stTIA - Inter Protocol Vaults™ Collateral Onboarding Discussion
Introduction
As part of onboarding of new collateral types for Inter Protocol Vaults, it is suggested to have a discussion period where the community can evaluate and comment on any proposed new collateral type. This post is to kick off that discussion for stTIA and will be open for 10 days to determine whether or not the community feels that moving forward with adding stTIA as an Inter Protocol Vaults collateral type is warranted.
DCF is proposing to onboard stTIA as collateral to mint IST. stTIA is a liquid staked token of Celistia’s TIA token issued by Stride. As of January 29, 2024, TIA has a circulating supply of over 160 million tokens, a price above US$17 and a total market cap of over US$2.8 billion. TIA is available on most major exchanges, including Osmosis, and has a daily transaction volume of over US$150 million. Now available on IBC Cosmos chains, TIA is an exciting addition to the ecosystem: Liquid Staking TIA allows holders to continue earning TIA staking rewards while maintaining liquidity of the underlying token, allowing participation in DeFi activities across Cosmos.
On Osmosis there are two main pools, earning APRs of 34% for TIA/OSMO and 15% for TIA/USDC (as of January 29, 2024), making TIA an attractive and well-traded token on Osmosis, which should enable efficient liquidations, if needed.
About DCF
The Decentralized Cooperation Foundation’s (DCF) mission is to unite people and entities in the spirit of cooperation with web 3.0, blockchain and decentralization as a binding fabric.
At this point in time, we are focusing our efforts on Agoric’s proof-of-stake chain and the Cosmos-focused IBC environment. Engagement with — along with the acceleration of — those ecosystems is our purpose. As time passes, we will expand our purview to provide support for taking the technological foundation that Agoric’s chain and IBC are built on to other chains, and even for non-blockchain ecosystems.
Onboarding new collateral types
Most collateral onboarding discussions are initiated by members of the Inter Protocol community and led by a Proposal Champion from start to finish. Typically, they are supported by technical assistance from Agoric Systems (Agoric OpCo), risk management by the Economic Committee (EC), and with DCF helping to analyze business value / expenses to the protocol.
For this collateral type, there is a hypothesis that having stTIA available at its launch would be a strategic business opportunity for Inter Protocol. Instead of stTIA gaining tracking first and being added to Inter Protocol after it is used in many other places, the idea is to have Inter Protocol be one of the first utilities for using the stTIA minted on launch.
To facilitate this, the DCF is beginning this discussion in advance of the stTIA launch.
About Stride
The collateral in question, stTIA, is issued by the Stride blockchain. The Stride blockchain has been processing blocks since September 2022. stTIA is a liquid staked token representing staked TIA, and is fully backed by TIA at all times.
The first Stride testnet was launched in July 2022, and mainnet followed shortly after. As the first ATOM LST native to the Cosmos, stATOM quickly became a popular and trusted Cosmos token. Today, stATOM is integrated on nearly every major Cosmos DeFi chain, and represents over 85% of ATOM LST market share. In July 2023, the Stride blockchain transitioned to interchain security (ICS). Through this security arrangement, the Stride chain now has over $2 billion of economic security (as of January 29, 2024).
User Benefits
Additional collateral assets integrated into the Inter Protocol ecosystem help to enhance the protocol’s security and stability as per the overcollateralization thesis.
Inter Protocol vaults provide users a novel way to extend their DeFi strategies. When a staked asset serves as the underlying collateral, users can continue earning yields from the staking protocol. Simultaneously, they can utilize their minted IST to engage with other protocols, maximizing the potential of their underlying asset.
stTIA on Agoric
As an ICS-20 token minted on Stride chain, stTIA, or any other Stride liquid staked token, (represented by stXXX) can be bridged to Agoric through IBC. The transfer channels are: Stride channel-110, and Agoric channel-48.
Token Economics
Supply
The supply of stTIA is currently 0 as the launch has not occurred yet.
There is no supply schedule and no allocations; rather, stXXX is minted and burned by users - similar to IST. In order to mint stXXX, users must deposit XXX. When stXXX is burned, users redeem the underlying XXX token. Users must wait for the underlying XXX token’s unstaking period before redeeming the underlying XXX token. As such, stXXX is fully backed by XXX at all times.
stXXX Functionality
The staking rewards earned by the staked XXX underlying stXXX are auto-compounded and accrue to the value of stXXX Due to this feature, the amount of XXX redeemable by burning one stXXX constantly increases. And so the value of stXXX against XXX continually rises. At the launch, of stXXX, 1 stXXX can be used to redeem 1 XXX. Handling staking rewards this way makes it easy for applications to integrate stXXX.
The way stXXX works has never changed. As a crucial building block of Cosmos DeFi, it’s likely that stXXX never will change.
As a representation of XXX, stXXX inherits the properties of XXX. Since XXX is a top cryptocurrency with high confidence and minimal volatility, these properties are passed down to stXXX, making stXXX likewise very suitable for collateral.
stTIA Functionality
At launch, stTIA will be backed by a multisig instead of Stride’s usual ICA delegation method (because Celestia hasn’t enabled interchain accounts yet). The multisig is made up of 7 slashable validators that are on the valsets of both Stride and Celestia.
Stride is leading the charge for a CIP to add interchain accounts to Celestia. Once that is done, stTIA will migrate to the standard ICA model without the need to migrate liquidity or change the IBC/denoms (so integrators will not need to do anything to migrate). There is a technical blog coming on all of this in the next few days.
stXXX control
The Stride blockchain - and by extension the stXXX tokens - are controlled by the STRD governance token. Any changes to the current functionality of the Stride blockchain must be proposed in an open and transparent manner, and STRD holders must vote in favor.
In addition to this standard governance process, as an ICS chain Stride is run by the Cosmos Hub validator set. If STRD holders pass obviously malicious code, validators can choose not to run that code. (Of course, the Cosmos Hub validators that run the Stride chain are constrained by Tendermint Consensus. If a small group of validators attempted to act maliciously, its ATOM stake would be slashed.)
Stride documentation
Stride Documents: Stride: The Liquid Staking Zone 1
Stride Audits: GitHub - Stride-Labs/audits / stTIA Audit
Stride Labs Github project: GitHub - Stride-Labs/stride: Stride: Multichain Liquid Staking
Proposed parameters
The proposed parameters for stTIA in Inter Protocol Vaults would be determined by the EC:
- Debt Limit - X million
- Stability fee - (all other collateral types are at 0.75%)
- Collateralization Ratio - xxx%
- Liquidation ratio - yyy% (usually 10-20% below the min collateralization ratio)
- Minting Fee - (all other collateral types are at 0.5%)
Conclusion
We’re hoping for a positive response from the community to progress with this strategy and proposal to expand the supply and utility of IST in the wider Cosmos ecosystem and beyond.
We are eager to hear the communities discussion regarding stTIA and would invite the community to not only reply but to step up as the Proposal Champion and post an on-chain signaling vote, when appropriate.
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