How Stride will bring the Cosmos ecosystem DeFi to the next level
Liquid staking is the next big trend in the Cosmos ecosystem. DeFi in Cosmos is about to grow exponentially and Stride want to be a big part of it.
Today we will talk about Stride and how it will help Cosmos DeFi to grow.
What is Stride?
Stride brings liquid staking to all IBC-compatible chains. They want to cover the entire market for IBC-compatible chains and quite possibly beyond (considering the ongoing integrations with the Near & Polkadot ecosystems)
The IBC staking market is quite big. It was at 80B earlier. With the developing Cosmos ecosystem, this market will only grow. Stride will definitely benefit from it.
Also, Stride has a great team. It includes graduates from UC Berkeley and the University of Chicago with deep experience in DeFi, quantitative finance, product management, and engineering. They also have prior experience founding a self-funded Cosmos ecosystem startup and running their own Cosmos validator node
So, what is Liquid Staking?
Liquid staking protocols allow users to deposit a token into the protocol which is staked to earn yield and secure the network, and in exchange the user receives a derivative token (for example stETH) that is pegged in value to the original and can be used as equivalent to the liquid token for transfers, use in DeFi protocols, etc..
The liquid staking protocols take a small percentage of the user’s earned staking rewards in exchange for providing them with liquidity, in a true win-win scenario for both the protocol and its users.
How it works?
It's really simple and it's very important for the mass adoption
Stride vision and competitors
Let's first understand the positioning of the different liquid staking protocols coming up in Cosmos.
There are 2 categories of liquid staking protocols on Cosmos.
The first includes Lido Finance and Persistence. They both currently rely on smart contracts deployed on Ethereum.
Lido is planning to leverage interchain security and needs the Neutron consumer chain to be up-and running, which is probably still several months away Neutron is also purpose-built for the Hub but not all IBC chains.
Persistence's pStake is currently issuing staking derivative tokens as ERC20s on the Ethereum mainnet and require assets to be bridged back and forth from Cosmos They are planning to use their own sovereign chain with IBC support, but this will take time as well/
The second category is made for IBC-compatible chains and thats Stride.
- Implementing rate limitation, i.e limiting the rate at which certain on-chain actions are performed in order prevent exploits.
- Being audited by Certik and Oak
Rate limiting is quite interesting because the longer time-frame should ensure that exploitive actions are unable to be executed before malicious parties have been investigated
Stride will support native redemptions on day 1 for all chains. In other words, users will immediately be able to redeem their stTokens for native assets within the protocol
That means there will be two ways to exchange the staking derivatives for native tokens:
- redeem them for the underlying token with the protocol
Selling is faster, but the price is less certain due to slippage & deviations from the peg
Allowing redemptions is important to hold the peg b/w staking derivatives & the underlying tokens
The goal for all the liquid staking protocols is to make their staked assets as useful as possible in Cosmos DeFi That means integrations with DEXs (Osmosis, Sifchain, Crescent), money markets (Kava, Mars, Umee) and other DeFi products
Stride will enlist the help of their investors & several market-makers to make sure their pools (such as stATOM/ATOM) have deep liquidity and enable trades with minimum slippage.
They will also use the new Osmosis stableswap feature to increase the stability of the peg.
Something I also found interesting is that Stride is making use of the new Interchain Accounts (ICA) module.
They've in fact extended the ICA functionalities by adding callbacks, and planning to submit a PR to the core IBC repository
Financial backers
Stride raised $6.5m from top-tier VC funds. You can read more about it here
How to build on Stride?
Stride made really good article about how to start developing on it. You can read it here.
Also, there are ongoing testnet that called 'Poolparty'. We made a tutorial on how to run a node