Enshrined Liquidity and Staking

An overview of Initia's L1 staking, consensus, and Enshrined Liquidity mechanisms.

Overview

The Initia L1 uses a delegated Proof-of Stake-consensus mechanism with one twist. Through the x/mstaking module multiple tokens can be staked directly with validators for voting power as long as they have been whitelisted via Governance through a whitelist proposal.

The x/mstaking module accepts either solo INIT tokens or whitelisted INIT-X LP tokens from InitiaDEX as stake. We call this mechanism Ensrhined Liquidity.

Enshrined Liquidity benefits the Omnitia ecosystem in multiple ways:

• productive assets are put to work

• security is diversified from solo INIT volatility

• staking rewards are amplified given LP stakers earn swap fees, yield from other tokens in the pair, and exposure to additional assets they want to hold

• liquidity on the L1 is significantly amplified and accesible to both L1 apps and L2 chains

• Inter-minitia routing: transfers between L2s route through the L1 and may be swapped during the process

• Enables tokens in whitelisted LPs to be used for gas on the L1

Any whitelisted staking token may be bonded with a validator and will begin to receive block rewards. When unbonding stake with validators, tokens are un-deleged and no longer have voting power or earn block rewards. Unbonding tokens are subject to a 21 day unbonding period, after which they may be claimed.

Whitelisting

For an LP token to be eligible for staking and block rewards it must first be whitelisted by the Initia L1 governance. For an LP token to be eligible for whitelisting it must have INIT in the pair. If the LP token is a weighted DEX pool LP (a la balancer), the INIT weight in the pool must be >= 50%.

A whitelist proposal must be made indicating the LP tokens contract address along with a reward_weight.

Reward Weights

Tokens staked with validators earn inflationary INIT block rewards according to the inflation schedule detailed in the INIT tokenomics section.

Each whitelisted LP token along with solo INIT have a reward_weight assigned to them.

Rewards per token per block are calculated as such:

token_rewards_n = block_rewards * reward_weight_n / total_weights

token_rewards_n is the amount of inflationary INIT rewards for whitelisted token (INIT or LP) n.

block_rewards are the cumulative INIT rewards for a given block.

reward_weight_n is the governance set weight parameter for whitelisted token (INIT or LP) n.

total_weights is the sum of all reward_weight_n over all n whitelisted tokens.

In the future it is planned to have reward_weights adjusted more frequently similar to that seen in Curve Gauge votes.

Governance Power

The Initia L1 governance power of a given staker is derived from all staked tokens they may have. This includes solo INIT tokens and LP tokens staked.

We calculate voting power in INIT denomination, summing staked solo INIT balances and LP token balances by converting LP tokens to their equivalent INIT value.

To calculate an LP tokens equivolent INIT value we use the following calculation:

LP Voting Power = num_LP_tokens * tokenWeight

tokenWeight = (initPoolBal / totalShare) * (initWeight + quoteWeight)/initWeight

Let's look at a simple example:

• Say there is an 8:2 INIT-USDC pool and INIT is valued at 1 USDC.

• The pool contains 80 INIT and 20 USDC and there are 100 LP tokens (totalShare)

• User N holds 30 LP tokens

• tokenWeight = (80/100) * (8 + 2)/8 = 1

• LP Voting Power = 30 * 1 = 30 INIT