Overview
An important aspect of Stride has always been the trading liquidity available for stTokens on DEXes throughout the Cosmos. This liquidity gives stToken holders the ability to instantly swap to the unstaked token whenever they want. Given the importance of this trading liquidity, forward guidance about future incentives has always been given, so that stToken holders and stToken liquidity providers are never surprised.
Building on that tradition, the Stride DAO, working in concert with the Stride Foundation, is pleased to present a 60 day program for incentivizing stToken trading liquidity. This blog post gives everyone transparency into what is going on, and gives reliable guidance about the future of stToken incentivization.
This program takes effect April 7th, on which date current incentives will change.
Past and future of stToken incentivization
Since the launch of the first stToken in early September 2022, stToken liquidity on DEXes throughout the Cosmos has been reliably incentivized. The need for incentives has increased as the number of stTokens has expanded. There are currently seven stTokens, most with at least one STRD-incentivized liquidity pool.
But instead of continuing to incentivize with just STRD, another option is now available. In February, Stride governance passed proposal 153, which directed the Stride Foundation to swap 3M STRD tokens earmarked to be distributed as incentives for 1.5M USDC. With that 1.5M USDC now available for liquidity incentives, the amount of STRD emitted can be reduced without significantly affecting stToken trading liquidity.
(For those curious about the 3M STRD that was swapped: as part of the deal the purchasers agreed to a vesting schedule, whereby the STRD won’t begin to vest until February of 2024. All details were disclosed before the swap took place, and can still be viewed on the Stride governance forum.)
The 60 day program
Here is a what the next 60 days of stToken incentives will look like, beginning April 7th:
***Regarding stEVMOS incentivization, there are currently incentives for an stEVMOS/EVMOS pair on Osmosis. However, in the coming weeks these incentives will switch to the new Forge DEX on Evmos, as specified in the above chart***
Details
There are many things to note about the above table.
First of all, currently about 27,000 STRD is emitted per day as incentives. But once this new incentive program takes effect on April 7th, that rate will fall to 7,100 STRD per day - a decrease of more than 70%.
Less than half the USDC in the incentive reserve will be expended in this 60 day period, meaning that the program could be renewed for an additional 60 days. It likely will be renewed.
If all USDC in the incentive reserve is expended, there’s a possibility of more STRD earmarked for incentives being swapped to USDC. This would be dependent on market conditions, and would require governance approval by STRD stakers.
The program calls for existing USDC in the incentive reserve not to be deployed as such, but rather to be swapped for various tokens which would then be deployed as incentives. This has numerous benefits, such as suppressing the fluctuation in pool APR as the pooled tokens change in value against the incentive token. Also, it makes sense for incentive tokens to be liquid staked, so that they always earn yield.
Astute readers will notice that incentives in dollar terms are being reduced for the stOSMO, stJUNO, and stSTARS pools. These three pools were recently transitioned from constant product to stableswap. Due to liquidity being used more efficiently, less incentives are now required to achieve the same level of slippage. From a trader’s perspective, these pools will offer roughly the same experience, even though liquidity will be lower.
To reiterate, this change will not be made until April 7th, giving all liquidity providers for stToken pools ample notice.
Final thoughts
Part of the appeal of Stride protocol’s liquid staked tokens is that they always have ample liquidity for trading. Holders of stTokens always have the option of instantly swapping to the unstaked token. This is possible because of liquidity incentives provided.
These incentives have always been provided, and will continue to do so for as long as necessary. Liquidity incentives have always been reliably provided, and proper forward guidance about future incentives has always been given.
Although the tokens used for incentivization are changing, holders of stTokens and stToken liquidity providers can have confidence that stToken liquidity will be supported indefinitely, and adequate guidance about future changes will always be given well in advance.
Whether or not this program will be renewed for an additional 60 days or somehow modified will be communicated well in advance of the end of the 60 day period.