zone; Stride has a proposal in place that will allocate 450k ATOM / ~$4.5m from the ATOM community dao for initial liquidity in a stATOM/ATOM pool on this dex. This is worth noting since it seems like a place we want to have IST liquidity, and I’d also like to encourage similar strategic efforts from our community once it seems Vaults are in a good place.
    • In the near term, it could be great to see IST/USDC (native from noble) and IST/ATOM liquidity pools on Neutron or other ICS chains. Duality docs, website is another planned appchain dex that seems promising and worth connecting with. These decisions probably require more thoughtful analysis around “the ideal mix of liquidity”, which I haven’t really provided, but hoping folks who are thinking about this can chime in.

  • What folks/groups are currently leading the charge on these efforts?

    • It was also great to see the efforts from @RedRabbit to have IST and BLD added to superfluid staking. Aside from the economic incentive, it makes the pools pretty prominent in the web interface :clap:. It seems like having more coordination on this topic from key stakeholders would be beneficial, especially as it closely relates to collateral type selection and protocol risk management for vaults.

  • What is the temperature check on protocol owned liquidity. Is this something we should be thinking about in these conversations?

    • I am perhaps running before walking by bringing this up, but closely related to these discussions is the notion of protocol owned liquidity. For stablecoin protocols, this could involve something like the D3M module from Maker DAO. In the context of this conversation, it could involve the Inter Reserve, or a different module, holding LP tokens for strategic pairs to help ensure sufficient market liquidity. An ATOM/IST pair may not make sense as it’s a directional asset, but perhaps a stablecoin pair might. There is more nuance to this than I’m suggesting in a few words here, but I am curious what others think on this topic over a longer-term horizon. If it’s not suitable for the protocol to hold these, perhaps the discussion could be around LP tokens as a collateral type and what oracles would look like for that.

Osmosis Quotes: Osmosis IST* Quotes at 0.30% and 3% slippage - Album on Imgur
ShadeSwap Quotes: ShadeSwap IST* Quotes at 0.30% and 3% slippage - Album on Imgur

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