There are already a few liquid staking providers: Stride, Quicksilver, and Persistence being the main ones. When it comes to the Cosmos Hub, all of them benefit from the Liquidity Staking Module developed by Iqlusion. Indeed, this module that is deployed on the Cosmos Hub allows to move staked ATOMs from one wallet to another, and this includes to these liquid staking providers.
Thanks to this module, you can convert your staked ATOM into Stride’s stATOM, Quicksilver’s qATOM, or Persistence’s stkATOM, without going through a first unbonding period.
However, these projects do not allow you to move the other way around: converting stATOM, qATOM, or stkATOM into staked ATOM. They are capturing stake, and not releasing it. If you want to swap your staked ATOM into liquid ATOM, you need to first go through one of these liquid staking tokens then swap for ATOM on a DEX such as Osmosis, paying a premium of ~2.75% today.
Moonkitt’s goal is to make this process more flexible, allowing someone to convert their staked ATOM into a liquid staking token, but also the other way around: from a liquid staking token into staked ATOM.
The intended features are:
1. An interface where users can freely use the Liquidity Staking Module to liquefy staked ATOM, send the liquid staked ATOM, solidify it again.
2. A liquid staking token (let’s call it mkATOM) that would be pegged to the ATOM (i.e. you can always redeem one mkATOM for one staked ATOM in your wallet). This is different from other stATOM, qATOM, stkATOM which all compound the staking rewards into the token (after taking a fee).
3. The ability to convert liquid staked ATOM into mkATOM, stATOM, qATOM, stkATOM directly from the interface in point 1.
4. A marketplace for ATOM / mkATOM where:
a. Users who have liquid ATOM and want to stake can swap for mkATOM (gaining a premium on their liquid ATOM)
b. Users who have mkATOM (from point 3) can swap for liquid ATOM (paying a premium for the service – likely less than what stATOM or qATOM offers)
5. The ability to redeem mkATOM for liquid staked ATOM at any time
6. The ability to unbond mkATOM and receive liquid ATOM after the unbonding period (21 days)
7. An arbitrage vault where people can put in their ATOMs (staked or not) that would
a. use liquid ATOM to purchase mkATOM from sellers on the DEX (thus helping the 4.
b. users sell mkATOM for liquid ATOM), b. Unbond those newly purchased mkATOM
c. Wait 21 days for the unbonding time to completed.
Loop with phase a: Purchase mkATOM from the now liquid ATOMs, etc.
If swapping 17 times a year (17 x 21 days = 357 days) liquid ATOM for mkATOM at 2% discount, it gives a 34% APR on the ATOM, without any artificial incentive needed.
