Prop 216: Liquid Stake the OSMO in the Community Pool
Summary
There are currently 246,805 OSMO in the Stargaze community pool. These funds have been there since genesis, when Stargaze conducted a token swap with Osmosis. Since then, the OSMO hasn't been touched. As it's been unstaked this whole time, it's missed out on roughly 150K OSMO of staking rewards.
This proposal aims to liquid stake all the OSMO in the community pool for stOSMO, so that it can earn staking rewards while remaining liquid. If this proposal passed, the stOSMO owned by Stargaze would earn 27,272 OSMO per year, given the current stOSMO APY.
As for implementation, this proposal aims to transfer the community pool OSMO to a DAODAO multisig comprised of trusted community members. The multisig would liquid stake the OSMO, and then transfer the resultant stOSMO back to the community pool. Stargaze governance would then be in full control of the stOSMO, and the multisig would dissolve itself.
Justification
The OSMO in the community pool is idle and therefore is currently being inflated away. In order to prevent this from happening further, it is important to put the OSMO to work.
The best way to do this is Liquid Staking. By Liquid Staking at the current 11.05% APY, the community pool would accrue the equivalent 27,272 OSMO (almost $10k USD) per year in staking rewards while remaining liquid.
Additionally, this aligns the Stargaze Community with the Osmosis ecosystem, as by liquid staking the OSMO, Stargaze is contributing to Osmosis chain security.
Why Stride?
- Stride has Withdrawals: This ensures that the stOSMO in the community pool can be unstaked and redeemed.
- stOSMO has Deep Liquidity: In case the stOSMO needs to be sold in exchange for OSMO, there should be sufficiently deep liquidity such that the funds are not at the risk of being sold below the peg of stOSMO (the rate at which the Stride protocol redeems stOSMO for OSMO). The stOSMO/OSMO pool on Osmosis is an incentivized stableswap pool, which bolsters the strength of stOSMO's peg. It is also the 6th largest pool on Osmosis with around $2.3mm USD of liquidity.
- Security: Stride has taken several measures, including recurring audits, rate limiting and chain minimalism to obtain the highest level of security. This makes stOSMO an incredibly secure LST.
- Existing Alignment between Stargaze and Stride: Stride is aligned with Stargaze. For instance, there are currently nearly 37.5m STARS liquid staked with Stride. Stride also spent 15k STRD from its community pool acquiring Bad Kids earlier this year.
- Validator Alignment: Osmosis is currently undergoing Stride's host chain validator selection process, and the Stride community is likely to pick some great validators to which the OSMO staked with Stride will be delegated. Validators that relay between Stargaze and Osmosis are likely to be included, as these sorts of contributions are criteria the Stride community considers in its validator selection.
Details
If this proposal passes, it will release 246,805 OSMO from the Stargaze community pool to a subDAO / multisig with the address stars1ysr6l962ugtlz3at3mvwxf02gh047tzkwcu9tv58ws943muvtxvqhrkask (view it here)
- Jorge (Stargaze): stars14a3593je3ezmhgc6glp3epmx5a922df45rjuh9
- John Galt (Stride): stars1g4mzycyfgh5g4nyjs2sk0nqt53ng8t9skrqz8y
- Alkadeta (Stargaze Validator): stars1rhcrnt9dqzufq2pu5ypzk29c65fdzvgrgen44v
The multisig signers have bound themselves to follow this set of instructions. Multisig signers will:
- Liquid stake 246,805 OSMO with Stride protocol, resulting in a certain amount of stOSMO.
- Send the full amount of stOSMO received as a result of liquid staking to the Stargaze Community Pool address.
Final Thoughts
Liquid staking the OSMO in the Stargaze Community Pool for stOSMO will be extremely valuable to the Stargaze community. Not only would this allow the Community Pool to stay liquid while earning yield, it will also contribute to Osmosis' chain security.
Please refer here for the commonwealth discussion.
Disclaimer: this prop was put up by a Stride contributor.