Introducing Supernova
Internet of blockchains: Cosmos
Since the advent of Bitcoin, the first blockchain, various blockchains have surfaced for the purpose of solving unique problems. Bitcoin provided us with a means of transferring value in the digital space without the need to trust 3rd parties, and Ethereum has pushed the boundaries to add smart contracts to serve general purposes on top of the blockchain. Now we are in the era of multichains where various chains co-exist to solve problems in their own respective solutions.
Cosmos is a pioneering ecosystem with foundations that are native to the multichain era. As their slogan ‘The internet of blockchains’ suggests, Cosmos is a decentralized network of independent, yet interoperable app-chains that are connected through Inter Blockchain Communication(IBC) protocol. Each app-chains operate in parallel, so each of the app-chains is not affected by others and has higher scalability.
Why stake when you can DeFi?
Due to its own consensus algorithm, Tendermint, Cosmos requires token holders to stake a certain amount of their tokens to safeguard the security of the chain.
The optimal outcome for a chain is to acquire more than a certain amount of staked tokens. So in order to incentivize the token holders to stake their tokens, app-chains provide economic incentives in the form of staking yield along with voting powers to the on-chain governance that provides the stakers the sovereignty to govern the ecosystem that they have an interest in. However, even with all staking incentives, the most optimal behavior of token holders is not staking but DeFi activities.
Therefore, based on the game theory, if individuals pursue the optimal strategy, the outcome is not desirable for the entire ecosystem and incurs a social dilemma, even though the strategy may be better for the individuals.
So here is the question in one sentence. Why stake when you can use DeFi and earn more yields?
Primary solution: Liquid Staking
So what do we do to solve this social dilemma situation? The primary solution is liquid staking. Liquid staking enables token holders to earn staking yields on Proof-of-Stake blockchains and provides liquidity for the stakers as well. In other words, it can provide additional liquidity for the ecosystem while preserving the security of the chain.
This provides optimal results for both the individuals and the overall ecosystem since the individuals can use the shadow tokens that they receive for staking in DeFis to earn yields.
However, liquid staking alone is not enough. The shadow tokens, which serve as the proof of the staked tokens, lose their full potential unless there are certain utilities. Without the utilities, the shadow tokens lack liquidity and are nothing more than the original tokens themselves.
So… why SuperNova?
As mentioned above, liquid staking may serve as an optimal solution, and the idea has already been proved in Ethereum as well as other PoS ecosystems, including Solana. But then, why wasn’t it on Cosmos until now? There are two main reasons:
On Cosmos, it was hard to build a liquid staking protocol until the IBC spec and the ICA went live.
Shadow tokens lose their full potential unless there are ways to utilize them, and the IBC becomes a hurdle for acquiring such utility.
Supernova solves these challenges as follows:
- Providing auto compounding and liquid staking through a self-made module, using Interchain Account.
- Providing staked-swap between shadow tokens and for those who wish to undelegate their staked assets without an unbonding period.
- Providing utility to the shadow tokens by enabling the holders to use them as collateral to mint ‘over-collateralized’ stablecoin.
With the combination of the above, Supernova will become the ‘Ultimate Money Lego for Staked Assets’, and the team will continue to add various features for staked assets down the road.
Stay Tuned Cosmonauts!
Supernova is currently undergoing rapid development. We will launch our MVP product soon after making sure the security of the protocol is tested and proved.
Please stay tuned for information in the coming days to know more about our roadmap and updates. You can follow us on Twitter to stay up-to-date about the news on Supernova. Our Medium will provide details of the updates.
Also, we would love to meet you at our community Discord! We are looking forward to meeting you, Cosmonauts!
