Utilizing ASTRO-axlUSDC Liquidity Pool Token for xASTRO staking instead of ASTRO

Hey guys! Hope everyone is coping well. Given that Astroport on Terra 2.0 is still in its infancy, these are great times to brainstorm new ideas that can potentially pull Astroport ahead of its peers.

The idea that I would like suggest will be as what the title describes: to use the ASTRO-axlUSDC Liquidity Pool token for xASTRO staking instead of just purely using ASTRO.

Justification:
Back when Terra 1.0 was still functioning, there was a proposal to deepen the liquidity of the ASTRO-UST pool for the following reasons:

  1. Slippage reduction for meta-governance projects looking to accumulate ASTRO ahead of the vxASTRO launch.
  2. Deeper liquidity will increase the safety of the TWAP oracle for protocols like Mars.

While this proposal will likely be successful in increasing the liquidity of the ASTRO-UST pool, it may increase the risk of generating more sell pressure on $ASTRO, negatively affecting the price action of $ASTRO.

By using the ASTRO-axlUSDC liquidity pool token as the asset required for governance token, it can bring about multiple benefits to several populations of users.

For Astroport:

  • Significantly increasing the liquidity available for $ASTRO as users have to provide liquidity for governance staking

  • Assurance of the availability of deep liquidity as liquidity will be locked up either via vxASTRO or via Retrograde attracting and locking up xASTRO

  • Frees up a significant portion of $ASTRO emissions which can be redirected to attract liquidity for other assets

For xASTRO holders:

  • Increased yield on xASTRO (xASTRO staking yield + swap fees generated from the ASTRO-axlUSDC pool)

Cons:

  • The risk of impermanent loss is now introduced to xASTRO staking due to the underlying asset being a liquidity pool. One of the main value proposition of xASTRO staking was to be able earn yield on a single asset with no risk of impermanent loss.

However, I believe that the risk of impermanent loss is sufficiently minimized with yield from xASTRO staking, compensating for the decrease in the gain of value if ASTRO moons. If the value of ASTRO were to decrease, the total decrease in value of the ASTRO-axlUSDC pool is lesser as compared to purely holding $ASTRO, which is good from the user’s perspective.

Credits to ApolloDAO’s $apASTRO concept as well as one of Bancor’s Governance Proposal for inspiring the idea.

Community sentiment and feedback is highly appreciated!

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Good proposal, it will increase the liquidity pool of astro-axlUSDC. It brings bigger TVL to astroport. And we can earn double earnings(apr from lp mining and apr from staking LP token), it is like the apr booster.

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@FarmerTuHao , this is actually a good concept although we potentially see a 50% sell pressure for all staked ASTRO rewards. This ties in neatly with protocols like Retrograde that will be locking the ASTRO-axlUSDC LP indefinitely, although I would prefer another stablecoin to be paired with ASTRO before it gets locked perpetually.

For xASTRO-axlUSDC LP farmers:

  1. We will potentially see 50% of all ASTRO farmed to be sold to axlUSDC for it to be paired into an LP.
  2. A zap function to zap ASTRO into ASTRO-axlUSDC LP will be needed.

With pre-attack Astroport, we’ve seen over 85% of the ASTRO staked, so a back-napkin calculation of sell pressure of ASTRO rewards will be 85% / 2 = 42.5% of 274k ASTRO daily emission sold. At $0.04 price today, that’s about $11k sell pressure daily. We would definitely need higher than $11k buy pressure to withstand the daily sell pressure from this strategy.

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Hi, sounds very interesting. I’m not smart enough to know how this would work, but here’s a simple man’s query on it… What if something happened to the axelar protocol? Would the axlUSDC be safe? I don’t know the technicalities of it, and to be honest, I’m a bit traumatised by what happened with Terra haha :stuck_out_tongue: I sadly have no suggestions either, unless you can interact with native assets like Thorchain

In all honesty, all bridges have their own risks, both Axelar & Wormhole. If there is a hack on the bridges, it will render these tokens without any backing. The best solution is to have a native stablecoin, but at the present moment, we do not have a collateralised stable on IBC. axlUSDC or wUSDC is our best bet at the moment.