mars

Prop 189: stkATOM Redemption Rate - Neutron Outpost

mrc: 97 title: stkATOM Redemption Rate - Neutron Outpost authors: Mars Foundation forum-url: https://forum.marsprotocol.io/t/1297

Summary

The objective of this proposal is to update stkATOM market on Neutron Outpost to utilize the recently deployed redemption rate contract developed by Persistence to increase the oracle robustness of this market.

Motivation

Currently the stkATOM oracle price source utilizes the Astroport TWAP to convert stkATOM to ATOM price. As with other LST tokens listed on Mars, it is recommended that a composite price source is used to increase the robustness and help mitigate any oracle manipulation attempts. Now that Persistence is pushing redemption rates of their LSTs on-chain Mars should utilize these.

Oracle Risk

We propose the use of a custom oracle for stkATOM that incorporates both the Persistence redemption rate (RR) as well as stkATOM’s market price as follows:

stkATOM/USD = min(stkATOM/ATOM TWAP, stkATOM/ATOM RR) * ATOM/USD (Pyth)

Where:

  • stkATOM/ATOM TWAP is the 30 minute geometric mean TWAP taken from the stkATOM/ATOM PCL pool on Astroport.
  • stkATOM/ATOM RR is the redemption rate of stkATOM according to the Persistence contract deployed on Neutron.
  • ATOM/USD is the standard Pyth price feed for ATOM.

This implementation achieves the following:

  1. It is robust to upwards price manipulation attempts since the price will always have a ceiling that is determined by the redemption rate. As such, even if the TWAP is manipulated, an attacker is not going to be able to reflect that into the price Mars uses.
  2. While downward price manipulation can still happen, it is mitigated given that stkATOM won’t be borrowable, the scope of possible downwards price manipulation exploits is reduced to attacks that artificially decrease the price to make a certain position liquidatable. While this can happen, we believe it’s unlikely because: 1) the potential profits are lower than a pure price manipulation attack to steal assets (especially with Mars’s new auction-based liquidation mechanism); and 2) the risk is higher given that the attacker cannot guarantee that he’ll be the one performing the liquidation.
  3. It allows Persistence to aggregate liquidity in more efficient pool types (PCL instead of XYK) where TWAP-based oracles by themselves (without the redemption rate) would not be robust.

Implementation

This is a signaling proposal, not an executable proposal.

The Mars smart contracts on the Osmosis chain are currently controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary parameter changes.

Copyright

Copyright and related rights waived via CC0.

Disclaimers/Disclosures

This proposal is being made by Mars Protocol Foundation, a Cayman Islands foundation company. Mars Protocol Foundation engages in research and development of the Mars Protocol. Mars Protocol Foundation and certain of its service providers and managers own MARS tokens and have financial interests related to this proposal. The aforementioned persons or their affiliates may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Neutron/NTRN. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.

This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Mars Protocol Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Mars Protocol Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Mars Protocol Foundation shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.