Summary
The objective of this proposal is to list stkATOM as a collateral asset on the Neutron outpost of the Red Bank.
Motivation
stkATOM is a liquid staking derivative for ATOM. This allows users to effectively use a representation of ATOM across DeFi without sacrificing the staking yield. Furthermore, this listing would allow users of the Red Bank on Neutron to leverage stake ATOM. By listing stkATOM and allowing it to be used as collateral, we believe that it would generate considerable organic demand for the Red Bank.
Risks
In the sections below we’ll explore the risks associated with listing stkATOM and the proposed risk parameters for the listing.
Technical Risk
| Metric | Requirements | Comments |
|---|---|---|
| Time Since Launch | - | stkATOM was originally launched on Ethereum on July 13, 2021. stkATOM was migrated to Persistence Core-1 in January 2023. |
| Custom Public Audit | Ideal | pSTAKE Finance was audited by Oak Security on February 17, 2023. |
| Recent Audit | Ideal | The audit was performed within the last year. |
| No Critical Vulnerabilities | Ideal | No critical vulnerabilities have been exploited. |
| Bug Bounty Program | Ideal | pSTAKE Finance has a live bug bounty on Immunefi of up to $100K, depending on the issue’s severity. |
Centralization Risk
pSTAKE Finance has admin functionality that can do three functions:
- create-host-chain (add a new chain for liquid staking)
- update-host-chain (modify validators, fees, code parameters, and active/deactivate host chain)
- update-module-params (update exchange rate safety limit, admin address, fee address)
The admin addresses do not have access to funds and all admin functionality can be achieved through on-chain governance.
Oracle Risk
We propose to use the following methodology to price stkATOM:
stkATOM/USD = stkATOM/ATOM (TWAP) * ATOM/USD (Pyth)
Where:
- stkATOM/ATOM is the 30 minute geometric mean TWAP taken from the stkATOM/ATOM PCL pool on Astroport.
- ATOM/USD is the standard Pyth price feed for ATOM.
There are several risks worth highlighting with this implementation:
-
Smart contract risk stemming from the Astroport TWAP functionality. If there was a bug in Astroport’s TWAP implementation, Mars could be exposed to faulty prices and potentially bad debt.
-
Reporting risk stemming from Pyth. If Pyth reported bad prices, Mars could be exposed to insolvency. However, Mars has implemented several Pyth-related circuit breakers that should mitigate the materialization of this risk.
-
TWAP Price Manipulation. While Mars will always be exposed to this risk, it is mitigated by:
3.1. There’s currently ~$4M in liquidity in the stkATOM/ATOM PCL pool on Astroport, from where the price of stkATOM will be retrieved. We believe this level of liquidity, coupled with the proposed LTV, offers an acceptable level of manipulation resistance for the feed.
3.2. The deposit cap both reduces the size of a potential attack and mitigates an attacker being able to amass a significant synthetic stkATOM position by looping the asset multiple times (see here for an example of the attack).
3.3. Given that stkATOM won’t be borrowable, the attack vector where the price is artificially reduced wouldn’t be possible.
For the above reasons, we believe the proposed oracle implementation for stkATOM is robust.
Risk Parameters Suggestion
- Max. LTV: 44.5%
- Liquidation LTV: 45%
- Liquidation Bonus: 15%
- Deposit Cap: 25,000 stkATOM
- Borrow Cap: 0 stkATOM (not borrowable)
- Interest Rate Parameters:
- Optimal Utilization: 60%
- Base IR: 0%
- Slope 1: 15%
- Slope 2: 300%
- Usable as collateral? Yes
- Available to borrow? No
Implementation
This is a signaling proposal, not an executable proposal.
The Mars smart contracts on the Neutron chain are currently controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary parameter changes.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Delphi Labs Ltd., a British Virgin Islands limited company. Delphi Labs engages in incubation, investment, research and development relevant to multiple ecosystems and protocols, including the Mars Protocol. Delphi Labs and certain of its service providers and equity holders own MARS tokens and have financial interests related to this proposal. Additionally, Delphi Labs is one of several entities associated with one another under the “Delphi Digital” brand. Delphi Digital’s associated entities and/or equityholders or service providers of such entities may hold MARS and may have financial interests related to this proposal. All such entities, service providers, equity holders and other related persons may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Neutron/NTRN, stkATOM and pSTAKE/PSTAKE. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Delphi Labs may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Delphi Labs is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Delphi Labs shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.