Summary
The objective of this proposal is to list stTIA on the Osmosis and Neutron outposts of the Red Bank.
Motivation
We believe this is an ideal asset to be used as collateral and could generate considerable organic demand for the Red Bank on Osmosis. As a liquid staking derivative, stTIA allows users to effectively use a representation of TIA across DeFi without sacrificing the staking yield. As such, this removes the current cost of opportunity of using TIA across DeFi and could catalyze more organic usage for the Red Bank.
Furthermore, this listing would allow users of the Red Bank on Osmosis to leverage stake TIA, a popular strategy we’ve already seen gain significant traction with stATOM-ATOM and stOSMO-OSMO. This further strengthens our conviction that this listing has the potential to further increase activity within the Red Bank on Osmosis.
Risks
In the sections below we’ll explore the risks associated with listing stTIA and the proposed risk parameters for the listing.
Technical Risk
In terms of technical risk, the asset meets the minimum requirements suggested by the Mars risk framework:
| Metric | Requirements | Comments |
|---|---|---|
| Time Since Launch | - | stTIA launched fairly recently, on February 1, 2024. |
| Custom Public Audit | Ideal | Stride has been independently audited by CertiK, Oak, and Informal Systems. The specific stTIA implementation was also audited by Informal Systems. |
| Recent Audit | - | The audits happened in September of 2022. |
| No Critical Vulnerabilities | Ideal | No critical vulnerabilities have been exploited. |
| Bug Bounty Program | Ideal | Stride has a live bug bounty that pays up to $1M USD. |
Centralization Risk
stTIA works differently from all other Stride LSDs. Specifically, while all other Stride LSDs use ICAs to stake/unstake on the native chains of the underlying assets, this isn’t possible with TIA, as Celestia currently doesn’t support ICAs. Given this, Stride uses a 5/7 multisig on Celestia to stake/unstake TIA on that chain. This multisig is composed of the following Cosmos validators: Imperator, Polkachu, Staking Facilities, Stakecito, Strangelove, Lavender, FiveEnigma.
While the above scheme is temporary, as Stride intends to migrate to using an ICA once it’s available, it clearly poses some centralization risks. Specifically, if the wallets of the members that compose the multisig were to be compromised, the underlying funds could be at risk. In turn, this might lead to high volatility and drastic repricings of the token, which could expose the Red Bank to bad debt.
Oracle Risk
We propose the use of a custom oracle for stTIA that incorporates both the Stride redemption rate (RR) as well as stTIA’s market price as follows:
stTIA/USD = min(stTIA/TIA TWAP, stTIA/TIA RR) * TIA/USD
Where:
-
On Osmosis, stTIA/TIA TWAP is the 30 minute arithmetic mean TWAP from the stTIA/TIA Supercharged Liquidity Pool on Osmosis (pool #1428).
-
On Neutron, stTIA/TIA TWAP is the 30 minute arithmetic mean TWAP from the stTIA/TIA Astroport PCL Pool on Neutron.
-
stTIA/TIA RR is the redemption rate of stTIA according to the Stride contract deployed on each chain.
-
TIA/USD is the Pyth provided feed, used to normalize the price to USD.
This implementation achieves the following:
- It is robust to upwards price manipulation attempts since the price will always have a ceiling that is determined by the redemption rate. As such, even if the TWAP is manipulated, an attacker is not going to 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 stTIA 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 Stride to aggregate liquidity in more efficient pool types (Stableswap or Supercharged Liquidity instead of XYK) where TWAP-based oracles by themselves (without the redemption rate) would not be robust.
Implementation details
To implement the liquid staking derivative (LSD) price source type for Neutron, we’ll need to add a new price source (implementation is similar to Osmosis but use TWAP from Astroport).
#[cw_serde]
pub enum WasmPriceSource<A> {
// Other variants...
/// Liquid Staking Derivatives (LSD) price quoted in USD based on data from Pyth, Astroport, and Redemption Rate provider (e.g. Stride).
Lsd {
/// Transitive denom for which we query price in USD. It refers to 'Asset' in the equation:
/// stAsset/USD = stAsset/Asset * Asset/USD
transitive_denom: String,
/// Params to query TWAP price
twap: AstroportTwap<A>,
/// Params to query redemption rate
redemption_rate: RedemptionRate<A>,
},
}
/// Parameters to query TWAP price from Astroport
pub struct AstroportTwap<A> {
/// Address of the Astroport pair
pub pair_address: A,
/// The size of the sliding TWAP window in seconds.
pub window_size: u64,
/// The tolerance in seconds for the sliding TWAP window.
pub tolerance: u64,
}
/// Parameters to query redemption rate
pub struct RedemptionRate<T> {
/// Contract address of the redemption rate provider
pub contract_addr: T,
/// The maximum number of seconds since the last price was provided by an oracle, before rejecting the price as too stale
pub max_staleness: u64,
}
Risk Parameters Suggestion
Osmosis:
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 stTIA
- Interest Rate Parameters:
- Optimal Utilization: 60%
- Base IR: 0%
- Slope 1: 10%
- 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
Neutron:
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 stTIA
- Interest Rate Parameters:
- Optimal Utilization: 60%
- Base IR: 0%
- Slope 1: 10%
- Slope 2: 300%
- Liquidation Bonus: 10%
- Reserve Factor: 10%
- Usable as collateral? Yes
- Available to borrow? No
Implementation
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
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Mars Protocol Foundation, a Cayman Islands foundation company. Mars Protocol Foundation engages in research and development of the Mars Protocol. Mars Protocol Foundation and certain of its service providers and managers own MARS tokens and have financial interests related to this proposal. The aforementioned persons or their affiliates may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Neutron/NTRN, Osmosis/OSMO. 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. Mars Protocol Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Mars Protocol Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Mars Protocol Foundation 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.