Current Cosmos Liquid Staking Landscape
The adoption, incentivization, and growth of stkATOM in the last nine months have been crucial for pStake contributors to better analyze and understand the current liquid staking market in Cosmos and users’ needs.
Besides pSTAKE, Stride (support for 11 cosmos chains) and Quicksilver (support for five cosmos chains) are the other liquid staking providers in Cosmos. Despite support for many tokens, most traction ( > 80%) for these protocols comes from ATOM liquid staking.
This polarized adoption may be attributed to one/many essential question(s) for liquid staking to even exist for a token. (listed below)
Growing the pSTAKE protocol
The idea for pSTAKE expansion to any ‘token’ has always been driven by introspecting on the following questions:
- Is there a need for liquid staking in that token’s ecosystem?
- What benefit would a token’s liquid staking bring to the pSTAKE protocol regarding strategic partnerships, revenue, and traction?
- How does the token community respond to liquid staking?
- What is the DeFi landscape in the token ecosystem?
- Can pSTAKE bring about a change and have a clear differentiator with stkToken compared to other existing LSTs?
- What would the incentivization (always subject to governance) look like for the initial adoption of stkToken?
- Is the pSTAKE community aligned and excited about supporting stkToken?
- Is the timing optimal?
With this forum post, I suggest that the pSTAKE protocol expand its liquid staking support to the leading DeFi hub in Cosmos, Osmosis, by launching stkOSMO.
Why Osmosis?
Need for liquid staking
Osmosis is the liquidity hub of Cosmos, empowering applications such as borrowing lending, vaults, stablecoins, and more. Osmosis has a 51.8% staking ratio. That means ~$168M+ OSMO is illiquid and locked and could potentially be used to further boost the Osmosis DeFi landscape.
Benefits
- Ecosystem Partnership
- Onboarding a new PoS chain to the pSTAKE protocol is a long-term bet on the chain’s ecosystem. Osmosis is well positioned to capitalize and grow in its business niches. pSTAKE is expected to reap benefits with visibility, revenue, user acquisition, and long-term value.
- Revenue
- pSTAKE charges a 5-10% protocol fee on the total staking rewards generated. Assuming (on a lower end) that, on average, 5M OSMO is liquid staked with pSTAKE at current prices and a 10% protocol fee, this adds ~$35,000 in revenue to the pSTAKE protocol.
- The pSTAKE protocol will diversify its revenue streams by expanding to Osmosis.
- The pSTAKE on Cosmos codebase was recently refactored for scalability and smoother expansion. It is noteworthy that this additional revenue comes without the need for any significant development effort to onboard Cosmos based tokens like stkOSMO.
- Onboarding Users to pSTAKE
- Osmosis has ~181,000+ monthly active accounts, representing one of the largest user bases within Cosmos.
- Onboarding power DeFi users to the pSTAKE protocol will not only help in creating value for stkOSMO but also expose them to pSTAKE’s other offerings like stkATOM, stkBNB and stkETH in the future.
Osmosis’ Community Sentiment around Liquid Staking
The Osmosis community is slightly divided on liquid staking OSMO, but adoption seems to continue, as seen with Stride and Quicksilver’s offering. Recently, Stride, the leading OSMO liquid staking provider, suggested that they get acquired by the Cosmos Hub. The community has not received this news well as it creates a riff between the liquid staking provider and Osmosis. I see this as an opportunity for the pSTAKE protocol to capture value by creating products that are aligned with the Osmosis community.
DeFi Landscape
Compared to the rest of Cosmos, the DeFi ecosystem on Osmosis is well-matured and yearns for diversification of liquid staking.
| DeFi Primitive | Osmosis |
|---|---|
| DEX | Osmosis |
| Borrowing Lending | Mars Protocol |
| Vaults / Structured Products | Quasar, IBCX, Calc Finance |
| Native Stablecoin | Membrane (CDT) |
| Perpetuals | Levana |
| Fiat On-Ramp | Transak, Kado |
| Liquid Staking | Stride, Quicksilver |
| Total DeFi TVL | ~117.48M |
pSTAKE Differentiator
- Partnering for the long run
- As mentioned above, expansion to Osmosis is a long-term bet on its ecosystem. pSTAKE contributors will try to partner and work closely with the respective team to create value together instead of working in isolation.
- Unique features
- pSTAKE is built with users at the forefront. Unique features such as Instant Redemptions will give stkOSMO users a product-level differentiator compared to other liquid staking providers.
- Ecosystem Alignment
- pSTAKE contributors believe in sovereignty and that a liquid staking protocol should not meddle in with key internal affairs such as validators, gate keeping stake delegation, governance, etc, of the ecosystems it is on.
- Primary stkOSMO/OSMO liquidity will be proposed to be built on Osmosis to deeply embed stkOSMO and it’s major utility into the Osmosis DeFi landscape.
Incentivization
LSTs (Liquid Staking Tokens) are powerless without deep liquidity against their base tokens. This is essential to meet the actual premise of liquid staking, liquefying a staked position.
Initially, the priority will remain to bootstrap deep liquidity of these tokens against their native token and then further expand utility to other DeFi primitives.
PSTAKE incentives will be used from an earlier proposal passed by the PSTAKE governance to increase the adoption of pSTAKE in Cosmos.
pSTAKE Community Temperature Check
With these things in mind, I ask the pSTAKE community to share their thoughts on the above suggestions for the pSTAKE protocol to expand its liquid staking support to one of the leading ecosystems in Cosmos, Osmosis.
I request pStakers to share their feedback by answering the following questions:
- What do you think of expanding to Osmosis as the next stkToken?
- Does pSTAKE bring strong differentiators in a commoditized liquid staking market?
- Do you have any specific insights into the incentivization of stkOSMO?
Following the discussion, a signaling proposal to expand pSTAKE on Cosmos by onboarding Osmosis will be put up on the pSTAKE Snapshot, considering relevant inputs from community members.