Requested Feedback: Exchange Liquidity Strategy for IST

In the latest (5/30/203) version of the Inter Lite Paper, one of the stated goals is as follows:

Inter Protocol connects to the multi-billion dollar interchain ecosystem through the Inter-Blockchain Communication (IBC) protocol. IST is available to all connected chains in the growing IBC ecosystem.

However, there is limited mention of an exchange liquidity strategy for IST in the whitepaper. The PSM is the only exchange venue under the purview of the Econ Committee per the paper, but there are many more venues where IST is traded or could be traded. For some stablecoin protocols, evidenced by the bribe markets on Curve, management of external liquidity is vital to the success of the project.

In the Liquid Staking Token Vaults Thread, I raised some questions about Inter’s exchange strategy that, while relevant, were a bit divertive to the topic at hand. I would like to move that discussion here for more direct feedback. I am raising this in the Econ Committee subthread, but would like to invite everyone to participate in the discussion!

Some potential outcomes from the discussion:

  • If plans are already in the works, more visibility for community members around the strategy
  • An understanding of who (collectively, individually) is responsible for these efforts, and what the goals of these efforts should be (i.e., make IST widely available, help ensure a sustainable liquidation market)
  • An understanding of the types of pools that are most desirable for IST. Stableswap, constant product w/ a risk asset pair, newer concentrated liquidity/CLOB designs, or a mix.
  • Similarly, an understanding of what liquidity is “meaningful” (is it better to build up $5m at Venue 1 before spreading liquidity thin at Venues 2-5)
  • An understanding of the interplay between exchange liquidity for IST, CollateralType/IST pairs, and CollateralType risk assessments (i.e., does having a CollateralType/IST liquidity pool reduce the risk profile of an asset?)

And a nice to have:

  • Are there any ongoing strategic efforts for partnerships with new exchanges? The Astroport/Neutron/Stride partnership is interesting but seems like something that requires a bit of coordination.

In terms of liquidity, I think it really depends on a DEXs volume.

With there being a rather large amount of IST liquidity on Crescent, and more stkATOM liquidity than stATOM liquidity, it may be cheaper to build IST liquidity, volume, and velocity by launching an stkATOM-IST on Dexter, especially if incentives will be matched by the pstake and or xprt communities. A goal of having a meaningful and valuable amount of IST liquidity on Dexter in an stkATOM-IST pool may currently only need to be equal in size to the stATOM-IST pool on Crescent. Incentivizing a pool with that goal in mind could be valuable enough to both communities.

As for AstroPort, it would be nice to see if Stride would be willing to co-incentivize a IST-stATOM pool, especially if stATOM vaults are opened. Leveraging the power of vaults to form liquidity incentive partnerships is something worth exploring,

Another thing people may find interesting is the Picaso DEX, especially if Osmosis passes matching PICA liquidity incentives for the PICA/OSMO pool as bridging over DOT seems a lot cheaper using Centauri bridge supported by Picasso than through the Axelar bridge.

Osmosis Governance Proposal to Match PICA Incentives

Pablo DEX:

A thoughtful post on the Aave GHO Governance forum has reminded me of this topic. In short, @monet-supply, raises the point that stablecoin growth can only be led sustainably via the demand side, not the supply side .

IST does not currently have incentives to increase the supply side, either through token incentives or below market borrow rates / collateralization ratios, and nor is it below peg, so the post is not entirely relevant. But the points made about trust, liquidity, and utility for driving the demand side are very pertinent.

My takeaways for IST after reading this are -

  1. A concerted effort needs to be made around an exchange liquidity strategy. Perhaps before these efforts begin, community members and stakeholders can weigh in on the following -

    1. Are folks aligned that devising an Exchange Liquidity Strategy is pressing at this time?
    2. Who’s purview should this effort fall under? (Econ Committee, DCF, a new subDAO/working group)
    3. Has the EC engaged Gauntlet on this topic, and received any guidance that’s worth sharing?
    4. If efforts are already ongoing, but not publicly shared, an update in this thread or on the next community call would be greatly appreciated!
  2. Efforts to increase the utility of IST are important and should continue. Some examples -

    1. Gas token status on other IBC-chains (h/t @RedRabbit for efforts here)
    2. Commercial service payment, like Akash or Omniflix
    3. Direct purchase via fiat onramps, like Kado Money
  3. Timeliness and Urgency. Cosmos liquidity and ecosystem maturity is relatively low compared to other incumbents, which can make growing IST liquidity challenging. Nonetheless, it presents an opportunity to entrench IST across the Cosmos and set the stage for when the ecosystem matures and market conditions improve. In particular, it seems important for IST to align with exchange protocols in the AEZ while liquidity is still nascent.

1 Like

Hello, Ox.
@monet-supply’s comments and thoughts on the Aave side were very insightful, thanks for bringing them to the surface here.

I can speak perhaps to a few of your comments, (also very well thought-out). My perspective is one from marketing both from DCF and Inter Protocol angles.

Increasing the utility of IST across IBC is a high priority. Establishing relationships with as many protocols as possible to get IST used as a gas fee token (at the very least), is our path of least resistance toward the so-called ubiquity that we are aiming to achieve. The partners’ team at Agoric, as well as efforts in marketing, are constantly working towards this.

Broader utility is, of course, something we all have our eyes on and we continue to look for opportunities and partners to make this happen. The recent relationship with OmniFlix is a great example of this. IMHO, partnerships such as the OmniFlix, the sort that is more general-consumer-facing outside strong economic modalities, are incredibly beneficial.

The DCF is actively looking for builders to propose projects that will facilitate the utilization of IST (among other things). With that, we are always looking to hear from the community about ideas, thoughts, suggestions, or even leads to devs or projects that may help this.

I am sure you’ve seen the recent announcement re: Kado. In less than 45 days we’ve launched two great relationships that increase IST accessibility. And - one more relationship coming hopefully by end of this month.

I am going to ping a few of the folks who are much more bright than myself re: liquidity and see if we can get a nice conversation going on the rest of your post.

Thanks for the great comments. Great things are happening and the best is yet to come.