Let’s talk about the Cosmos Liquidity Staking Module (LSM) that will be launched recently.

Author: web3crypto.eth, Source: Author Twitter @alexwanng

Let’s focus on the Cosmos Liquidity Staking Module (LSM) that will be launched recently:

First of all, LSM is not intended to replace third-party liquid staking protocols.

On the contrary, it is to unlock the pledged ATOM for third-party protocols. The current protocols that support LSM are mainly @stride_zone and @PersistenceOne, which is theoretically beneficial to these two protocols.

Secondly, what is the most direct value of LSM?

As the name suggests, it must release liquidity. There are many places where ATOM liquidity is needed in the Cosmos ecosystem, especially various DeFi or derivatives platforms.

Therefore, the LP and TVL of each DEX will be enriched, and the ecology of lending, stablecoins, etc. will be easy to develop, which can be understood as the central bank releasing water into the river.

Of course, this liquidity is ultimately not reflected by atoms, but by Mint alternatives like stAtom. For example, there are many protocols, and even ecosystems outside of Cosmos will see the inflow of stAtom, which is an indirect benefit of providing liquidity.

Finally, there is an additional value that there are certain restrictions on the liquidity of ATOM, that is, there cannot be unlimited Mint, so you can also understand the M in LSM as Management (currently Module).

Therefore, the direct value brought by LSM is firstly the promotion and prosperity of the liquidity of internal applications in the ecosystem, secondly the increased opportunities for atoms to flow into heterogeneous chains, and the standardized and unified management of atoms.

Third, some people are worried that LSM’s support for unlocking pledged atoms will lead to a serious drop in the pledge rate?

Theoretically not. After all, stAtoms and atoms are minted according to a certain ratio. That is, when a stAtom comes out, your atoms are actually pledged, but they are transferred to a liquidity service provider to be pledged, but it is still the Cosmos Hub network.

Therefore, in theory, the decline in the pledge rate is not directly related to LSM. Only the way in which users actively unlock their own atoms is the direct factor.

Fourth, will the release of large liquidity by atoms lead to large sales and a price drop?

There is indeed such a sentiment in the push. After all, it originally took 21 days to unlock, which was largely a measure to reduce selling. But now it can be unlocked at any time, which essentially means that you can exit at any time.

Therefore, in theory it is more convenient to sell. The disadvantage is that the price may not be very good, but the advantage is that the market can reflect the true price of the subject matter faster.

Fifth, the basic operation method of Stride is explained.

Stride's method before accessing LSM was very simple, that is, you deposit it with spot ATOM, and then mint stAtom for you.

After connecting to LSM, if you understand it simply, you can understand it as making a redelegate for Stride, so that you don't need to spot it, but directly use your own mortgaged atoms, and then also give you mint stAtom. Of course, the difference is, You cannot unstake directly, but you must return the statom before you can unstake. (This is a loose analogy, and the technical details have not been confirmed)

In addition, after obtaining stAtom, you do not need to claim your own income. In fact, the way it obtains income is a dynamic and current ratio with Atom. For example, you initially use an atom to obtain 1 stAtom, and you exchange it back after a while. It may be to exchange for 1.1 atoms.

Finally, are you optimistic about the launch of LSM?

! [LSM] (https://img-cdn.gateio.im/resized-social/moments-40baef27dd-744e5b524c-dd1a6f-6d2ef1)

Someone asked what exactly LSM is "managing". Let me add here. Simply put, it limits the total number of ATOMs that can be mortgaged, and also imposes requirements on participating validators, as follows:

LSM will limit all liquid staking providers, with an upper limit of 25% of the total staking, which means the estimated maximum ATOM value is approximately more than 50 million ATOM.

This value is considered based on preventing the total proportion of liquid staking providers from exceeding one third.

Once the limit is reached, LSM will prevent cross-chain accounts from staking more ATOM.

An additional security requirement for validators: the validator himself needs to pledge a certain amount of ATOM (called validator pledge), in order to strengthen the "interest correlation".

The maximum amount that a validator can receive from the provider is the amount of the validator's own pledge X 250 (250 is the initial pledge factor, which can be adjusted by governance).