Jul 27, 2021

5 min read


-Lets start with the proposal at hand-

To OSMO holders, we propose that ION is a commonwealth within the borders of Osmosis. We share the same chain, the same security, the same founder and we hope/strive for the success of OSMO and ION alike. While we recognize Osmosis as the sovereign chain, we cannot thrive without some degree of independence. We must be free to decide some matters for ourselves.

ION will function like an ERC-20 on Ethereum. ION will be built on top of the Osmosis chain and bring value to Osmosis, but the code will be fundamentally separate.


  1. Sovereign contract code: the ION DAO will be given the ability to approve upgrades to the contract code of the ION protocol.

3. Sovereign Treasury for ION Community. Creating and maintaining a treasury outside of Osmosis governance. This benefits both parties by ensuring financial independence and a more focused future for each.

Specialized Governance

As Osmosis continues to grow, there will be an increasing number of protocols built on top of the base layer. These protocols will require specialized governance to function properly. The needs of these protocols will be orthogonal to issues relating to the base protocol. For example, Ethereum’s core developers do not necessarily possess the expertise needed to govern MakerDAO. Questions regarding MakerDAO are best decided by Ethereum users who opt into Maker governance and learn the minutiae of the protocol.


Establishing ION as its own commonwealth will create a model for future protocols built on top of Osmosis. Osmosis governance will be able to focus on the parameters of the platform, such as AMM reward distribution, without having to govern every application built on top of Osmosis.

The DAO is an important signaling event for Osmosis. It shows that Osmosis can develop secondary protocols that are symbiotic with base layer governance. This model will be crucial for developing a diverse DeFi ecosystem on Osmosis capable of rivaling Ethereum.

Moreover, the ION DAO will signal the importance of decentralized governance for second-layer protocols on Osmosis, ensuring the decentralization of the overall ecosystem. The ION DAO will create a norm for future Osmosis developments. Autonomy for the DAO will enable specialization within Osmosis communities, while maintaining the collaborative community-driven ethos that has played a key role in generating proposals like this one.

Without sub governance for ION, there is no way to implement an ION protocol without taking a significant amount of funding and developer attention from Osmosis. The DAO also prevents the ION protocol from having to mint new supply to pay for building costs. The DAO, as envisioned by the community, will take on the responsibilities for ensuring the construction of the ION protocol and governing upgrades to its core code.

The DAO can revitalize ION without requiring any funds from Osmosis. The ION community is assembling a proposal that will be available to view in the coming days.* The community proposal identifies a way to fund the development of an ION protocol without (1) diverting the core developers away from their work on the Osmosis protocol, (2) needing any funds from the Osmosis community pool or development fund, (3) necessitating an increase in the ION supply.

BENEFITS FOR OSMO HOLDERS (in potential use cases)

The stablecoin creates a symbiotic relationship between OSMO and ION. The DAO can choose to treat LP tokens containing OSMO as a more valuable form of collateral than other tokens. Therefore, OSMO holders can mint stablecoins with a lower collateralization ratio. OSMO holders can compound these incentives by creating special rewards for liquidity pools containing the native stablecoin.

Most importantly, a native stablecoin will create tremendous value for OSMO after the implementation of superfluid staking. Osmosis LPs can simultaneously deposit their OSMO into a liquidity pool, delegate it to a validator for staking and use it to collateralize a stablecoin. Superfluid staking means every LP on Osmosis could be collateralizing stablecoins with their LP tokens, allowing Osmosis to enjoy all the benefits of over-collateralized stablecoins (stability) without the downsides (capital inefficiency).

This proposal shows that Osmosis can develop second-layer protocols with specialized governance and strengthen the alignment of users across Osmosis. This model will be crucial to the continued growth of Osmosis and Defi as a whole.

I — Innovation driven

O — Open and auditable

N — Never Subverted