Original Thread: Commonwealth
stIBCX was launched just a few days ago. It’s an index token composed of a diversified basket of Stride liquid staked Cosmos tokens sourced from the Osmosis DEX. stIBCX is issued on the Osmosis blockchain, and its governance token is ION.
This proposal aims to support the roll-out of stIBCX by:
- Adding the stIBCX/OSMO pool (#1039) to the minor incentive category
- And enabling superfluid staking
As a matter of custom, Osmosis governance does not consider bundled onchain proposals. Therefore, this forum post will result in two separate onchain proposals.
So what’s the point of stIBCX?
Primarily, stIBCX offers convenience. By simply holding stIBCX, users get exposure to most significant Cosmos tokens. The tokens underlying stIBCX do not forfeit their staking rewards, as the majority of them are liquid staked. The tokens underlying stIBCX are automatically rebalanced periodically, to reflect the changing Cosmos landscape. And stIBCX is of course completely liquid, so users can trade it whenever they want. So it’s a great token for casual or beginner Cosmonauts to hold.
Beyond convenience, stIBCX could become a very popular collateral token. The great thing about stIBCX as collateral is that it contains many large and small tokens, but they all have the same liquidation point. This can be a life-saver! For example, starting with $100, a user could buy $98 worth of ATOM and $2 of Token X, and then set up one leverage position using each token. If Token X suddenly goes to zero, then the Token X leverage position will be liquidated. Now let’s take a few steps back. What if instead the user bought an index token composed of 98% ATOM and 2% Token X, and then set up a single leverage position using the index token. Then if Token X suddenly went to zero the leverage position would be intact, since the collateral would only be down 2%. This is the main benefit of using an index token as collateral as opposed to separate tokens. Given the strengths of stIBCX, it could easily become a standard collateral token across Cosmos DeFi leverage applications.
So if stIBCX is such a great product, how does it benefit Osmosis?
Mainly, stIBCX creates trade volume for the Osmosis DEX, because all tokens in the stIBCX basket are sourced from the DEX. Whenever stIBCX is minted or rebalanced, it creates trade volume. So the bigger stIBCX becomes and the more integrations it gains, the more trade volume generated on Osmosis DEX. And the fact that stIBCX is issued on the Osmosis blockchain furthers the status of Osmosis as the hub of Cosmos DeFi. Imagine a future where stIBCX replaces stATOM as the most common Cosmos collateral, used in leverage applications across the Cosmos. Such a future would be very positive for Osmosis.
stIBCX is the latest token in the Osmosis family, the others being OSMO, ION, and IBCX. All these tokens are native to the Osmosis blockchain, and as such Osmosis governance has an interest in ensuring they all have adequate trading liquidity.
So in order to ensure a smooth roll-out for stIBCX, it would make sense to include the stIBCX/OSMO pool in the minor incentives category. This would allow the pool to receive OSMO incentives proportional to the amount of trade volume it generates.
But Osmosis governance won’t be the only DAO incentivizing the stIBCX pool. The Stride DAO has indicated its intention to add STRD incentives to this pool. Starting on Tuesday, June 20th, the stIBCX pool will be incentivized with 300 STRD per day, in order to bootstrap liquidity.
And in the near future, it’s likely that the Ion DAO will also contribute incentives, in the form of ION. After all, stIBCX will likely become the flagship product of Ion DAO.
Superfluid proposals ask whether governance trusts the stability and security of another chain enough to allow a token issued by that chain to have an influence on Osmosis governance. In this case, since stIBCX is issued on the Osmosis blockchain, the question is: does Osmosis governance trust the Osmosis blockchain? Hopefully it does!
But the Osmosis blockchain itself is only one point of failure. stIBCX is backed by tokens from the Stride blockchain, and it is issued on the Osmosis chain by Ion DAO’s CosmWasm smart contracts. Osmosis governance has already demonstrated trust in the security of the Stride blockchain by approving the STRD/OSMO pool for superfluid staking, and indeed Stride is widely regarded as a highly secure chain. Turning to the Ion DAO’s contracts, they have been thoroughly audited by Oak Security. The stIBCX contracts are the same used for IBCX, and IBCX has been live without incident for more than a month now.
Given these factors, there would be minimal risk in enabling superfluid staking for the stIBCX/OSMO pool.
The liquid staked index token is a powerful product. It simultaneously makes it easy for new users to get exposure to a wide array of tokens and gives sophisticated users advantages when it comes to collateralization for leverage applications. stIBCX is the first liquid staked index token in the Cosmos; it has the first-mover advantage. With the help of Osmosis governance, stIBCX has the potential to become the dominant Cosmos liquid staked index token for the foreseeable future.
The two separate requests in this forum post would enable a smooth and successful roll-out of stIBCX, giving it a strong start on its mission to proliferate across the Cosmos. Ultimately, it’s in Osmosis’ interest to support stIBCX, because wide-spread adoption of stIBCX would further establish Osmosis as the center of Cosmos DeFi.
Pending community discussion, the two proposals in this forum will go on chain as two separate votes in one week. In the meantime, please provide any comments or questions you may have!
Target on-chain date: The two separate proposals will be live for voting starting June 21st, 2023.