Summary
The objective of this proposal is to increase the cap of the following asset on the Osmosis outpost as follows:
- stTIA from 50,000 to 100,000 stTIA.
Motivation
stTIA was recently onboarded to Mars. Utilization remains low, as stTIA deposits on Mars are not yet eligible for Stride’s ongoing stTIA airdrop. However, Mars stTIA deposits on Osmosis are expected to soon be whitelisted for the airdrop. When this happens, it will present a golden opportunity for Mars users to loop TIA and stTIA to maximize airdrop yield.
In recent months, Pendle, Gearbox, Silo, and other DeFi apps in the Ethereum ecosystem have seen increased usage and fees from users employing various looping strategies to maximize airdrop yields. Once stTIA deposits on Mars are whitelisted, Mars protocol could similarly benefit.
As of today, the stTIA airdrop will last another 88 days, with 22,222 STRD being allocated to eligible stTIA holders daily. Currently, airdrop yield for stTIA is roughly ~50% APR, in addition to TIA’s normal staking yield and potential other airdrops.
Given Mars’ risk methodology, stTIA liquidity levels on Osmosis DEX are sufficient to support a Mars deposit cap of 100K stTIA. And although DEXes on other chains are outside the purview of Mars’ risk framework, it bares mentioning that in addition to the ~$4M of liquidity in stTIA pools on Osmosis there is an additional ~$5M of liquidity in stTIA pools across Neutron and Dymension. Through arbitrage, this liquidity effectively helps support the price of stTIA on Osmosis.
Risks
The deposit caps serve two main purposes:
- They limit the exposure to any single token. This is important to mitigate idiosyncratic risks specific to any particular token and to mitigate liquidity risk, which may impede proper functioning of the liquidations system and could ultimately lead to bad debt.
- They mitigate looping attacks in which attackers are able to generate artificially large positions of certain tokens with the purpose of subsequently manipulating their price and effectively stealing assets from the protocol.
As the caps increase, so do the risks explored above. At the end of the day, a right level of the caps should strike the right balance between risk aversion and protocol usefulness. In this sense, we believe that while the proposed caps do increase risk for the protocol, it is still conservative given the liquidity levels of the assets.
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.
Disclaimer
I am a contributor to Stride protocol.