We think $5.7m is a great motivator for Hypha and Informal to allocate time and resources to resubmit a second proposal. We have a lot of respect for the due diligence done by everyone here, but we still cannot get over the fact that we are spending quite a bit and allowing for a profit margin and bonuses at times where many are bleeding and finding it difficult to recover from red figures this year.
We need to move forward, at the same time we’re not pressed for time. The continuity of development is crucial and the Atomic IBC is important.
The vote is poised to pass, all I can ask for is for the teams to respectfully forgo the bonuses, if not have the committee set a really high bar for awarding bonuses. The 7 USD spot pricing is also odd vs. a more typical 30-day TWAP in grants that we’ve seen. The recent price bump is likely a bonus in itself if it holds for the year.
Separation of duty is difficult, and talents may or may not be scarce. Leaders who stepped up to take on leadership roles can face these challenging questions which we hope can be clarified sooner than later in the future.
For these reasons, we’ll vote to Abstain which effectively contributes to the quorum. We haven’t received many delegations to be a major validator, no matter how we run secure and upgraded hardware or voice our opinions here, but we hope in the future to be able to help contribute at the start of any proposals at this scale regardless of being entrusted with more delegations.
We’re torn about how this is set up while agreeing that the advancements by Informal and Hypha are important for Cosmos. We believe we can handle future contentions which can be arbitrated with more context in meaningful conversations rather than escalated via spontaneous penmanship.
Meant to say it’s a huge budget allocation ask, hence it should be highly motivating for Team Hypha and Informal to send in a new request, instead of saying “we lack resources to submit a new proposal”… we’re disappointed when we hear that.
It’s not motivating when you feel entitled to it.
So if you want them to feel the sufficient motivation to resubmit, KysenPool should vote NWV rather than abstain.
Voting No/Abstain at this stage is basically voting Yes.
If you want to express dissent in your vote, there’s only one vote.
I’d like to address these two points. The bonuses are to be awarded by the oversight committee only if we receive an overall grade of “exceeds expectations”. These grades are decided unanimously by the committee, and if even one member doesn’t feel that we exceeded expectations, then I’m guessing they will default to “meets expectations”. So I think it’s unlikely that we will get them unless everybody is really thrilled with a quarter.
On the liquidation and the buffer, we are covering upside and downside. We will only receive $4M USDC + $1.7M worth of ATOM from the main budget (excluding the bonuses), no matter what the price is. That means that if the price is $10 when this is liquidated (just to make the math easy), the liquidation multisig would sell 400K ATOM for USDC, and keep 170K ATOM for the main budget, resulting in a total spend of 570K ATOM, with the rest sent back. Of course the price probably won’t be $10, so the numbers will be different.
In retrospect, with how the markets played out, it would have been very advantageous for us to simply have requested the budget in ATOMs at a TWAP price of around $6.75 or whatever. We would have avoided having to explain the complicated buffer situation to everybody, and we would have ended up with a big surplus from the recent price rise. But I am happy with how it is because we are really only requesting what we need, in dollar terms.
In the future, teams will use @Noam’s DRIP mechanism, which will stream ATOMs over the course of the work, adjusting the amount for current prices. This will make things a lot simpler.
If the inflation cut proposal passes (Min Inflation to 3.5% and Max Inflation to 10%) and I think it will pass rather overwhelmingly unless Jae is able to put together a ATOM 2.0-like veto vote which I don’t think he will, ATOM will be trading north of $15 next year. So in dollar terms, the amount of compensation you are getting will be double what you are planning for today.
Obviously if you are a trader don’t take my word for it and trade this because I don’t know jack, but I, in the role of a CFO/budget manager, would be making these assumptions.
The liquidation multisig has processed the ATOM-USDC liquidation. This is the transparency report on the process including links to multisig addresses, transactions, and details of the OTC deal obtained.
The proposal text quotes 814,285.71 ATOM to account for the full $5.7M budget, plus a 25% buffer, bringing the total community pool spend in the proposal to 1,117,858.14 ATOM. This liquidation process has used 425,986 + 181,043.66 for a total of 607,029.66 ATOM. All excess ATOM (410,829.18) has been returned to the Community Pool. Given the upwards price movement during the voting period of the proposal, the 25% buffer was not touched, and the $5.7M + 100k ATOM budget used up 12% of the community pool, not the 20% quoted in the proposal.
Important notes
The following multisigs are used throughout this process:
All multisigs used in this process are controlled by a ⅗ threshold of the validators identified in Proposal 839:
CryptoCrew
SimplyStaking
Stakecito
Stakin
Citadel One
The price used to do all ATOM-USD and ATOM-USDC calculations ($9.39) is the price received on the OTC trade. This price, which was quoted by the Kraken OTC desk, was 3.5% lower than the spot price on the exchange at the time of liquidation (around $9.75) given the size of the transaction.
This process can be observed in block explorers beginning at 2023-11-13 17:00 UTC and ending at 2023-11-13 20:00 UTC. Any transactions prior to this timestamp are from the creation and testing of the process. Minor transactions afterwards may be part of further testing between now and the next stage of the liquidation process.
Stage 1: ATOM to USDC
Beginning with 1,117,858.14 ATOM available in the multisig, the following steps were taken to liquidate $4M worth of ATOM (accounting for 70% of the $5.7M budget):
Prefunded a Kraken account owned by Informal Systems with 500k ATOM. This step is necessary to secure an OTC bid of this volume.
Secured a bid for trading 425,986 ATOM for 4,000,000 USDC tokens using Kraken’s OTC desk. This equates to a per-ATOM price of $9.39 USD. This price will be used for all further calculations.
Returned any unused ATOM from this trade to the Hub multisig.
This left the Hub multisig with 691,872.84 ATOM remaining.
Stage 2: Returning ATOM to Community Pool
With 691,872.84 ATOM left in the Hub multisig, the following steps were taken to reserve $1.7M worth of ATOM (accounting for 30% of the $5.7M budget) and the 100k ATOM bonuses:
Calculated the ATOM to reserve for the budget (i.e. $1.7M USD worth of ATOM).
At a price of $9.39, this equated to 181,043.66 ATOM.
Including the 100k ATOM bonus, this means that a total of 281,043.66 ATOM will remain in the Hub multisig.
Subtracting 281,043.66 from 691,872.84 means that 410,829.18 ATOM should be sent back to the Community Pool.
Transfer Ethereum-based USDC to the Noble multisig to get Cosmos-based USDC.
Transfer Cosmos-based USDC to the Hub multisig.
Stage 4: Create final vesting wallets
Informal budget: 3.16M USDC + 143,024.49 ATOM
Informal bonus: 79k ATOM
Hypha budget: 840k USDC + 38,019.17 ATOM
Hypha bonus: 21k ATOM
Some constraints and information on the next steps:
The Ethereum-to-Noble transfer will use CCTP, which is expected to be available on November 28.
All Ethereum gas fees are paid by Informal Systems.
Vesting is intended to begin on December 1, 2023. At this time, the Ethereum-to-Noble and Noble-to-Hub transactions will be processed.
Vesting wallets must be empty before receiving funds in a single transaction. This will be done in December and the addresses will be disclosed in the next update.
Gas in Cosmos is negligible and will not be reported, but is clearly visible in linked transactions.
Thanks for the transparency. But what are the plans for this 30% left in ATOM of the $5.7M budget? If this is sold later and ATOM price is much higher, will the same process be done with a return of ATOM above the 30% dollar value? For the 100k ATOM bonus it is different and understandable to keep it as ATOM
The 30% of ATOM will be placed in the vesting wallets alongside the USDC budget portion. Part of the design was to hold a portion of the budget in ATOM for values alignment, since the budget is guaranteed (subject to adequate performance) but the bonuses are not.
The liquidation multisig completed the final phase of liquidation on November 30th by completing stages 3 and 4 that were previously remaining. We are sharing the work done during this phase to provide transparency to the community.
Important notes
As before, the following multisigs are used throughout this process:
All multisigs used in this process are controlled by a ⅗ threshold of the validators identified in Proposal 839:
CryptoCrew
SimplyStaking
Stakecito
Stakin
Citadel One
Funds in final vesting accounts are controlled by the teams but unvested amounts can be clawed back by Cosmos Hub governance through a software upgrade. The final vesting accounts created are as follows:
3.1 Get USDC from the multisig wallet on Ethereum to the multisig on Noble
USDC 4M were transferred from the Ethereum multisig to the Noble multisig over multiple transactions using CCTP, one of which was a test transaction. The CCTP contract used can be seen on Etherscan. The following are the transaction hashes:
Transaction for Informal budget for USDC 3,160,000 and 143,024.478479 ATOM
The vesting period for above accounts is 365 days and ends on November 30th, 2024. During this period the tokens are unlocked linearly.
Notes:
The ~0.02 ATOM discrepancy between target ATOM in Informal’s budget as stated in our last report and the actual final ATOM amount placed in the vesting account is due to gas costs
There was a small fee (~USDC 5) taken off the USDC amount when transferring over IBC from Noble to Cosmos Hub. This was refunded by the Noble team on the Cosmos Hub side
We want to thank John Letey and the rest of the Noble team for their support during the process.
