Introducing Liquid Staking in Cosmos: The Gaia v12 Upgrade and Its Implications
Cosmos’ Gaia v12 upgrade introduces the Liquid Staking Module, allowing ATOM holders to liquid-stake instantly, mobilizing $1B+ for DeFi within the ecosystem. Initial cap set at 25% of staked Atoms.
The Cosmos network has always been at the forefront of blockchain innovation. With the latest “Gaia v12” upgrade, the Cosmos Hub introduces the groundbreaking “liquid staking module” (LSM), enhancing the staking experience for ATOM holders. In this article, we delve into the details and significance of this upgrade for both seasoned stakeholders and newcomers to the Cosmos ecosystem.
Liquid Staking Explained.
For those new to the concept, liquid staking allows users to maintain liquidity with their staked assets. Traditionally, staking would lock up assets, making them illiquid for a duration. With liquid staking, however, users can gain tokens representing their staked assets, ensuring liquidity while still participating in the consensus and security of the network.
The Gaia v12 Upgrade.
At block height 16985500, around 9 am ET, Cosmos implemented the anticipated Gaia v12 upgrade. A significant feature of this upgrade is the Liquid Staking Module (LSM).
With LSM, Cosmos has resolved one of the pain points of staking: the unbonding period. Atom coins staked with Cosmos Hub validators can now be converted into liquid staked Atom instantly, without needing to unstake or wait for the two-week unbonding period. This transformation paves the way for over $1 billion worth of staked Atom to be mobilized as capital across DeFi protocols within the Cosmos ecosystem.
Cosmos’ Vision of Interoperability.
The Cosmos network is designed to promote interoperability. It’s an ecosystem of several chains which can seamlessly interact using the Inter Blockchain Communication protocol, all anchored by the Cosmos Hub. This infrastructure empowers developers to build application-specific chains known as ‘Zones’ within interconnected networks termed ‘Hubs’.
LSM Specifications and Safety Nets.
To ensure security and stability, the LSM initially caps the total amount of Atom that can be liquid staked to 25% of all staked Atom. This cap is a precaution to mitigate liquid staking risks and can be adjusted in the future through governance votes.
Several entities, including Stride, Persistence, core Cosmos SDK developers, and Iqlusion, have contributed to the development of LSM, signifying the collaborative spirit of the Cosmos community.
The Broader Ecosystem and Previous Endeavors.
The introduction of LSM has added a new dimension to ATOM. Now, while securing the network, it simultaneously enhances liquidity within the ecosystem. Cosmos Hub, as the first blockchain within the Cosmos Network, has consistently been an innovator. The proposal for ATOM liquid staking was introduced in April, but other protocols like pStake and Stride had already implemented ATOM liquid staking before this.
The 25% initial limit, inclusive of third-party staked tokens, aims to minimize the potential risks of a liquidity cascade. Along with refining the liquid staking mechanics, LSM also introduces governance-controlled parameters. This flexibility enables governing members to make dynamic updates to the module. Additionally, to ensure commitment and security, liquid staking providers are required to contribute a certain amount of ATOM tokens to accept tokens through delegation.
The Gaia v12 upgrade, with the integration of LSM, represents a pivotal moment in the evolution of Cosmos Hub. By harmonizing staking security with liquid assets, the Cosmos team ensures a flexible, secure, and user-centric environment, further solidifying Cosmos’ position as a leader in the blockchain space. Whether you’re a seasoned stakeholder or new to the Cosmos universe, this upgrade offers exciting opportunities for participation, liquidity, and growth.
