Cosmos votes on liquid staking plan in bid to boost DeFi

LSM may soon remove the 21-day unbonding period of 25% of all ATOM tokens

article-image

WindAwake/Shutterstock modified by Blockworks

share

The Cosmos Hub is voting on a major software upgrade proposal to replace existing staking, distribution and slashing modules with the Liquid Staking Module (LSM).

The vote, which began on Aug. 25, will run until Sept. 8. At the time of writing, 99.8% of participants have voted in favor of the new upgrade, though the proposal has not yet achieved quorum. 

Enabling the LSM is a significant development for network liquidity and unlocking millions of dollars worth of ATOM tokens. These funds could then be used to fund DeFi activities across the various chains that comprise the Cosmos ecosystem. 

Like on any other proof of stake network, Cosmos Hub validators must lock in their own “stake” to the network before participating in network activities. This unbonding period on the Cosmos Hub lasts 21 days and is used to prevent mass withdrawal of funds.

If the LSM proposal passes, 25% of staked ATOM can be used immediately, Blockworks research analyst David Rodriguez said. 

“Essentially, 25% of staked capital will be unlocked and can be immediately liquid staked to any provider ATOM stakers want to use,” Rodriguez said. 

An additional security measure — known as a “validator bond” — will also be introduced with LSM. This means that each validator must bond 1 ATOM to receive up to 250 ATOM tokens from liquid staking delegates. The more ATOM tokens a validator self-bonds, the more likely they are to receive delegated tokens.

Riley Edmunds, co-founder of Stride Labs — the team behind liquid staking network Stride — notes that the LSM model will be a safety framework for liquid staking across the Cosmos Hub.

Loading Tweet..

“It’s a safety framework that regulates the adoption of liquid staking by preventing providers from controlling over one-third of total stake and safeguarding against the risk of validator corruption,” Edmunds said. “All the LSM’s settings are controlled by Cosmos Hub governance.”

With these necessary features in place, Edmunds notes that the cost of liquid staking will be radically reduced.

“It lets users instantly convert staked ATOM into liquid staked ATOM instantly. Previously, users who were already staked had to unbond and wait three weeks before they could liquid stake,” he said. “With LSM, these same users will be able to instantly liquid stake. A few mouse clicks on app.stride.zone will convert their staked ATOM to stATOM.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.

article-image

If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale

article-image

Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference

article-image

Meanwhile, stocks rally after Jerome Powell finishes his Capitol Hill tour

article-image

Plus, Blinks have reshaped many people’s understanding of what blockchains are capable of

article-image

Franklin Templeton has the lowest intended ETH fund fee so far, though a similar advantage did not help it win the race for bitcoin ETF assets

article-image

It’s now time for the entire Bitcoin community to recognize that Satoshi’s design transcends the confines of a single chain