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Ride The Cosmos: Priming IST
Since the announcement of the Inter Protocol whitepaper at Consensus 2022, interest in the Inter Stable Token (IST) across Cosmos has been growing. With dYdX’s recent announcement to launch a Cosmos zone and bridges like Axelar scaling their support for assets, the time to bring IST to Cosmos is here. During our last Community Call, we shared plans to launch IST in Q4 2022. Today, we’re diving into everything you'll need to #RideTheCosmos.
Ride Mechanics
At launch, IST will be made available using Inter Protocol’s first minting mechanism, the Parity Stability Module (PSM). The PSM will enable users to mint IST using other stable tokens in the ecosystem like USDC, which have been brought to Cosmos using bridges such as Axelar and Gravity. Each combination of underlying stable token, bridge, and IBC route has different availability, costs, and risks, and thus each combination must be managed individually.
Minted IST will therefore be backed by a portfolio of external stable tokens controlled by granular minting limits that protect the protocol against the failure of a single bridge or asset. IST combines Cosmos stable token liquidity into a single, fungible, risk-weighted asset.
Here’s a diagram showing how it works:
Minting Limits Explained
The minting limit set for each PSM contract will cap the amount of IST that can be minted for the reference stable token. For example, in the diagram above, a maximum of 8.5M IST can be in circulation, where no more than $500K is minted in exchange for USDT over the Gravity bridge. These limits will be set by an Economic Committee (EC), which was recently voted in by stakers of the Agoric BLD token (BLDer DAO). The EC helps to maintain the integrity of the protocol by driving economic strategy, managing risk parameters, evaluating new collateral types, monitoring operations, and responding to process improvement proposals.
For additional information and discussions about the Economic Committee, see the forum post proposing establishing an EC. Several EC processes and operations will be further defined by the BLDer DAO and future governance proposals as Inter Protocol continues to grow.
Value to/from Agoric
In a recent announcement, Agoric introduced 5 additional dapps across a variety of DeFi primitives building towards the launch of the Agoric mainnet. For Inter Protocol, building on Agoric was an easy choice given that their familiar, Hardened JavaScript smart contract platform allows Inter Protocol to be modular and upgradable. This means fast reaction times to changing market conditions, which is necessary for a stable token. Plus, in the near future, BLD stakers will earn IST fees in exchange for supporting the system as Inter Protocol grows throughout Cosmos — a win-win for everyone involved.
Next Steps
After the launch of IST, Agoric and the Inter Protocol launch team will evaluate system performance and respond to any issues. The next phase to launch will likely consist of the Protocol Reserve and the Automated Market Maker (AMM). The AMM will focus on IST pairs with other top Cosmos assets (e.g. ATOM) and will give users a place to swap and arbitrage tokens.
Once the AMM shows sufficient liquidity, additional minting mechanisms like the Vault and its companion liquidation system will launch, which will bring Inter Protocol to a fully collateralized state and allow holders of Cosmos IBC ecosystem tokens to mint IST as debt positions.
Get Involved
Inter Protocol is moving fast and looking for community members like yourself to bring us to the next level. Here’s how you can get involved.
Zones: Bring IST to your Cosmos zone to support a decentralized, Cosmos-native medium of exchange.
Community: Evaluate, test, and support our Economic Committee and like-minded Inter Protocol community members.
Developers: Get involved in the evolution of Inter Protocol as it moves to over-collateralized vaults and cross-chain execution
Arbitrageurs: Earn profits keeping the IST peg tight by capitalizing on price differentials and using the Agoric PSM for guaranteed 1:1 pricing. Prepare for vault liquidations!
For all the above, you can join our Discord community to chat. You can also follow us on Twitter for the most up-to-date announcements.
Thanks for reading!