stkATOM - Inter Protocol Vaults Collateral Onboarding Discussion

Introduction

The pSTAKE team is proposing to onboard stkATOM as collateral to mint IST. stkATOM is a liquid staked token of ATOM issued by pSTAKE Finance on the Persistence chain.

Liquid Staking ATOM allows holders to continue earning ATOM staking rewards while maintaining liquidity of the underlying token, allowing participation in DeFi activities across Cosmos.

We have recently opened a conversation on the Cosmos forum to request 600k ATOM to facilitate more distribution of stkATOM. As part of the proposal, the Cosmos Hub may mint IST worth ~$450,000, and provide liquidity on a stkATOM/IST pool on Dexter as protocol owned liquidity, pending the result of the forum post (and the on-chain proposal).

About pSTAKE

pSTAKE is a Liquid Staking Provider for the Cosmos Hub and has been providing ATOM LS service since mid-2021. The early version, stkATOM v1(which was also one of the first ATOM liquid staking solution), was developed under unique constraints, including the absence of IBC in the early days of the Cosmos network and the lack of a well-established decentralised exchange (DEX). Despite such constraints and a complex solution, pSTAKE, at its peak, captured ~$40M stkATOM (ERC-20) TVL and served over 6,400 users.

Post the advent of IBC, a DEX such as Osmosis, and IBC v3 (introducing ICA), a non-custodial Liquid Staking solution could be built.

pSTAKE deprecated its v1 solution last year and launched stkATOM as an IBC-enabled asset on the Persistence Core-1 chain earlier this year (January 2023). pSTAKE’s stkATOM v2 solution is entirely non-custodial and similar to other LS solutions in Cosmos. We can set up IBC channels between Persistence and Agoric to bridge stkATOM via IBC.

Token & Financial Characteristics

One can learn more about current stkATOM stats, features, usage, and security considerations here. This gives a detailed overview of the LST product, including its distribution, trading venues and security.

As mentioned stkATOM is a liquid staked derivative of ATOM, meaning it’s always fully backed by the underlying ATOM. Currently only 1.7% of all staked ATOM is liquid staked, this can go up to a maximum of 25% of the total staked supply. Theoretically, that would be the max supply of stkATOM.

The Agoric community should evaluate the audits on the pSTAKE protocol. pSTAKE is the only LS provider with an active immunifi bug bounty program.

As an oracle implementation, we would suggest a similar approach as with stATOM. Using Agoric’s existing implementation to retrieve the price from Osmosis, Dexter and Astroport (Neutron). If additional precautions or discussions are required for implementation, this can be done with the respective technical teams.

Portfolio Characteristics

Inter Protocol’s Vaults let you mint IST against the value of your IBC assets (like ATOM) to unlock liquidity. Allowing stkATOM to be used as collateral to mint IST, makes sense for the following reasons:

  • stkATOM preserves staking rewards
  • stkATOM is native to Cosmos, hence avoids bridging risks
  • It is a better alternative to ATOM as collateral, since stkATOM will “self heal” the collateral position in the vault due to value accrual of the staking rewards
  • Allowing stkATOM to be used as collateral to mint IST would increase liquidity (and adoption) of IST by making it available to a wider range of users
  • Benefits for multiple communities: This collaboration would benefit both the Agoric and pSTAKE communities by providing them with access to new products and services
  • With the advent of USDC and USDT into Cosmos, its important that IST keeps its relevance as collateralized stabelcoin and ensures good distribution throughout the wider Cosmos Ecosystem
  • Dexter, the liquidity hub of the Persistence Ecosystem, is expected to bootstrap liquidity in a stkATOM/IST pool for further IST use case and adoption. Further, I encourage the Persistence and Agoric communities to co-incentivize this pool for further traction and alignment.

Stride has posted a thread on the same topic a few months ago. The conversation is very similar since the underlying asset is almost identical. Consequently, their on-chain proposal for stATOM was recently approved, paving the way for stkATOM.

We believe that stkATOM follows the same principles and would strengthen utility for IST and foster more collaboration between Agoric, pSTAKE and the Persistence team.

The proposed parameters for stkATOM on Inter Protocol would follow the same logic as stATOM:

  • Debt Limit - 750,000 IST
  • Stability fee - 2.5%
  • Collateralization Ratio - 220%
  • Liquidation ratio - 200%
  • Minting Fee - 0.5%

The Agoric community will still need to decide on the appropriate risk parameters for stkATOM collateral. This will include deciding on a maximum loan-to-value ratio and a minimum collateralization ratio. For now, we propose the same values as stATOM.

Conclusion

We’re hoping for a positive response from the community to progress with this proposal and expand the supply and utility of IST in the wider Cosmos ecosystem.

We are eager to hear your views and will be actively answering any questions or concerns you may have. Once we have had ample time for discussion and have incorporated all your feedback, we plan to put forward a formal on-chain proposal for BLD Governance to make a decision.

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Great to have a diversified set of ATOM liquid staked tokens as collateral!

On behalf of the oracle network coordination team, we’ll start investigating data sources to find the best and most secure way to provide stkATOM pricing in USD.

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Thank you for posting, @Bartv.

This in particular, is very exciting!

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Hi everyone,

We’d like to extend an invitation to the Agoric community for a Twitter Space session on November 1st, Wednesday, at 3:00 PM UTC to discuss pSTAKE’s proposal for 600k ATOM Allocation from the Cosmos Community Pool and address any questions around it.

Since the proposal involves using 100k ATOM for IST minting on Inter Protocol and IST liquidity provisioning on Dexter (as per my post above), we believe it’ll be of great interest to the Agoric community.

We’d highly appreciate your presence and support for the event :point_down:

https://twitter.com/i/spaces/1lPKqbNMkaQGb?s=20

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Update: Gauntlet has shared their recommendations for adding stkATOM as a new collateral asset.

Dear Agoric community!

The onboarding process for stkATOM is in full swing. Everything is progressing nicely, but I wanted to get some feedback from the Oracle Operators, EC and others on the required oracle solution. For stATOM you’ve been using a custom oracle solution - since there are a lot of similarities between both assets, would you recommend a similar approach for stkATOM?

Note, based on the Gauntlet analysis, the majority of the stkATOM liquidity is on Dexter (Persistence Chain) and Astroport (Neutron).

Edit: It seems Simply Staking has taken this up already. Building an oracle price feed which uses the general ATOM price from CEX’s, and multiples it by the stkATOM ratio, to retrieve a stable stkATOM price. we’ve provided the GRPC call to get the redemption rate.

Thanks!

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Quick update that both proposals for the stkATOM vault on devnet and testnet have passed!

https://devnet.explorer.agoric.net/agoric/gov/34
https://emerynet.explorer.agoric.net/agoric/gov/31

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