Stride Overview — Liquid Staking in Cosmos
Liquid Staking — Dive into the why and how.
There are a few options to consider when it comes to compounding or leveraging assets in DeFI nowadays, so let’s talk Liquid Staking.
In contrast with the most popular ‘regular’ staking method where your tokens a locked for a period of time, not allowing transactions of any kind to be executed during the bonding period, liquid staking grants the user the possibility to actually use the tokens whenever the need arises.
That means that you can still contribute to the Proof-of-Stake security on different blockchains without being subjected to long bonding timeframes. Holders receive what is called a ‘receipt token’ as means to identify their ownership of staked tokens. This is also known as a derivative token, since they bear resemblance to derivative assets.
The receipt can be further used as collateral for trading or in lending protocols by borrowing assets, or even used for liquidity farming, all of which grants an extra yield and percentage on top of your current earnings through the staking method. These options and freedom of choice vary depending on the platforms and protocols of course.
There is about $10.5B invested in liquid staking with the TVL increasing from one year to another as the adoption becomes more and more popular.
Security-wise, liquid staking divides your staked tokens across multiple validators in the set, mitigating the risk of any significant losses that could occur from slashing in case of validator misconduct or technical issues.
Stride
Now that we’ve covered the basics through an introductory ground, let’s explore one of the most promising options available on the market.
Stride is a multichain liquid staking protocol focusing on the Cosmos ecosystem and it is also a future consumer chain on Interchain Security with enhanced full features and soon enough extra layers of security. It is actually one of the first liquid staking providers of its kind on Cosmos.
Value and evaluating scalability
The protocol is currently sitting at around $7.25M TVL and occupying the 28th spot on DefiLlama’s stats board, competing with other protocols in its field.
What’s interesting about this, in particular, is that Stride is not competing with the top 5 or 10 providers that encompass around 90% of the total value locked in liquid staking overall, since most of it is based on Ethereum.
Stride targets Cosmos, where, as we already know, the ecosystem is worth well over $65B with hundreds of dApps and over 40 IBC chains currently in existence and expanding.
It wouldn’t be wrong to consider liquid staking as an emerging market when it comes to Cosmos, which gives Stride an edge over potentially obtaining a long-term significant TVL out of the available assets in its targeted market.
Capital and investors
Stride raised $6.7 million last year around August in a seed round co-led by Pantera Capital, Distributed Global, and North Island VC. Additionally, other investors on the list include Cerulean Ventures, 1Confirmation, Node V, Everstake, Imperator, and Cosmostation.
As Pantera Capital has most aptly pointed out:
Still, the primary market opportunity is that more than 60% of all Cosmos’ ATOM tokens are staked by users to counteract inflation. This puts the Cosmos ecosystem at the 3rd most total value staked only behind Solana and ETH 2.0 and represents an incredible market opportunity for liquid staking. The interoperability between the DApps on Cosmos also provides a large ecosystem for users to deploy their stATOM or other assets.
Team
The Stride team seems more than qualified to lead their vision into a new chapter against competitors, with Vishal Talasani as a previous hedge fund founder and also as a quant researcher, the latter with his colleague and co-founder of Stride, Riley Edmunds.
Security and more
Stride has already been audited by both Certik and Oak Security and is under continuous audit for the purpose of providing proper security of code as well.
Right now it supports $ATOM, $OSMO, $JUNO and $STARS tokens.
As explained in the introduction of the article, once you stake your tokens with Stride, you will receive the derivative token in exchange. In this case, stTokens which can be used and moved freely across IBC-enabled blockchains in Cosmos.
Future plans on supported tokens are many, with some of the main ones underlined on the Stride website being:
•Secret Network (stSCRT)
•Injective (stINJ)
•Evmos (stEVMOS)
•Terra V2 (stLUNA)
•Sei Network (stSEI)
•Kujira (stKUJI)
In theory, we could see any IBC token on this list as long as it passes governance.
2023 plans, tons of features
The network focuses on bringing simplified UX features, where it now also supports st-Tokens transfers onto Osmosis, directly from app.stride.zone, helping improve access to liquidity provisioning.
For the first half of 2023, Stride has some big plans after the latest proposal on updates being passed, promising to deliver enhanced security, governance features, UX improvements, data transparency, and core research.
Just recently, they put out a huge thread on the aforementioned. Let’s summarize a few of the most important ones below 👇
Security
- Interchain Security — security coverage under the umbrella of Cosmos Hub’s validators. We have previously covered the ICS subject in this article.
- IBC Rate limiting — monitorization of the number of tokens that can be transferred cross-chain for mitigating potential hacks.
- Continuous auditing
- Bug bounty
Governance
The plans will provide different voting rights across multiple chains as follows:
- Planetary Liquid Governance (vote from the Stride blockchain)
- Galactic Liquid Governance (vote from Osmosis Liquidity Pools)
- Cosmic Liquid Governance (vote from anywhere in the Cosmos)
Other features
- The Liquid Staking Module (LSM) — Allows staked tokens to be directly liquid-staked with Stride without the intermediate step of unstaking.
- Interchain Skips — Removes the need for IBC bridging when liquid staking.
- Stride Stats (http://info.stride.zone) — Statistics dashboard similar to info Osmosis with figures as TVL, redemption rate, market rate, current unbondings and more.
Core research initiatives:
-Bonded Liquidity Market — Instant withdrawal when matched against new deposits.
- Protocol-Owned Arbitrage — Arbitraging of stToken pools to the protocol rate and creating a positive feedback loop that influences treasure growth.
- InterchainWiki — Data on validators and the networks they participate in, for easier tracking of added value in monitoring for future fair delegations.
- stTokens on Ehereum
- stTokens of non-Cosmos Chains through the use of non-IBC interchain accounts.
For more details on each, remember to check out the thread linked at the beginning of this chapter.
Integration and pools
Stride Protocol has managed to add many integrations of their assets within pools all over Cosmos. Here are some, but not all of them:
ATOM/stATOM: https://app.osmosis.zone/pool/803
stOSMO/OSMO: https://app.osmosis.zone/pool/833
STRD/OSMO: https://app.osmosis.zone/pool/806
JUNO/stJUNO: https://frontier.osmosis.zone/pool/817
STARS/stSTARS: https://frontier.osmosis.zone/pool/810
stOSMO/OSMO on Demex: https://app.dem.exchange/trade/stOSMO/OSMO
stOSMO/ATOM on Demex: https://app.dem.exchange/trade/stATOM/ATOM
Stride’s integration with Demex Exchange of Carbon Protocol is one we have been particularly following as the yield options offered by Carbon’s exchange are definitely in the upper range of technological advancement on the market, something that is extensively covered in their own article here.
There is also an in-depth Stride x Demex strategy which can be explored in Carbon’s post by following this link.
Fees and use-cases
Stride charges a 10% fee out of the staking rewards with the idea that it might also be changed in the future should governance decisions decide upon it. The fee goes to the Stride Foundation and has generated cca $20,000 in revenue. However, we have seen a change on this quite recently, where STRD stakers have decided to redirect past and future revenue to themselves based on prop 8.
The stTokens require deep liquidity for actual usefulness and this is addressed through short-duration incentive gauges. In order to have a better look at how this is defined, they have provided a liquidity pool guidance spreadsheet outlining the details of how it chooses to maintain incentive rates and add liquidity as the need arises.
It’s a rather complex operation that requires a lot of effort from their end, so we can only applaud the strategy, which, combined with their other tactics, could lead to an interesting result in the price value of the tokens in the future.
Airdrops
Speaking of tactics, airdropping was one of the core mechanisms combined with their other methods of keeping the economy in the green area.
Most notably we have to mention the drop from November 2022 which targeted ATOM, STARS, JUNO, INJ and OSMO stakers. In the idea of decentralization, a huge part of the supply (6.3%) will be distributed via airdropping.
While, through other methods, the whole point remains that the distribution of $STRD is to be as far and wide as possible, minimizing the possibility of a huge number of tokens ending up in the hands of a few parties. Hence exchange validators are excluded from this airdrop.
For tasks, vesting, claw-back, and redistribution check out Stride’s blog post here.
Regarding claw-back though, the concept is quite simple:
“Three months after an airdrop became claimable, all unclaimed STRD will be clawed back. It will then immediately be recycled into a new airdrop, which will be distributed proportionally across the original recipient set.”
— quite neat, right?
On December 7th of 2022 we saw 4% of the supply being airdropped, as covered by Stride here.
Tokenomics
Worth noting that there have been some updates to the original tokenomics of Stride! The original can be found here while the updates can be read here.
- Maximum supply of 100M tokens
- STRD will be emitted according to its emissions schedule until it hits the maximum specified
- The projection is for only 2.5M STRD to be emitted in the first year, as opposed to the 9.5M that was planned. Much lower than initially anticipated. The team seems to be encouraging stakers to vote for increasing the emission rate should that be considered the proper solution.
- STRD allocated to core contributors and investors is locked for the first year, after which it vests for another two years. STRD can still be staked and voting on governance proposals is possible.
- Staked STRD belonging to investors and contributors currently receives staking rewards. Core contributors are currently working on a solution to prevent investors and contributors from receiving staking rewards so that everyone else can enjoy a much higher reward. As an interim measure, 100% of contributor staking rewards are being directed to the community pool.
The goals being aimed for are
- To provide STRD to all the communities involved/integrated with Stride
- Promotional purposes for Stride Liquid Staking
- Long term value building for STRD token
For these reasons, it relies on a short inflation runway instead of a long-term inflationary schematic. Stride plans on making the product the main actor, leaving the fees collected from using the product as the core aspect of Stride’s rise or fall.
Governance token
- The Stride governance token is called STRD.
- Genesis circulating supply is 9,200,000 STRD
Token allocation
- Maximum supply 100,000,000 STRD
- 50% of the supply will be in circulation by the middle of year 2
- 95% will be in circulation by the end of year 3
Allocation categories
- Airdrop: 6,300,000 STRD, or 6.3% total supply
- Staking rewards: 5,200,000 STRD, or 5.2% total supply
- Community incentives: 31,000,000 STRD, or 31% total supply
- Community growth: 3,600,000 STRD, or 3.6% total supply
- Initial Security Budget: 2,200,000 STRD, or 2.2% total supply
- Strategic Reserve: 10,910,000 STRD, or 10.91% total supply
- Core contributors: 24,200,000 STRD, or 24.2% total supply
- Partners: 16,700,000 STRD, or 16.7% total supply
“The Stride incentive pool is available at launch and not emitted block-by-block. The Stride DAO, controlled by STRD-holders, will decide how the incentive pool is distributed. However, to make STRD emissions more predictable, there is an emissions quota that the DAO must meet in year one.”
For more information on vesting and emission, please refer to Stride’s blog posts linked at the beginning of the Tokenomics chapter.
Conclusions
Overall I think we can conclude that Stride is one of the top contenders in occupying the most important spot in Liquid Staking in Cosmos.
The transparency of decisions in the allocation of tokens and the strategy employed in the wide distribution of governance tokens leaves us with the idea that Stride really does care more about the product than anything else.
The technology seems to be following the roadmap and the proposals being forwarded are on point with what needs to happen. This year will likely cement the network’s position, depending on the development team’s ability to deliver as promised.
Not financial advice
None of the information provided (whether written or quoted) is intended to be interpreted as financial advice of any kind. BlockHunters does not endorse or recommend any of our readers to invest or trade based on the information presented. We do not guarantee that any of these publications are up-to-date or fully accurate. As such, we cannot be held liable in any situation wherein the contents of our written articles are used for personal investments. We will always recommend that our readers do their own research and take decisions into their own hands.
About BlockHunters
BlockHunters is a non-custodial staking service provider currently supporting the most promising projects in the cryptocurrency ecosystem with active nodes and different model infrastructure key components.
Based on the vision of driving technology forward and helping with security, connectivity solutions, governance insights, and community support, BlockHunters is dedicated to offering competitive and practical prowess.
Where to find us
🔗Website https://blockhunters.org
🔗Linktree https://linktr.ee/blockhunters
🔗Explorer https://scan.bh.rocks/
🔗Twitter https://twitter.com/BlockhuntersOrg
📃Telegram chat https://t.me/BlockhuntersTG
📃Telegram announcements https://t.me/BlockhuntersAnnouncements
📧Email office[at]blockhunters[dot]org
