The stToken Scaling Factor Auto-update Contract makes use of the Stride Redemption Rate Oracle Contract to automatically update the scaling factor for stToken stableswap pools, such as the stOSMO/OSMO pool.
Currently, the scaling factor for stToken stableswap pools is updated every several days using a multisig address controlled by the Stride Association. By using the Auto-update Contract the Stride Association can relinquish this responsibility, which would thereafter be carried out in an automatic and fully trustless manner.
Normal stableswap pools concentrate the two tokens at a 1:1 ratio, which is ideal for USD stablecoins. But Osmosis stableswap pools have an optional scaling factor, which enables the concentration ratio to be continually scaled. The scaling factor is utilized for stToken stableswap pools, because stTokens constantly appreciate in value against their underlying tokens.
Currently, it is the responsibility of a Stride Association multisig address to gradually increase the concentration ratios on several stToken stableswap pools. But that process can now be automated.
For example, the stOSMO:OSMO redemption rate is currently 1:1.148. Soon, the Stride Redemption Rate Oracle Contract could feed this redemption rate to Osmosis. Then the stToken Scaling Factor Auto-update Contract would take the stOSMO redemption rate and use it to adjust the scaling factor / concentration ratio on the stOSMO/OSMO stableswap pool.
Note that once these two contracts are uploaded, a further governance proposal would be required for the Stride Association multisig to relinquish control of stToken pool scaling factors to the Auto-update Contract.
Code repository: Github - https://github.com/Stride-Labs/st-scaling-factor
Commit hash: 7e75ff9e92755a4ad284a8f07b332f4d5b444062
Compiler version: cosmwasm/rust-optimizer:0.12.13
Target onchain date: August 30th