[LAST CALL] Transfer unclaimed NTRN airdrop tokens to Cosmos Hub

Hub Proposals Signaling/Text
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Change log

  • 2023-09-20 Created initial post

Summary

This proposal seeks to ratify the following motions:

  1. Authorize the Neutron DAO to execute a proposal to trustlessly transfer ~42,727,950 unclaimed NTRN tokens to the Cosmos Hub community pool. This requires instantiating specific smart-contracts to register an Interchain Account on the Cosmos Hub, transferring the tokens over IBC and executing a FundCommunityPool message.
  2. Adopt the following rules for how the Cosmos Hub network, governance and community may use or deploy these tokens to ensure long-term alignment between Cosmos Hub and Neutron:
    1. Do no harm: The Cosmos Hub, its governance and community pledge to only use or deploy the NTRN tokens in ways that do not harm the Neutron network or DAO.
    2. Cooperation: The Cosmos Hub, its governance and community pledge to use or deploy the NTRN tokens in ways that benefit both the Cosmos Hub and the Neutron network and DAO.

Governance votes

The following items summarize the voting options and what they mean for this proposal:

YES: You authorize the Neutron DAO to perform the steps required to trustlessly transfer unclaimed airdrop tokens to the Cosmos community pool and vote in favor of adopting the “Do no harm” and “Cooperation” rules to guide the future use of the NTRN tokens.

NO: You do not wish to authorize the Neutron DAO to perform the steps required to trustlessly transfer unclaimed airdrop tokens to the Cosmos community pool and/or do not support the adoption the “Do no harm” and “Cooperation” rules.

ABSTAIN: You wish to contribute to the quorum but you formally decline to vote either for or against the proposal.

NO WITH VETO - A ‘NoWithVeto’ vote indicates a proposal either (1) is deemed to be spam, i.e., irrelevant to Cosmos Hub, (2) disproportionately infringes on minority interests, or (3) violates or encourages violation of the rules of engagement as currently set out by Cosmos Hub governance. If the number of ‘NoWithVeto’ votes is greater than a third of total votes, the proposal is rejected and the deposits are burned.

Proposal

Authorize the Neutron DAO to transfer unclaimed airdrop tokens

The terms of the security agreement between Neutron and the Cosmos Hub, as defined in Prop 792, include the transfer of unclaimed tokens from the NTRN airdrop to the Cosmos Hub.

As of the end of the claim period, a total of ~27,272,050 NTRN has been claimed. This can be verified using the Airdrop Contract’s total_claimed query (see here on Celatone). As a result, 42,727,950 unclaimed NTRN tokens are earmarked to be transferred to the Cosmos Hub.

Unlike traditional accounts, to receive tokens, the Community Pool (CP) requires a specific FundCommunityPool message which cannot be triggered directly over IBC. To perform the transfer, a simple “vehicle” smart-contract on Neutron is therefore required. This contract leverages the Interchain Transaction module to register an Interchain Account on the Cosmos Hub, transfer the tokens over IBC and execute the FundCommunityPool message.

If this signaling proposal is approved, and once the vehicle contract has been instantiated, an executable proposal would be submitted to the Neutron DAO to perform the transfer. The executable proposal would include updating the airdrop contract’s recipient address to the vehicle contract’s address and triggering the transfer function to deliver the tokens to the CP on the Cosmos Hub network.

Adopt the “Do no harm” and “Cooperation” rules

The 42,727,950 unclaimed airdrop tokens will grant the Cosmos Hub’s network, governance and community considerable influence over the consumer chain. They represent roughly 4.2% of the total supply of NTRN, roughly 28% of the circulating supply and would equate to roughly 50% of the voting power on the network if fully bonded (see FAQ section).

To ensure the tokens are used in a long-term aligned way and set a positive precedent for large tokens allocations and tokenswaps within the ATOM Economic Zone, this proposal seeks to ratify the following two rules. Their application should include but not be limited to the examples provided below.

  • Do no harm: The Cosmos Hub, its governance, and community pledge to only use or deploy the NTRN tokens in ways that do not harm the Neutron network or DAO.

This clause seeks to ensure the use of caution and consideration towards the consumer chain when deploying its native assets.

For example, “dumping” large amounts of tokens into public liquidity such that the price would be significantly affected should be avoided - if the Cosmos Hub wishes to reduce its exposure to the asset, it should do so in ways that minimize the impact on other LPs, the DAO’s finances and the project’s momentum. This would also maximize the returns for the Cosmos Hub by minimizing slippage.

Less obvious examples could include applying caution when deploying NTRN tokens to obtain voting power in the Neutron DAO: if implemented naively, doubling the voting power without actively participating in governance could make it challenging or impossible for the DAO to reach quorum on proposals, therefore crippling its operations.

  • Cooperation: The Cosmos Hub, its governance and community pledge to use or deploy the NTRN tokens in ways that maximizes the benefits to both the Cosmos Hub and the Neutron network and DAO.

This clause seeks to ensure that the tokens are used in a collaborative and mutually beneficial way.

For example, if the Cosmos Hub wished to deploy the tokens as liquidity on a DEX, or deploy them as collateral for a loan, it should do so on an instance of a DEX or Credit protocol deployed on the Neutron network, so that the Hub’s deployment of NTRN tokens also contribute to the liquidity and growth of Neutron’s ecosystem. This would also benefit the Cosmos Hub as it would support the growth of its consumer chain, the price of its native asset and the revenue it generates for the Cosmos Hub.

Overall, the Do no harm and Cooperation clauses are intended to be common sense, and seek to be mutually beneficial rules for the Cosmos Hub and Neutron. Explicit support from the Hub’s governance should help increase alignment within the AEZ and set a positive precedent for rulemaking on the Hub, to pave the way for more advanced future agreements between the Cosmos Hub and consumer chains.

FAQ

What is the ROI for the Cosmos Hub?

A balance of 42,727,950 unclaimed NTRN tokens, valued at approximately $18,000,000 at the time of writing, are now allocated to the Hub. Since the initial funding to Neutron was valued at approximately $500,000 at the time, funding Neutron’s development generated a 3500% “return” for the Cosmos Hub’s community pool:

\text{Return} = \left( \frac{18,000,000 - 500,000}{500,000} \right) \times 100

How much voting power would Cosmos Hub have on Neutron?

As of the time of writing, if all unclaimed airdrop tokens were staked in Neutron governance, the Cosmos Hub would represent ~50.27% of the voting power.

\text{Cosmos Hub's Share} = \left( \frac{42727950}{84954565} \right) \times 100 = \left(0.5027\right) \times 100

The Cosmos Hub’s share of the voting power could decrease over time as the circulating supply of NTRN and the total amount staked increase, unless additional tokens are acquired. Given the maximum supply of NTRN (1,000,000,000), the minimum share of voting power the Hub Community could have is 4.2%. This is extremely unlikely as it assumes that every single NTRN tokens would be bonded in governance.

Due to technical limitations on the Cosmos Hub, there is currently no technical solution to allow the Cosmos Hub to maintain ownership over the tokens while participating in Neutron governance. To address these limitations, contributors at Hadron and Timewave have developed actionable solutions to allow the Cosmos Hub to wield voting power while retaining direct ownership. These solutions are expected to be presented in separate governance proposals to the Cosmos Hub.

What are some potential use cases which could be considered by the Cosmos Hub in the short term?

There has been a number of recent discussions about productive deployment of the Hub’s treasury asset:

  • @Noam published an article detailing objectives and strategic considerations for the Hub to strengthen itself and the AEZ.
  • It was followed by actionable suggestions from @Stride, including “Deploy[ing] a meaningful amount of NTRN/ATOM liquidity to Astroport Neutron.”
  • NTRN liquidity from the Hub could be combined with Neutron’s Voting Vault architecture to provide voting power to ATOM stakers.
  • The Cosmos Hub could borrow some amount of funds on Mars on Neutron with a very high collateralization ratio to safely obtain stablecoins and other tokens which could be paired with ATOM or NTRN to complete its Liquidity-as-a-Service offering.

The design space for mutually beneficial deployments of the token is wide, which provides an exciting opportunity to future collaboration and growth within the AEZ.

8 Likes
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It’s a no-brainer to vote yes to free NTRN tokens in the Community Pool imo

5 Likes
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Looks like an easy yes.

24-9-2023
I saw this tweet, and I think it can be a better way to spend these NTRN, if we split a portion of these NTRN with validators. For their services.

2 Likes
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Free NTRN?

Free NTRN.

Yes pls.

2 Likes
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Will the vehicle contract be tested and reviewed properly?

Otherwise its a sure yes.

1 Like
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Yes, the contract will be tested and audited.

1 Like
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One idea about this proposal, since the revenues provided by Neutron to the Cosmos Hub have been negligable for many months now, why instead of just sending all this NTRN to the Cosmos Hub community pool these funds are used as revenues for the Cosmos Hub? Maybe not all at the same time but over several months?
ATOM stakers and validators were expecting revenues from Neutron, at a minimum to cover the additional infrastructure costs but this hasn’t been the case. Neutron now has an opportunity to improve this by using these ~42M NTRN as revenue for the Cosmos Hub. The community pool is already very well funded after the increase of the community pool tax from 2% to 10%, so why sending then this ~42M NTRN to the community pool instead of using it as revenue for the Cosmos Hub validators and stakers? @Spaydh

2 Likes
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In the case of the AAT is voted … why not. But I join Cosmic Validator.

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I think this is a rather short term solution to the problem of validator compensation that ends up costing more in the long term.

Both the voting power on Neutron and the idea of the Hub’s PoL being used within the AEZ are vastly more impactful to the price of ATOM in the long term than receiving these tokens as an airdrop right now. I don’t think anyone expected NTRN to be generating serious money in a bear market, under a year.

Airdropping these tokens now without any vesting would likely nuke the NTRN price btw, making any revenue coming to validators even less helpful moving forward.

But I get it. It’s a bear market and your costs are going up and you need to pay bills. So, I do think we should just get started with that increase in validator commission. I also think we need to come up with better models to make sure all validators earn enough to get by. This is something I’m posting about, likely next week or the one after (Stability Reserve Fund).

But I would highly caution against short term fixes like paying out NTRN to all validators and delegators. In the short term we have the soft opt-out option that’s available to every unprofitable validator in the bottom 5% of voting power. I believe you’re part of that group and can opt out as well.

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We made a poll on twitter which has hundreds of votes so far and the vast majority is voting to send the NTRN tokens to stakers and validators rather than to the community pool, we should also hear what the community has to say. Also, some people mentioned that it doesn’t have to be all or nothing for each case and a balance could be found. A part of this ~42M NTRN could be sent as suggested to the community pool, but other part should be used as a ‘Stability Reserve Fund’ for Neutron to provide a minimum reasonable revenue to the Cosmos Hub. This could actually be a great opportunity to try your Stability Reserve Fund idea. Why part of this NTRN isn’t moved to USDC gradually with little price impact and then this is used as revenues for the Cosmos Hub? I mean Neutron has to pay the bills to the Cosmos Hub. We funded the Neutron development, gave like 450k ATOM for liquidity of some Astroport pools, providing security for free to Neutron for months, I mean nothing is for free, they should start paying the bills.

Edit to add current results of the twitter poll:

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Of course the community decides and should weigh in. This is always the case! Though a poll is anecdotal, and on-chain votes are what really matters. I’m just voicing my opinion on the matter obviously.

I just think it’s hurting the Hub in the long term to ask for payment now. We all understood consumer chains are often an investment of time & resources in what is hopefully a good payoff. No investor that I know expected an ROI within the same year. These things take a while.

I also don’t think we can expect the NTRN token holders to agree to these tokens being paid out directly to validators and delegators (and subsequently likely being sold on the open market).

2 Likes
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I would like this proposal to pass as it is so that Neutron can fulfill their agreement that was defined in prop 792.

Certainly, afterward, we can have a conversation about what to do with the funds in the community pool.

2 Likes
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Honestly? This makes perfect sense

1 Like
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I think it makes even more sense looking at the data released by Numia. In the month of September, Neutron brought to ATOM stakers and validators a total of $335 in revenue, and some people asked on twitter if $335 had a typo. Even if this revenue was not shared with stakers, and given to only 1 validator out of 180, still wouldn’t even be enough to cover infra costs for running Neutron of one validator: https://twitter.com/NumiaData/status/1710458669274398995

1 Like
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Personally I would rather have the tokens on the community pool and solve the challenge of how the hub votes on neutron’s governance.

Profitability of nrtn for validators is an issue but hopefully it is only a short term issue. Selling ntrn tokens to cover those costs doesn’t feel great. The long term alignment of the hub and neutron feels more important.

Either way I think the best plan is to do an initial transfer to the community pool and then look at how best to use these tokens.

2 Likes
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The proposal has been updated to “Last Call” status. The on-chain proposal is expected to be available shortly.

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Support this. Let’s go.

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First of all this proposal is sign of great professionalism from the Neutron team, the real sign of a long term engagement with actual economic foundations.
At Govmos we propose a balanced allocation composed of

  • 30% allocation in the Neutron’s Voting Vault to avoid taking too much grip on the protocol’s governance.
  • 30% allocated to LP in the forthcoming Duality DEX with a progressive assignment over 6-12m to create a smoother entry in the market and avoid creating unfair competition against astroport.
  • 40% kept in the community pool to create a base liquidity to the AAT proposed by @Noam .

For now it makes no economical sense to borrow stablecoins, but that strategy could be an option in a more stabilized market environment with sustainable defi primitives at play. Our recommendation on that from would be to wait until the AEZ has its own lending/borrowing protocol.

2 Likes
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Has this proposal been passed yet?

2 Likes
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No,sir you go to the keplr wallet to vote.