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This proposal would restructure Stride’s delegation program on Osmosis to deprecate the existing Stride delegation process in favor of copy-staking. The full proposal, with a description of how the proposed copy-staking model will work as well as the benefits and tradeoffs, is outlined below.

Background

Stride governance has the final say on all aspects of the host-chain delegation process, selecting the means by which validators on host-zones like Osmosis are chosen to receive delegations as well as how tokens delegated with Stride are divided up amongst the chosen set.

Historically, Stride governance has elected to utilize a council process to manage delegations on Osmosis. At a high level, this process selects Osmosis validators for Stride delegations by:

• Employing a council of 5 volunteers approved by Osmosis governance to evaluate and score validators based on a variety of on-chain and off-chain criteria
• Aggregating and averaging the scores for each validator
• Selecting the highest scoring 8 validators from each quartile of the active set by voting power to receive delegations from Stride.
• This process serves to help decentralize the voting power on Osmosis and improve the health of the chain by distributing LST delegations amongst highly performant validators.

The council process, however, assumes that the Osmosis community wants liquid staking providers to be opinionated delegators. While some chain communities will undoubtedly prefer LSPs to play an active role in decentralizing the chain via their delegations, an obvious tradeoff to this model is that delegation decisions for tokens staked with a LSP are made by the LSP’s users rather than by the host-chain’s users.

Some chains may prefer a delegation model in which the LSP takes a neutral approach to making delegations, opting instead to preserve the existing staking dynamics between a chain’s validators and its community of stakers. This is where copy-staking comes into play.

Stride’s Copy-Staking Model

Thanks to a recent software upgrade, Stride can now delegate to Osmosis’s entire set of 150 validators, making copy-staking a viable model for Stride’s OSMO delegations on Osmosis.

Copy-staking works exactly as it sounds. Stride “copies” the delegation preferences of the host-chain’s community by delegating to all validators in the active set according to existing stake weight. Stride’s existing delegations to any validator are not included in the stake weight calculations.

For example, if the rank 1 validator has 5% of a chain’s existing delegations after subtracting any existing Stride delegations, 5% of all tokens liquid staked with Stride will be delegated to that validator. If the rank 2 validator has 4% of delegations, Stride will delegate 4% to that validator, and so on. As stake weight across the set changes over time, Stride’s delegations will also change accordingly.

Stride adjusts copy-staking delegation weights on a monthly basis. In a future upgrade it will be possible to rebalance delegation weights continuously as organic stake weight changes.

Copy-Staking can be considered a truly neutral approach to LST delegations because it preserves the existing power dynamic between stakers and validators. If a validator consistently behaves in a manner that doesn’t align with a chain’s community of stakeholders, those stakeholders can redelegate away from that validator and reduce that validator’s vote power. In turn, Stride will reduce the allocation to that validator to match the validator’s new vote power.

By emulating the delegation preferences of a chain’s stakers, liquid staking protocols like Stride can also preserve the chain’s existing governance dynamics by preventing any one validator (or any subset of validators) from having more voting power than they otherwise would without liquid staking delegations.

Stride is the first liquid staking provider in the Cosmos Ecosystem to offer this neutral solution to its host chains. Copy staking is already in place for stTIA and stDYM delegations. The purpose of this proposal is to determine whether Stride’s OSMO delegations should also transition from the existing council model to the more neutral copy-staking model.

Implementation Details

Governance proposals will go live on both the Stride and Osmosis chains to approve the transition to copy-staking. If both proposals pass, Stride will transition its OSMO delegations to a copy-staking model by delegating across the entire active set of 150 validators according to existing stake weight for each validator with the following limited exceptions:

• Validators with greater than 10% commission will be excluded from delegations
• Centralized exchange validators will be excluded from delegations
• Delegations will be capped at 10% for validators with greater than 10% vote power. For example, a validator with 11% vote power will only receive 10% of Stride’s delegations. The remaining 1% will be distributed proportionally to remaining validators according to existing stake-weight. Currently, this provision would not affect Osmosis because the rank 1 validator only has 6% of vote power.
• The bottom 5% of validators in the active set (8 validators in total) will be excluded from delegations
• All OSMO currently delegated to a validator by Stride will be excluded when calculating existing stake weight

The purpose for these exclusions is to keep liquid staking costs low and eliminate potential risk vectors associated with a copy-staking delegation model. Stake that would have gone to a validator excluded from delegations under these exceptions will be redistributed amongst the remaining validators according to existing stake weight.

Final Thoughts

Copy-staking represents Stride’s commitment to more closely align with the needs and wishes of its host-zones. While some chains will continue to prefer the existing Stride delegation process, copy-staking gives chains the opportunity to opt-in to a more neutral delegation model.

Given how active Osmosis’s governance community is, Osmosis is a prime candidate for copy-staking. A copy-staking model will allow for the existing voting dynamics, built by the delegation habits of Osmosis’s community of stakers over time, to be preserved.

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