Hey, everyone. John from Stride here.
I’m happy to see Persistence offer to join this initiative to improve the economic security of dYdX chain. In the abstract, DeFi processes should always be designed with redundancy in mind.
However, given the facts of this particular situation, I do not think depositing half the proposed 20M DYDX with Persistence would make this initiative more secure. In fact, splitting the amount between Stride and Persistence could increase the risk.
The most crucial security aspect of a proof-of-stake (PoS) blockchain is its economic security, represented by the dollar value of staked tokens. Every other aspect of security is ultimately dependent on economic security. When considering blockchains to provide services for dYdX, the dYdX community should give thorough consideration to their economic security.
In Stride’s case, economic security is provided by the Cosmos Hub blockchain, through interchain security (ICS). ICS is a battle-tested security arrangement whereby all staked ATOM on Cosmos Hub provides economic security for Stride chain (similar to Eigen Layer’s restaking). The current amount of ATOM staked is roughly $3B, meaning that Stride has $3B of economic security.
On the other hand, Persistence uses its own token, XPRT, as economic security. The current value of Persistence’ economic security is $60M. And due to the volatility of the XPRT token, within the last six months Persistence economic security has at times dipped as low as ~$25M.
The key thing about economic security is you want it to be as high as possible relative to chain TVL. When TVL begins to approach the level of economic security - and especially if TVL were to exceed economic security - it creates perverse incentives, and a governance attack becomes more likely.
If dYdX governance choses to liquid stake the proposed 20M DYDX with Stride, Stride’s $3B of economic security would be more than enough to handle it - even if the price of ATOM fluctuated. But in the case of Persistence, its economic security of just $60M may not be sufficient to prevent bad things from happening - especially given the volatility in the price of XPRT.
So given the critical factor of economic security, I believe the full proposed amount of 20M DYDX should be deposited with Stride. Economic security is the most fundamental aspect of security for a PoS chain; with low economic security, no other kind of security matters. And among Cosmos liquid staking providers, only Stride has the necessary economic security to handle this deposit.
If Persistence would like to pursue their proposal, I would recommend that they make a separate proposal that does not involve Reverie’s original proposal from last week. And ideally, the fact of the low economic security on Persistence chain should be addressed in any future proposals, as economic security is the bedrock of all security on a PoS chain.