The Osmosis community pool currently possesses several non-OSMO assets that can generate further yield for the protocol and deepen useful markets on Osmosis.
Currently, these include:
Assets received as part of proposals or subDAO agreements
1.09M AXL (~$1.1m)
6.3M STARS (~$290k)
35k AKT (~$104k)
5000 SCRT (~$2k)
250,000 UMEE (~$1.5k)
Increasing Stablecoin revenue from Taker fees
Currently totalling $265k in
Increasing Volatile token revenue from Taker fees
13.5k ATOM (~$138k)
1.8k TIA (~$34k)
9.9 ETH (~$25k)
Custodied on Behalf of ION DAO, included for completeness
This proposal is the first of a series that will propose utilizing these assets as Protocol Owned Liquidity to:
- Protect the value of Protocol-owned assets against inflation.
- Create new markets on Osmosis through bootstrapping the liquidity rather than incentive use
- Reduce swap fees in existing routes, increasing Taker fee generation.
This proposal would transfer the STARS in the Osmosis Community Pool to an intermediary Liquidity subDAO to be processed and returned to the Osmosis Community Pool as Protocol Owned Liquidity of stSTARS/STARS.
The Osmosis Community Pool owns 6,314,579.55 STARS, mainly from the loan repayment for the STARS Loan Swap (Proposal 99).
This STARS has been sitting unused in the community pool for the past two years, losing value to inflation on Stargaze.
This proposal aims to deploy this liquidity to maintain the value of the tokens against STARS inflation while fulfilling a useful function on Osmosis.
Liquidity will be deployed into a newly created stSTARS/STARS supercharged liquidity pool with a swap fee of 0.05% with ranges set as:
- Lower position of 1.1, providing a wide position in the pool to enable the use of stSTARS as collateral in applications.
- Upper position of 1.62, the projected redemption rate in 1 year. This ensures that some of the STARS position is staked to lower the impact of inflation on the community pool holdings and ensure that the position remains valid for a year.
Swap fees for deploying protocol liquidity will err on the low side compared to pools currently favored by regular liquidity providers to make the wider, static range more competitive as well as ensure that a higher proportion of trading fees are collected in the form of Taker Fees rather than by the position itself.
This position requires around 40% of the STARS to be converted to stSTARS. This will be performed by a combination of purchase on Osmosis, where this receives more than the current peg, and direct liquid staking on Stride.
This liquidity position will then have the ownership transferred back to the community pool.
This is a 4/6 reusable multi-sig and is comprised of:
- CryptoAssassin (Validator)
- EffortCapital (Blockworks Research)
- Johnny Wyles (Osmosis Labs)
- NosNode (Validator)
- RoboMcGobo (Osmosis Grants Program)
- Trix (Independent)
Target On-Chain Date: 14th January 2024