cosmos

Prop 956: Update the Hub’s stATOM/ATOM POL position on Osmosis

Summary

As stATOM redemption rate continuously increases (currently at 1.415 ATOM which surpasses the upper bound of the initial range), the POL position is currently out of range and not earning any swap fees.

This proposal seeks to:

  • update the liquidity range for the Hub’s POL of stATOM/ATOM on Osmosis from the previously set range of [1.0, 1.35] to a new range of [1.1, 1.45].
  • Increase the amount deployed via Quasar from 90K ATOM to 210K ATOM by adding 120K ATOM.
  • Give the custodians of the position the power to update the position in the future if it goes out of range again.

These changes aim to ensure the efficiency of the Hub’s liquidity in the pool.

Link to the full discussions in the forum: https://forum.cosmos.network/t/last-call-proposal-updating-the-hubs-statom-atom-pol-on-osmosis/14273

Background

In the original proposal #858, the Cosmos Hub community approved the allocation of 900k ATOM to provide liquidity in the stATOM/ATOM pool on Osmosis, with 90% of this liquidity placed within a static range of [1.0, 1.35]. This range was chosen to provide liquidity mostly below the redemption rate of stATOM, which at the time was 1.228. The rationale behind the initial range was that liquidity is more effective below the redemption rate. However, a buffer above the redemption rate was included to accommodate the continuous increase.

Rationale

As of now, the redemption rate of stATOM has increased to 1.415 ATOM and surpassed the position’s upper range of 1.35. Making the position Out Of Range, which means all assets parked in the pool are in $ATOM ( approx 811,060 $ATOM) and not earning any fees from swaps. Meanwhile, the amount deployed via Quasar has generated almost as much revenue while only representing 10% of the total POL deployed.

To address this, we propose:

  • Increasing the liquidity deployed via Quasar to a total of 210K $ATOM

    This will allow the Hub to increase its revenues while minimising its exposure to $stATOM. → Note: Deployment via the Quasar vault incurs a 20% performance fee ( applied only to accrued revenue and not the principal).

  • Adjusting the range of the remaining liquidity to [1.1, 1.45]:

    This range will accommodate for the rate increase, maintain most of the liquidity below Stride’s redemption rate all while earning swap fees for the Hub’s liquidity.

  • Give the POL’s custodians the power to update the the position if it goes out of range again:

    This will make sure the position never stays Out Of Range by allowing the custodians to move quickly and eliminating the waiting period of 28 days ( at least) of waiting period associated with governance. → Note: This power only concerns performing updates to the range when it’s out. It doesn’t allow any other updates, such as increasing the amount deployed via Quasar for ex… → Note: For records sake, Johnny Wyles will update the community about these updates if/ when they happen by commenting on this discussion/ the initial discussion.

    Proposed Implementation

    The position is managed by a 3/5 multisig on Osmosis with Zaki Manian, Valentin Pletnev, Joni Z, Masha and Johnny Wyles as signers.

    If the proposal passes, signers will have the discretion to implement the suggested changes in order to maximise safety and avoid any sort of market manipulation.

    This is in regard to the timeline, number of transaction and size when performing the updates suggested.

    Note: Plans to re-route POL deployments through Hydro are currently being voted on. In case the plans are finalized before a favourable outcome to this proposal, the implementation of this proposal will be managed by the Hydro committee.

    Voting Options

    • Yes: You’re in favour of updating the liquidity range to [1.1, 1.45].
    • No: You’re against updating the liquidity range to [1.1, 1.45].
    • Abstain: You’re neither for nor against but wish to contribute to quorum.
    • No with Veto: Strongly oppose the proposal and deem it a spam, harmful to the Hub.