Summary
Moreso than any other, the crypto industry is subject to wild swings in sentiment - from mind-boggling euphoria in the bull market to terrifying distress in the bear market. This is a regular fact of life in the crypto industry.
Stride protocol was launched in September of 2022, which happened to be during a bear market. Market sentiment continued to deteriorate during the first year of Stride’s existence, posing hard challenges to the growth of Stride protocol. While these conditions were not ideal, Stride protocol has nonetheless grown into an essential pillar of Cosmos DeFi.
Currently, Stride protocol total-valued-locked (TVL) stands at an all-time-high of $55,000,000. In the Cosmos liquid staked token (LST) market segment, Stride enjoys a market share of over 85% for ATOM - and over 95% for INJ, OSMO, EVMOS, and JUNO. With upcoming liquid staking support for new Cosmos tokens, such as DYDX and TIA, Stride protocol is poised to significantly expand its presence in the Cosmos ecosystem.
Notably, Stride protocol has been monetized since February of 2023. Currently, 8.5% of staking rewards of all liquid staked tokens are diverted to staked STRD. Additionally, 1.5% is diverted to staked ATOM, as the Stride chain is secured by Cosmos Hub’s interchain security. In total, diverted staking rewards currently stand at over $1,000,000 annualized.
While bear market sentiment caused headwinds, in the last year Stride protocol has consolidated a strong foundation for liquid staking in the Cosmos ecosystem. As sentiment begins to shift and a new bull market may be forming, Stride is very well positioned to build on its strong foundation and experience explosive growth in 2024.
Positioning
In its first year, Stride protocol has become the clear liquid staking market leader for the Cosmos ecosystem. Combining the major Cosmos tokens ATOM, INJ, OSMO, EVMOS, and JUNO - Stride has roughly 90% liquid staking market share.
Stride protocol enjoys this strong position due to its close alignment with Cosmos chains. Business development efforts and technical efforts have created these major synergies:
• Stride chain receives interchain security from Cosmos Hub. Cosmos Hub has also deployed $3.6M worth of ATOM to an stATOM liquidity pool. Stride protocol diverts 1.5% of liquid staked token staking rewards to staked ATOM.
• Osmosis deployed $11M worth of OSMO to an stOSMO liquidity pool. Stride protocol deploys significant STRD incentives on Osmosis.
• Evmos deployed roughly $300K to an stEVMOS liquidity pool. Stride protocol deploys some STRD incentives on Evmos.
• Juno deployed $1.65M worth of JUNO to an stJUNO liquidity pool.
In addition to alignment with major Cosmos chains, Stride LSTs have significant traction on many of the leading Cosmos DeFi apps. Indeed, Stride LSTs - especially stATOM - represent by far the largest form of collateral currently being used to collateralize different forms of debt across the Cosmos.
Here’s a brief summary of the dollar value of Stride LSTs currently serving as collateral on various Cosmos leverage applications:
• $6.5M on Umee
• $3M on Shade Protocol
• $1.5M on Kujira
• $1M on Mars
• $0.275K on Inter Protocol
Stride protocol’s high market share, alignment with many Cosmos chains, and many DeFi integrations give it a significant advantage. As liquid staking grows in popularity on these chains, most users will liquid stake with Stride. As Stride expands to other major Cosmos chains, such as dYdX, Celestia, Namada, Penumbra, etc. - it is likely that similar efforts can be undertaken to create alignment, building on Stride’s success with its existing host-chains.
Specifically, the dYdX (DYDX) and Celestia (TIA) chains present a huge new opportunity for Stride liquid staking. When trading begins on the new dYdX Cosmos chain, the DYDX staking token will begin earning staking rewards in USDC. This creates the opportunity for Stride protocol to launch an LST for DYDX that would automatically reinvest the USDC into DYDX, thereby auto-compounding staking rewards, similar to the way stATOM works. This significant UX improvement could lead to large amounts of inflows for a potential stDYDX.
Similarly, a potential Stride LST for TIA could also create huge new demand for liquid staking. Celestia is working to create an ecosystem of modular blockchains, within which the TIA token would be central. Given the impressive technical and business talents of Celestia contributors, as well as its large treasury - there’s a good chance Celestia will realize its vision of a modular ecosystem. In such a world, a liquid staked version of TIA would be crucial, allowing users to use TIA onchain throughout the modular ecosystem without forfeiting staking rewards. A potential stTIA built with the support of Celestia contributors and the Celestia community could serve the Celestia ecosystem greatly. With its trusted brand, network effects, and experienced contributors, Stride protocol is the most probable candidate to build such as LST for TIA.
Market size
The total addressable market for Stride is massive.
Currently, only ~1.5% of all staked ATOM is liquid staked. This figure is roughly accurate for OSMO and INJ as well. And on DYDX, TIA, NAM, etc. - liquid staking has yet to launch; they’re green field opportunities.
Doing some rough math, the combined market cap of ATOM, OSMO, INJ, DYDX, and TIA is $5B. Assuming growth in a bull market and factoring in unlocks, the combined market cap of these tokens could easily reach $100B over the next year.
Assuming just 10% of this $100B combined market cap is liquid staked through Stride, that would give Stride a TVL of $2B. And assuming an average staking reward rate of 10% APR, the amount of staking rewards diverted by Stride protocol would amount to $100M annualized.
And this very rough $100M annualized reward projection only accounts for ATOM, OSMO, INJ, DYDX, and TIA. Realistically, in a year’s time Stride protocol will likely support liquid staking for 20 different Cosmos chains.
New features
Recently deployed and upcoming features are also helping to enable the growth of Stride protocol.
In September of 2023, Cosmos Hub launched its liquid staking module feature (LSM), which made it possible for staked ATOM to be instantly liquid staked. Stride protocol immediately integrated with the Hub’s LSM at launch, and has since received over 90% of liquid staked ATOM originating from the LSM.
Stride’s support for the Hub’s LSM makes Stride protocol a critical utility for the Cosmos Hub. Efforts are currently underway to install the LSM on other chains, which would similarly improve the liquid staking user experience and increase liquid staking adoption.
Another exciting new aspect of Stride protocol liquid staking is the increasing use of LSTs as collateral for perpetual futures DEXes. Normally, perps are collateralized with stablecoins. But beginning with Levana on Osmosis, Stride’s stATOM is being used to collateralize perps. Considering the growth of DeFi perps and the large capital requirements for collateralization, utilizing LSTs as collateral presents a massive new avenue for growth.
Finally, in 2024 there’s a strong probability of Stride LSTs being exported widely across the entire onchain crypto space. With the Cosmos ecosystem already saturated with DeFi integrations for Stride LSTs, areas outside of Cosmos are the next logical step. For example, it would make sense for LSTs of well-known tokens across crypto - such as ATOM, DYDX, and TIA - to be available as collateral on leverage applications across Ethereum, Solana, and Avalanche. As barriers and distinctions between crypto ecosystems are broken down through better bridging and modularity, Stride LSTs stand to find many new use cases across crypto.
Distribution
With Stride protocol having achieved the status as largest LST provider for the Cosmos ecosystem, Stride Labs has recently worked to facilitate custody support for several of Stride protocol’s LSTs. This would allow institutions to hold Stride LSTs, dramatically expanding the scope of entities willing to liquid stake Cosmos tokens.
Lastly, with a strong foundation in the Cosmos ecosystem and now that signs of positive sentiment are beginning to show, it increasingly makes sense to advertise and promote Stride protocol more widely. In 2024, increasing the awareness of Stride protocol will be a major priority.
Should Stride Merge with Cosmos Hub?
No.
At Cosmoverse 2023, a Stride core contributor introduced the idea to convert the entire STRD supply to ATOM, giving Cosmos Hub full control of Stride protocol. This was clearly identified not as a plan or a roadmap, but rather as an idea for the Stride and Cosmos Hub communities to discuss. And after several weeks of intense public discourse in a decentralized and transparent fashion, it has become clear that the idea is not feasible.
Being receptive and attentive to community feedback, Stride core contributors are no longer interested in this merger idea. They do not anticipate the merger idea being implemented now or at any point in the future. While Stride chain is decentralized and Stride governance may do whatever it wishes, Stride core contributors are done with the merger idea.
Final thoughts
Stride protocol is the child of a bear market. Launched in September of 2022, Stride protocol has experienced adversity for its entire existence. But that adversity forced the protocol to create real utility, real rewards, and a real community.
But as sentiment shows small signs of shifting, Stride protocol is poised to use its solid foundation in the Cosmos as a launch platform to boost off into the stratosphere. Stride’s dominant position as the main liquid staking provider for ATOM, INJ, OSMO, JUNO, and EVMOS means it will likely continue to benefit from increased liquid staking adoption. And major new Cosmos tokens, such as DYDX and TIA, present huge new areas of immediate growth.
While no one can predict the future, one thing is certain: the crypto industry will continue to be characterized by extreme booms and busts. Having been born in a bear market, Stride protocol has developed a solid foundation for success - so that whenever the next bull market materializes, Stride is well positioned to experience explosive growth.