Osmosis Superfluid Staking Launch, Feb. 28
The biggest advance in Proof of Stake since validator slashing is here! As a reminder, superfluid staking allows Osmosis liquidity providers to stake the OSMO in their LP shares (GAMM). Because superfluid staking adds to the security of the chain, superfluid positions also earn staking rewards on top of the usual fees and liquidity mining incentives.
Super-fluid UX
Superfluid staking will be effortless. When you provide liquidity to an Osmosis pool and bond it with a 14-day unbonding period, you will be given the option to superfluid stake that position with the validator of your choice. The next time you bond (14-day unbond) liquidity to that pool, it will automatically be superfluid staked to the same validator again.
Example: If you added $1000 to the ATOM/OSMO pool, you would be providing $500 of OSMO and $500 ATOM (it is a 50/50 pool). To superfluid stake, you would first select the 14-day unbonding period, which currently yields liquidity mining incentives of ≈75% APR on your $1000. Then, you would elect to superfluid stake, which would give you an additional staking APR of ≈78% on the OSMO.
To begin with, there will be a superfluid discount factor of 50% on the superfluid staked OSMO, which will provide a safety buffer during the rollout. This discount factor can and likely will be raised by governance once the system proves itself to be stable. Therefore, in this example, the superfluid value staked would be halved to $250 of OSMO. You would therefore be earning ≈94% APR on your position versus 75% without superfluid. Once the discount factor is raised, that number would approach 113%.
That number will naturally change over time with the underlying APRs. Further, as token prices fluctuate, the total dollar amount of an LP position will change with them, as will the relative weights of OSMO and ATOM within the LP. Fees and arbitrage will also need to be accounted for. A TWAP (time-weighted average price) oracle will track the underlying OSMO through these changes, ensuring that the stake in your LP position is always appropriately counted.
Launch Notes
In order to get superfluid staking shipped by the 28th, we are limiting the scope of the launch in three areas: pool selection, governance/validator options, and variable unbonding. As we iterate, these restrictions will be removed.
1) At launch, superfluid staking will only be available in Pool #1, ATOM/OSMO.
Restricting superfluid staking to one pool lightens the engineering lift and gives us real-world feedback on the mechanism without having to expose lower-liquidity pools to manipulation. Assuming all goes well, more pools will open up quickly.
2) Superfluid staked OSMO will temporarily have incomplete governance rights. Superfluid stakers will be limited to one validator per pool, and they will be unable either to override their chosen validator’s votes or redelegate away from them without unbonding.
This is not a long-term solution, but it greatly simplifies the necessary front- and back-end development, and makes the user interface super easy to use. We will upgrade in due course, but for now, it is more important than ever to delegate to system-aligned validators. At the same time, any validator attempting to manipulate the system would lose far more value in lost delegations/reputation than they could gain from an attack.
3) Superfluid positions cannot be partially unbonded.
In order to reduce your superfluid position, you will have to unbond the entire stake over 14 days. You can then re-bond with whatever new amount of liquidity you choose. This is analogous to how the bonded LP system already works, where you cannot reset the unbonding period on a position without first unbonding it. However, you can add to your superfluid position as often as you like without unbonding.
Unstaking Yes, Unbonding No
People have been asking whether or not their current positions need to be unstaked or unbonded to prepare for superfluid staking. Yes, you DO need to unstake your staked OSMO if you want to use it to provide liquidity that you want to superfluid stake. No, you DO NOT need to unbond your bonded (14-day) ATOM/OSMO LP positions. LPs bonded for 1- and 7-day unbonding periods will need to be unbonded and re-bonded as usual.
That’s what you need to know to prepare for superfluid staking! If we’ve left anything out, or if you’re curious to learn more, come chat with our friendly social media admins. We’re excited here in the lab! Not only are we getting a novel DeFi primitive, but Sunny gets to keep his hair.
