Lockups

Liquid Staking Module

The LSM shares (i.e Liquid Staking Module shares) represent tokenized, staked ATOM on the Cosmos Hub. By converting your staked ATOM into LSM shares, you unlock the ability to get voting power and Hydro rewards while still earning staking rewards on your staked ATOM. LSM shares are transferable, liquid versions of staked ATOM and play a crucial role in participating in Hydro.

Key Points:

• LSM shares allow you to earn rewards by voting for liquidity distribution on Hydro.
• By tokenizing your staked ATOM into LSM shares, you maintain the benefits of staking while gaining flexibility in using these tokens.

LSM Shares

This is how to get LSM Shares:

1. Stake ATOM:

• If you haven’t already staked your ATOM, you can do so via your preferred staking platform (e.g., Keplr, Cosmostation).
• Choose a validator and delegate your ATOM to start earning staking rewards.*

2. Convert to LSM Shares:

• Navigate to the Hydro website at hydro.cosmos.network.
• Click “Connect Wallet” in the menu or click one of the “Get Started” buttons on the homepage.
• In the first modal that appears, select one of the validators that you are currently staking ATOM with.
• In the next modal, choose the amount of ATOM that you want to use to obtain voting power.
  • Note: you will see the voting power update in real-time based on the Lock-up period and the amount of ATOM you input.
• Click “Get Voting Power”.

*NOTE: There are many reasons to choose your validator carefully in Cosmos. In the Hydro context, if your validator falls out of the active set, you will not receive staking rewards and will not be able to vote in Hydro anymore.

Voting Power

When you lock your LSM shares into Hydro, you gain voting power, which enables you to vote on liquidity distribution proposals. The amount of voting power you receive depends on two factors:

1. Amount of LSM shares locked
2. Duration of lock-up (1 month, 2 months, 3 months, 6 months, 12 months)

The longer the lock-up period, the more voting power you will receive. However, voting power diminishes over time as the lock-up period gets closer to expiration. The specific calculation of your voting power is based on the remaining lockup duration at the end of the current round.

This means that a user’s voting power decays over time in steps, and behaves like this:

Note: The Pilot Round of Hydro will have certain restrictions around lockups. Specifically, users will not be allowed in the first round to lock for more than 1 month. To learn more about the Pilot Rounds please read the Pilot Rounds documentation.

Key Points:

• Locking for longer periods (e.g., 12 months) grants more voting power than shorter periods.
• As lock-ups age, voting power decreases, requiring users to refresh or extend their lock-up to maintain influence.

Unlocking Your ATOM

On the Lockups page, users can unlock any expired lockups. Unlocking will initiate the process of converting your Liquid Staking Module (LSM) shares back into ATOM on the Cosmos Hub, returning them to their original staked position.

How It Works:

1. Select Expired Lockup: Navigate to the Lockups page and locate any lockups that have expired.
2. Initiate Unlocking: Click on the “Unlock” button to begin the process.
3. Approve Transactions: The system will guide you through the necessary transaction approvals to complete the conversion.
4. ATOM Restaked: Once the process is complete, your LSM shares will be converted back into ATOM in your original staked position on the Cosmos Hub, preserving your staking status.

This seamless process ensures that your assets are returned to their original state with minimal effort, maintaining flexibility and usability across Hydro and the Cosmos ecosystem.

Example Scenarios

Short Lock-Up

A user locks 1000 LSM shares for 1 month on 7-Oct. They receive 1000 in voting power. By the end of the one month, their voting power has diminished, and they can either refresh or unlock their shares.

Long Lock-Up

A user locks 5000 LSM shares for 6 months during a round on 7-Oct. They receive 10,000 voting power. Over time, their voting power gradually diminishes but remains significantly higher than shorter lock-ups due to the longer duration.

Multiple Lock-Ups

A user creates three lock-ups on 7-Oct:

• 500 LSM shares locked for 1 month
• 1000 LSM shares locked for 3 months
• 2000 LSM shares locked for 6 months

Each lock-up provides different voting power; the user can monitor their combined voting power on the Hydro dashboard.