The objective of this proposal is to list milkTIA on the Osmosis outpost of the Red Bank.
MilkyWay’s milkTIA is currently the only liquid staking derivative for Celestia’s TIA. As a liquid staking derivative, milkTIA allows users to effectively use a representation of TIA across DeFi without sacrificing the staking yield. Furthermore, this listing would allow users of the Red Bank on Osmosis to leverage stake TIA. With these factors in combination with the recent demand and popularity of TIA, we believe this listing will further promote organic usage of Mars.
In the sections below we’ll explore the risks associated with listing milkTIA and the proposed risk parameters for the listing.
The nascency of the contracts, as well as the lack of an active bug bounty increase the risks of listing milkTIA from a technical perspective. This risk could materialize in a number of ways and considerably impact milkTIA the asset, which could expose Mars to insolvency risk. Given this, the proposed risk parameters for the asset (listed below) are conservative. As more information about the technical riskiness of the asset is available, these parameters can be further relaxed.
|Time Since Launch
|MilkyWay was launched on December 18, 2023.
|Custom Public Audit
|MilkyWay was audited by Oak Security on December 12, 2023.
|The audit was performed within the last year.
|No Critical Vulnerabilities
|No critical vulnerabilities have been exploited.
|Bug Bounty Program
|There is currently no bug bounty active for MilkyWay.
The MilkyWay staking architecture looks as follows:
(ref. Staking – MilkyWay)
There are three points where centralization can arise from this architecture:
- Staking Contract on Osmosis: This contract receives TIA from users who want to liquid stake, mints milkTIA and sends TIA to the Staker Multisig on Celestia. This contract is controlled by a 5-of-7 multisig composed of 7 trusted operators: Everstake, Chorus One, Allnodes, 01node, DSRV, Keplr and Cosmostation.
- Staker Multisig on Celestia: This is a 5-of-7 multisig controlled by 7 trusted operators: Everstake, Chorus One, Allnodes, 01node, DSRV, Keplr and Cosmostation, who collectively secure $6.6 billion across different blockchains. It’s worth highlighting that this isn’t an active multisig. In fact, this multisig has only been used once, to grant the Grantee the ability to perform certain whitelisted actions with the TIA that’s transferred to the multisig. This is intentional, and the purpose is to allow the operators to keep the keys associated with the multisig in cold storage (as opposed to an actively used multisig that requires the use of “hot” keys, which are the significantly more easy to compromise).
- Grantee: As mentioned above, the Grantee can perform certain actions with the TIA that’s transferred to the multisig. These actions are very limited and only include staking to the MilkyWay validator set and unstaking from the validator set and sending the funds to Osmosis. The Grantee doesn’t have custody over user funds outside of this limited scope.
- Coordinator: Finally, The Coordinator is the daemon using the Grantee account to sign transactions. The Coordinator is currently run by the team.
We propose the use of a custom oracle for milkTIA that incorporates both the milkTIA redemption rate (RR) as well as milkTIA’s market price as follows:
milkTIA/USD = min(milkTIA/TIA TWAP, milkTIA/TIA RR) * TIA/USD
- milkTIA/TIA TWAP is the 30 minute arithmetic mean TWAP from the milkTIA/TIA Supercharged Liquidity pool on Osmosis (pool 1335).
- milkTIA/TIA RR is the redemption rate of milkTIA according to the MilkyWay contract deployed on Osmosis.
- TIA/USD is the Pyth provided feed, used to normalize the price to USD.
This implementation achieves the following:
- It is intended to be robust to upwards price manipulation attempts since the price should always have a ceiling that is determined by the redemption rate. As such, even if the TWAP is manipulated, an attacker should not be able to reflect that into the price Mars uses.
- While downward price manipulation can still happen, it is mitigated by two factors. First, by using an arithmetic mean TWAP, which is more robust to downwards price manipulation attacks than a geometric mean TWAP. Second, given that milkTIA won’t be borrowable, the scope of possible downwards price manipulation exploits is reduced to attacks that artificially decrease the price to make a certain position liquidatable. While this can happen, we believe it’s unlikely because: 1) the potential profits are lower than a pure price manipulation attack to steal assets (especially with Mars’s new auction-based liquidation mechanism); and 2) the risk is higher given that the attacker cannot guarantee that he’ll be the one performing the liquidation.
- It allows MilkyWay to aggregate liquidity in more efficient pool types (Supercharged Liquidity instead of XYK) where TWAP-based oracles by themselves (without the redemption rate) would not be robust.
Risk Parameters Suggestion
Following the methodology suggested by the Mars Risk Framework, we propose the following parameters:
- Max. LTV: 48.5%
- Liquidation LTV: 50%
- Deposit Cap: 50,000 milkTIA
- Interest Rate Parameters:
- Optimal Utilization: 60%
- Base IR: 0%
- Slope 1: 15%
- Slope 2: 300%
- Liquidation Parameters:
- Starting LB: 0
- Slope: 1
- Max. LB: 0.2
- Min. LB: 0.05
- Target Health Factor: 1.05
- Protocol Liquidation Fee: 0.25
- Reserve Factor: 10%
- Usable as collateral? Yes.
- Available to borrow? No.
This is a signaling proposal, not an executable proposal.
The Mars smart contracts on the Osmosis 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 and related rights waived via CC0.
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 INJ 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 Osmosis/OSMO, Celestia/TIA and milkTIA. 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.