Mint IST with new stATOM Vaults!

October 24 ,2023

It’s official, it's time to Stake ‘N’ Mint! 

After weeks of testing and development, and lots of anticipation from the community, we’re delighted to announce Prop #55 passed with 99.62% YES, and stATOM is officially coming to Inter Protocol as the 2nd collateral asset for IST Vaults. 

IST Vaults

Earlier this year Vaults launched as the second minting mechanism for IST, following the initial release of the Parity Stability Module (PSM). Vaults launched with ATOM as the primary collateral asset to begin with, chosen for its security, resilience and large and stable market cap.

Shortly after launch the Economic Committee voted to enable the community to propose any new collateral assets they would like to see used to mint IST. The resounding first choice was of course, stATOM from Stride.

But why was there such anticipation for a liquid staked derivative of ATOM to be used, and why stATOM from Stride in particular?

Liquid Staked ATOM

Much of ATOM is locked up and unavailable for use across Cosmos DeFi today. While this is great for providing security to the network and has led to ATOM being one of the most decentralized assets in the industry, it has stifled the growth of DeFi across Cosmos as a consequence. Today 66% of ATOM is locked up and staked to the network.  

Liquid staking, which is the ability to lock your assets (in this case ATOM) for a derivative staked version of equivalent value, is a much more capital efficient method. It allows users to continue securing the network whilst simultaneously providing liquidity to the ecosystem.

Throughout DeFi, it is becoming very popular to back decentralized stable tokens with LSTs. This is because using unstaked tokens forces users to effectively forfeit their staking rewards. The increased capital efficiency of LSTs becomes very attractive for the typical user of DeFi protocols.

But why is only a small proportion of ATOM today liquid staked then? One of the biggest barriers to adoption until now has been that users needed to wait 21 days to unbond their ATOM before they could deposit into a liquid staking protocol. 21 days of lost rewards is highly inefficient and unattractive to many holders.

However, now with the passing of Proposal 790, and the introduction of the Liquid Staking Module (LSM) in September this year, users no longer need to wait 21 days to unbond. They can instantly ‘liquify’ their already staked ATOM and use it instantaneously in Cosmos DeFi, without sacrificing Staking APR. Stride integrated this functionality immediately upon launch, and is expected to drive further significant growth for the stATOM.

Stride ⇏ Cosmos

So it’s clear why staked derivatives make sense as a collateral asset, but why Stride and stATOM in particular? 

Stride is the market leading liquid staking derivatives protocol on Cosmos today, having unlocked $35m of liquidity for Cosmos DeFi since its inception.

What’s more, this year Stride's application to join the ATOM Economic Zone (AEZ) and adopt interchain security (ICS) was overwhelmingly approved by Cosmos Hub governance which led Stride to become only the 2nd ICS chain in history. 

From July 2023 Stride has been providing shared revenue and more economic stability to the Hub as a result. As of today a percentage of the Hubs revenue comes directly from Stride. This is in spite of the fact only 1.1% of ATOM is actually currently liquid staked, equivalent to $4.4m. When compared to $18bn currently liquid staked on Ethereum, the opportunity for scale is clear.

stATOM is the most liquid, most ubiquitous LST across Cosmos zones today, with 85% market share of LSTs. It drives direct revenue back to the CosmosHub and by proxy the ATOM token itself so it’s no surprise to see it selected as an obvious choice for Inter Protocol. 

What’s next?

In August this year the proposal to onboard stATOM as collateral was put forward by the Stride team and having now passed with an overwhelming majority from the community, has been set in motion and is live and available for anybody to trade.

This is just the beginning of the continued progress of Inter Protocol to enable more collateral types to mint IST. We continue to welcome more projects to put forward ideas, and if you’d like to start a discussion about what you think should be the next, head over to our community forum and get a new discussion started today.

You can use this handy guide on how to make an on-chain proposal to add a new collateral type.

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