Summary
This is a proposal to deploy the meta-stable pool type for all Astroport deployments. This pool type was under development for Astroport prior to the collapse of Terra 1. It was specifically designed for liquid staked token (LST) pools. For pairs with an LST and the underlying token, this pool type is more efficient than basic stableswap. If deployed, it would make Astroport a more attractive DEX for liquid staking providers.
Justification
All LST pools on Astroport currently use the stableswap pool type. But this is not ideal. Stableswap concentrates liquidity at a 1:1 ratio, but LSTs are not pegged 1:1 to their underlying tokens. An LST will always appreciate in value against its underlying token, due to compounding staking rewards. So ideally, an LST pool should be able to continually adjust the ratio at which the LST and its underlying token are concentrated.
Osmosis stableswap pools have this functionality. On Osmosis, this is called a scaling factor. For example, for the stEVMOS-EVMOS stableswap pool, the concentration ratio continually scales as stEVMOS appreciates against EVMOS, such that it always reflects the stEVMOS:EVMOS redemption rate.
In the short term, using Astroport’s stableswap pool type for LST pools is acceptable, because the values of LUNA LSTs are currently close enough to the value of LUNA. (Since LUNA LSTs appreciate against LUNA at the staking reward rate, which is ~14, and no LUNA LST is older than 9 months).
But over time, it is untenable for LUNA LST pools to use the basic Astroport stableswap pool type. And even in the short term, doing so is less efficient than on Osmosis, since Osmosis stableswap pools have a scaling factor.
In general, Astroport stableswap pools are much better, because they allow for different amplification factors, whereas the Osmosis’ stableswap pool type only has one fixed amplification factor, which is equivalent to an Astroport amp_factor of 3. Nonetheless, over time liquid staking providers using Astroport will be forced to switch to Osmosis, as their LSTs appreciate in value and using the stableswap pool type on Astroport becomes untenable.
The solution is Astroport’s unreleased meta-stable pool type. Developed for Lido prior to the Terra 1 crash, this pool type is a stableswap with the added functionality of being able to continually adjust the concentration ratio between the two tokens.
Details
It is unclear what more needs to be done to deploy the meta-stable pool type. Apparently, it has already been developed. Perhaps only some slight modifications and updates are required to deploy it. Here is a canceled PR on the Astroport GitHub regarding the meta-stable pool type.
The meta-stable pool type should be deployed on all chains that Astroport is deployed on. Currently, there are many LSTs on Terra 2 that would benefit from this pool type. On Injective, Stride is developing stINJ, which will likely have an incentivized pool on Astroport’s Injective deployment. If, hypothetically speaking, Astroport were to launch on Sei, that deployment will need the meta-stable pool type too, for Stride’s stSEI.
Final thoughts
As liquid staking becomes increasingly important for Cosmos DeFi, deploying the meta-stable pool type on all Astroport deployments would help Astroport compete against other DEXes, because the meta-stable pool type allows for more efficient LST pools.
@stefan, what steps need to be taken to make this happen? Are the regular Astroport contributors willing to do this? Is a bounty required to get other contributors to help? (Following the precedent of the several USDC bounties that were used last year). Should I make an onchain signaling proposal to determine if the Astral Assembly wants contributors to work on the meta-stable pool type? (Following the precedent of the signaling prop about SLAMM).
Everyone else, please provide any questions or comments you may have (:
Disclaimer: I am employed by Stride Labs. That said, I also have a large stake in the Astral Assembly.