AMKT-IP-8: Whitelist 21BNB, 21SOL, 21AVAX for inclusion in AMKT

Proposals
1

Summary:

We propose adding new wrapped assets from 21.co in order to reduce reliance on Wormhole as a bridge.

AMKT currently utilizes Wormhole as a bridge for BNB, SOL, and AVAX tokens. This exposes users to risks associated with Wormhole.

21.co has built wrapped implementations of these assets. The structure mirrors assets commonly used in DeFi like BitGo’s Wrapped BTC (WBTC) and seeks to improve on cross-chain exposure.

Motivation:

We believe reducing the number of outstanding third party dependencies improves the overall security of AMKT.

While there’s a tradeoff on decentralization and a reliance on a third party custodian with the 21co assets, we believe reducing the total number of third party dependencies improves security and that the risks associated with 21co’s custody is lower than risks tied to Wormhole’s bridge.

Implementation:

We propose including the following assets for eligibility at the time of of the next reconstitution:

  • 21BNB
  • 21SOL
  • 21AVAX

In order to be implemented in the AMKT index, the assets must follow the criteria outlined in the AMKT methodology, which includes criteria for minimum liquidity thresholds and secondary trading. Should these assets meet the criteria at the time of the AMKT reconstitution, they’ll be added to the index like any other top 15 asset.

Risk Factors:

The implementation features a reliance on 21.co, introducing a custodial trust assumption for the underlying assets.

Dependency on 21.could adversely impact AMKT holders if the wrapped assets were found to be undercollateralized or otherwise rehypothecated.

If the 21.co wrapped asset contracts were to have a security vulnerability, AMKT holders could be adversely impacted.

If liquidity for 21.co tokens were to be insufficient, AMKT creations and redemptions could be adversely impacted.

Relevant Links:

Conclusion:

We recommend AMKT holders vote FOR our proposal to add the three new 21.co assets, limiting bridge risk for AMKT holders.

2

If the goal is security of AMKT. Wouldnt a diversified dependency be better. That way:

  1. If 21 co go down, we still have ethereum, BTC and wormhole wrapped tokens.
  2. If Wormhole go down we still got Ethereum, BTC, and 21co wrapped tokens.
  3. If we only have 21co then ETH and BTC would be the only token left i reserve if i understand correctly?

Seems to me that a diversified dependency would be better. But then again i think i might understand the proposal better if i can learn the risk with Wormhole and why this is seen as such a week point, that its worth reducing diversification in dependencies?

Best regards!
From a Learning and curious AMKT holder :slight_smile:

3

Yup have thought about this as well! On some level, yes, but it’s more a question of whether there’s greater risk in consolidating with one provider or spreading out across two. As an example with custodial risk, if you viewed it as more risky to centralize risk with one exchange vs spread out between Coinbase and FTX, you’d have been better off just staying with Coinbase.

Ultimately it’s up to the comunity to decide (this moved to a snapshot vote here: Snapshot), but my thought is that there’s more risk with Wormhole getting hacked than consolidating risk with 21co which is attached to a regulated asset manager that has over $5B in AUM. The tradeoff of course is that there’s an offchain dependency I don’t like + the liquidity concerns mentioned.

Curious for your thought + would love your vote on Snapshot.

4

I see your point, but im afraid that is survival bias. Cant make a hypotical risk management based on afterfacts. istead the hypotesis should be: before last bearmarket would you be better off choosing only one or spreading amongst the two? (afterfacts shows 50/50 in losing all money vs. keeping 50%).

By going with only one, there is higher risk (we are picking winners) instead of spreading risk.

But on the other hand i see your point. if one are spreading to much you will probably loose money anyways instead of going with actors you know are more “safe”