Unified Liquid Staking

Overview

KIRA allows Consensus nodes to stake any combination of multiple whitelisted assets through its Multiple Bonded Proof of Stake mechanism. Depositors are automatically issued redeemable receipt tokens representing their staked assets, making them LSDs by default.

Liquid staking has multiple pain points in the current DeFi landscape. Due to competition within the LSD sector, LSD liquidity is fragmented across DeFi. Furthermore, each LSD must be integrated individually for use within DeFi protocols, which introduces coordination overhead, additional attack vectors, and value leaks.

KIRA's Token Basketing module solves for the friction associated with liquid staking by aggregating users' receipt tokens by their liquidity denominations, into cohesive fungible assets.

Constant Product Amm Model

Token Baskets are simple automated market makers (AMM) following a constant product model, which is self-rebalancing and offers swaps without price impact. A key aspect is that the sum of products of each token's amount multiplied by its weight remains constant before and after any trade, expressed mathematically as:

$$\left \lfloor{ \sum_{i=0}^{tokens.Length - 1}tokens[i].weight \cdot tokens[i].amount}\right \rfloor = constant$$

In other words, this ensures the cumulative value of tokens in the basket remains unchanged (or slightly larger due to rounding). Any additional tokens from slippage account for surplus, while swap fees are paid to the network as fee rewards. This constant product model provides stability by preserving the basket's overall value.

Assets within the pool are weighted according to their underlying staked value - these predetermined weights dictate the fixed price ratios at which incoming swaps are filled.

Governance ensures each token's weight is properly configured to maintain the issued basket tokens' value. If weights are reconfigured (e.g. due to peg changes), the sum of each token's weighted amount must be greater than or equal to the issued basket tokens. For a basket B<id> containing tokens A, B, and C, governance ensure that:

$$\left(A_{amount} \times A_{weight}\right) + \left(B_{amount} \times B_{weight}\right) + \left(C_{amount} \times C_{weight}\right) \geq B_{<ID>\_<denom>.total\_amount\_issued}$$

This safeguards redemption by ensuring sufficient tokens in the basket to cover outstanding basket tokens.

Maintaining Peg Stability

To protect against depegging scenarios, each token has a configurable maximum limit within its basket. If an incoming swap would disbalance a particular basket's composition, dynamic fees adjust to incentivize rebalancing swaps over those that exacerbate the imbalance, returning it to equilibrium.

As Token Baskets are built into the base layer, this weighting system automatically adjusts for changes in underlying staked value. Staking rewards and slashing penalties are natively accounted for, without reliance on third-party oracles.

Should intervention be required, on-chain governance has multiple failsafe mechanisms:

• Consensus nodes can vote to include or exclude tokens from baskets
• In ongoing emergencies, swaps can be halted by governance until resolved
• Accumulated surplus swap fees function as an insurance fund controlled by chain governance. In the unlikely event an asset depegges within its basket, governance can mobilize this surplus fund toward restoring the asset's peg.