[idea] Shielded staking & DeFi management services

Technical Zone
1

With the MASP and shielded set rewards, Namada offers a potentially compelling place to keep assets, especially when keeping assets in the MASP does not require forfeiting opportunities to use them elsewhere, such in staking or DeFi. Conversely, using assets in staking and DeFi requires a lot of time-consuming management, which many (even most) users may not find worth their while to engage in. If Namada can offer a combination of MASP custody, management services, and shielded set rewards where, in general, a user can:

  1. Deposit some assets from elsewhere,
  2. Select how those assets will be used, at a high level (e.g. staking, DeFi strategies), and
  3. Select how they would like to receive rewards (e.g. in what asset), and how they would potentially like their assets rebalanced over time (where applicable), and
  4. Keep (representations of) their assets shielded in the MASP, receiving shielded set rewards (including potentially in assets beyond just NAM, and potentially in assets of their choice), with the ability to withdraw their assets at will (perhaps with a delay in case of staking).

This seems like a potentially compelling value proposition to me, and something that I think Namada could levy a small percentage-based service fee on sustainably – users will happily pay for time saved and simplification of accounting.

As some market evidence, Stride, the market leader in Cosmos LSTs, and Lido, the market leader in Ethereum LSTs, both charge a 10% fee.

Encouraging more assets held in the MASP is also synergistic with Namada’s overall privacy offering, and fees levied could be collected and held in a variety of assets in order to align the network more with the surrounding ecosystem at large. Namada’s full-stack integration as an app chain also lends itself well to the implementing the kind of logic (which will include many cross-chain interactions and custom state machines) required for these kinds of services, which can be difficult to implement on VM-only chains.

What might these services look like? The possible scope is broad, and if we take this direction we’d want to focus – I’m not sure quite where yet, but here are a few ideas:

  1. Shielded staking with configurable rewards: deposit ATOM/TIA/etc. (let’s say from a Cosmos chain), choose how you want your rewards paid (any supported token). Hold staked token vouchers in the shielded set and receive rewards in the selected token via SSR (Namada will swap via cross-chain swaps when necessary). Namada governance handles validator selection on the other chain(s) in question. Transfer your staked token vouchers whenever you want (inside the MASP), and any new recipients will now receive rewards. Staked token vouchers can also be withdrawn with the delay of the unbonding period.
  2. Shielded DeFi deposits – e.g. lending in Aave (Ethereum), or Mars (Cosmos) – deposit ATOM/TIA/USDC/etc., choose how you want your rewards paid or your position periodically rebalanced. Hold DeFi deposit vouchers in the shielded set and receive rewards in the selected token via SSR (Namada will swap via cross-chain swaps when necessary). Namada governance handles withdrawing rewards / rebalancing on the other chain(s) in question. Transfer your DeFi deposit vouchers whenever you want (inside the MASP), and any new recipients will now receive rewards. DeFi deposit vouchers can be withdrawn at any time (triggering a withdraw on the underlying protocol).
  3. Shielded liquidity provisioning – e.g. on Osmosis, or even Penumbra (if they support IBC-controlled LPs in the future) – deposit ATOM/TIA/USDC/etc., select how you would like your liquidity positions to be managed. Hold LP deposit vouchers in the shielded set and receive rewards (if you selected for rewards to be periodically paid out) in the selected token via SSR. Transfer your LP vouchers whenever you want (inside the MASP), and any new recipients will now receive rewards. LP vouchers can be withdrawn at any time (triggering a withdraw on the underlying protocol).
  4. Shielded “privacy index” – invest in an index of projects credibly supporting data protection technology (e.g. Namada, Penumbra, Zcash, Aztec, etc.), managed by Namada governance. The index holds (a) underlying assets and (b) some liquidity positions between them (collecting fees). Holders of the index token in the MASP receive some SSR, and can withdraw their position at any time (redeeming for the underlying assets).

We could even imagine a relatively general version of this where a user can configure a custom strategy for when various actions should be taken (e.g. LP, lending, staking, converting rewards, etc.) on supported “cross-chain action” destinations, and this strategy becomes associated with a unique denomination in the MASP (which receives SSR in whatever asset and frequency the strategy indicated).

This will require a sizeable amount of technical work to make real, but I think it could potentially be a very compelling service offering. Thoughts?

7 Likes
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wild! love it at first glance. but yeah, this could get complicated quickly

would it be similar to Yearn?

1 Like
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Absolutely love this idea! For example, buying and holding shielded Zcash as part of this index is a beautiful idea. Governance can work out which chains and allocation amounts.

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I’m not too familiar with Yearn. Perhaps similar in the general sense of managing positions, but I imagine that Namada could carve out a pretty different niche, from a few different angles:

  1. Natively cross-chain.
  2. Natively shielded (and even rewards are shielded).
  3. Strategies could be focused on a wider variety of goals, instead of just “generate maximum yield” (which is silly in my view, and doesn’t really work in a market equilibrium anyways) – for example, “support and invest in the privacy ecosystem”, “stake and send some of my rewards to fund public goods”, or “autobalance liquidity and send some of my fees to invest in the privacy index” :smiley: .

Perhaps an underlying hypothesis of mine (which could be wrong) is that there might be many users with more diverse preferences (in particular, not just “generate more yield”) who also care about privacy, and who are not well-served by the current available market offerings. I could be wrong about this hypothesis – this thread is in part an effort to collect data.

Yes, exactly. It would be difficult for the index to hold shielded Zcash, but I think it’s fine for the index’s ZEC holdings to be public (as well as those of the other tokens), as individual users’ holdings of the index would be shielded (in the MASP).

1 Like
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I like the revenue potential mechanics here on many sides. This is very important at this stage on the network.

SSR sounds cool. Are there any examples with Secret or Silk or any one else? Sorry, i dont think they are a good comparison with Namada (no offense to these projects but its a different league). Still, I wonder if they had similar experiments (on the business logic side of things).

What is your realistic estimation for something like this? Obviously speaking out of thin air. Im assuming this is quite a highly technical implementation. Not discouraging, on the contrary, my advice would be to focus on this, maybe create a prototype first and gather user/dev feedback (game of shields?).

PS. fricking cool btw =)

1 Like
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There is a lot to like about this proposal. Positioning Namada (whole network and individual operators) as a service provider, creates a natural path towards Anoma service providers (service commitments) later on;

  • compute
  • storage
  • network relay
  • ordering services
1 Like