Changelog
2025-03-19:
- Updated governance votes language to clarify the scope of the proposal, namely Neutron’s migration to a sovereign network and the allocation of NTRN.
- Clarified that the Cosmos Hub’s decision on whether or not to enable permissionless smart-contracts is a separate matter that will be handled in dedicated governance votes.
2025-03-26:
- Added commitment from the Neutron Foundation to return 50,000 ATOM received from Proposal 72 to the Cosmos Hub Community Pool.
- Added signer details and multisig addresses
Introduction
Cosmos Hub has evolved tremendously over the past few years.
As the Hub adopts a new stewardship and vision, centered around the creation of a native ATOM ecosystem and provisioning of interchain services, there is a unique opportunity to reassess the Hub’s legacy products and focus all resources on delivering a coherent vision for the Hub.
Neutron has always been a pioneering partner of the Cosmos Hub. When the Hub doubled down on Interchain Security (ICS), Neutron became the first project to bring the technology to market.
Today, as the Hub refocuses on building a native ecosystem on the Cosmos Hub and bridging services rather than Replicated Security, we propose to evolve the relationship between Neutron and the Cosmos Hub in order to create favorable conditions for a mutually supportive relationship moving forward.
Background
This section is intended to provide factual background information that is relevant to the broader proposal.
A brief history of permissionless smart-contracts on the Hub
Cosmos Hub governance initially rejected the launch of permission-less smart-contracts on the Hub as part of Proposal #69, deeming the technology too risky and incompatible with the Hub’s desired minimalism. At the time, the preferred path was to enable permissionless smart-contracts via a consumer chain, enabling Gaia to stay minimal while bringing developers and use cases in close alignment with $ATOM.
Core Cosmos Hub contributors at Informal Systems began searching for the right team to build a DeFi ecosystem around the Hub. P2P contributors proposed to build Neutron, the Cosmos Hub’s execution environment, which was approved by Cosmos Hub governance via Proposal #72.
The team subsequently spun-out of P2P to form Hadron Labs and the Neutron Foundation and develop the network, which launched on ICS on May 10th, 2023 as part of Proposal #792.
The Cosmos Hub community reconsidered its stance on permissionless smart-contracts on the Hub multiple times, with visions differing from permissioned CW to enable faster iteration of governance to acquiring and merging with Osmosis or building a “DeFi App Store” on the Hub.
Most recently, the Interchain Foundation acquired Skip to form Interchain Labs, which took over the maintenance of the core stack and Cosmos Hub.
Interchain Labs began working on a clear, unified vision for the Cosmos Hub, that of a central Hub for the IBC ecosystem, with Eureka routing and bridging products and permissionless smart-contracts on the Hub.
While this is an exciting vision, it is at odds with the historical expectations Neutron and the Cosmos Hub’s relationship was built on, and so it’s a good opportunity to revisit how things should be reshaped moving forward.
Background on Replicated Security
Replicated Security launched on Cosmos Hub following Proposal #187. Neutron was the first network to launch on the feature, following Proposal #792. Replicated Security was meant and advertised a simpler way for projects to launch in the Interchain while benefiting from increased ATOM alignment before they eventually graduate to sovereign networks.
Many Cosmos Hub validators proved extremely supportive and valuable to the project early-on. More than 35 validators opted to run Neutron despite not being required to thanks to the Soft Opt-Out feature.
The history of Replicated Security was also marked with a flawed economic model which disincentivized validators from investing time and resources into consumer chains, and with a number of technical challenges:
On the day of Neutron’s planned launch, Hypha and Informal identified a bug in the Cosmos Hub’s ICS code. This bug prevented validators that used ledgers from performing key assignment. This dramatically impacted the launch and resulted in an extremely painful, 48 hour-long process.
Since then, there were multiple instances of >12 hours downtime after correct instructions were distributed by the Neutron core teams to the validator set. In the latest instance, which occurred on January 13th this year, downtime lasted more than >19 hours after correct instructions were distributed. The specific sequence of event is documented in the post mortem here.
These incidents significantly increased risks for DeFi protocols in the ecosystem and hampered the project overall.
Background on the Hub’s community pool NTRN
In proposal #792, Neutron offered to allocate 7% of its genesis supply to an airdrop to ATOM holders. The initial proposal planned that unclaimed tokens would be clawed back by the Neutron DAO and used to growth the Neutron ecosystem and $ATOM use cases on the platform.
Following the proposal, contributors from Informal Systems, AADAO and other Cosmos Hub-adjacent teams lobbied in favor of updating the proposal such that the NTRN would instead be sent to the community pool.
Neutron contributors eventually accepted the change as an upfront payment for the Cosmos Hub’s economic security and overall support through ICS for the coming decades.
As part of Proposal #835, 42,727,950 NTRN tokens were transferred to the Cosmos Hub community pool and rough guidelines for how the tokens should be handled were approved by Cosmos Hub governance:
- 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.
- 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.
Since then, two distributions of NTRN from the Cosmos Hub community pool were approved:
- Proposal 867: 1,800,000 NTRN were distributed to Cosmos Hub validators for running Neutron nodes
- Proposal 931: An additional 360,000 NTRN are earmarked to be distributed to Cosmos Hub validators who ran the Slinky sidecar successfully over the first 3 months of the oracle’s launch on Neutron mainnet.
These showcase a good faith effort to find fair allocations of the NTRN from the community pool that are both cooperative and not harmful.
Rationale
There have been a lot of changes since Neutron launched on Replicated Security and NTRN was airdropped to the Cosmos Hub community: Replicated Security is being deprioritized, the previous maintaining team of RS is no longer being funded, and plans are being made to enable permissionless smart-contracts on the Cosmos Hub to build a local ecosystem around $ATOM and Eureka, etc.
This is a unique opportunity to lay the foundations for mutually beneficial relationships going forward:
The Hub no longer needs an execution environment, and wishes to deprecate Replicated Security. Neutron has sufficiently matured to become an ecosystem of its own.
Therefore, the best path forward is for Neutron should migrate off of Replicated Security and to its own sovereign network.
The Hub will no longer be providing the services it was granted NTRN for, and former Cosmos Hub contributors generally overpromised and failed to deliver on their commitments to the project (e.g., replicated security being no longer maintained, frequent discussions of acquiring or merging with other CW environments, ATOM 2.0 failing, soft POL commitments changing scope). Keeping such a large portion of the token supply in the community pool is bound to generate risk and conflicts. Leaving ICS will also generate tremendous on-going costs for the network to sustain its own security budget.
Therefore, the fair and constructive way to proceed is to distribute payment for the services rendered by the Hub so far, allocate resources to fund the network’s security budget and return the outstanding tokens for the services that were not and will not be provided to the Neutron DAO.
The following proposal achieves these two objectives and a fair allocation of tokens. It provides Interchain Labs with a clean slate to build an exciting roadmap for Cosmos Hub going forward and minimizes future friction around the allocation of NTRN. Finally, it pro-actively assigns resources for future collaboration and provides a clean way for $ATOM holders and validators to receive direct upside from the transitions.
This is an incredibly exciting opportunity to lay the challenges of the past behind us, and create excitement and support for both Neutron and the Hub going forward.
Proposal
This section describes the scope of the proposal’s executable messages and enforceable social signals.
Overview
- Support Neutron’s graduation to a sovereign network with strong synergies with the Hub
- Allocate community pool NTRN fairly to support the network’s migration and the adoption of on-chain use cases for ATOM and Hub-related assets
- Signal support for the development of differentiated and complementary on-chain ecosystems on Neutron and the Hub
- Enable continued collaboration to drive the adoption of ATOM, Neutron, and the Hub’s interchain services
See the sister proposal on the Neutron forum here: Mercury: Towards the Integrated Endgame - Main DAO Proposals - Neutron Forum
If this proposal is approved by Cosmos Hub governance, the Neutron Foundation has committed to return 50,000 ATOM received as part of Proposal 72 to the Cosmos Hub Community Pool.
Graduation to a Sovereign Network
This proposal signals support for Neutron’s graduation to a fully sovereign network via the Mercury upgrade.
From a technical point of view, the migration does not require any code changes on the Cosmos Hub side. Once completed, it will enable the removal of the Replicated Security and Top-N code from the Cosmos Hub binary. Partial Set Security will remain a feature of the Cosmos Hub.
The graduation process will require a Neutron network upgrade, dubbed Mercury, which will be scheduled via a sister proposal to the Neutron DAO.
To ensure a smooth migration, Cosmos Hub validators must continue to validate the Neutron network until the Mercury upgrade (scheduled for the 9th of April) is completed and the core teams confirm that the validator set transition has occurred properly. This will ensure that IBC channels are properly migrated and continue to operate smoothly, safeguarding user funds and protocols across the Interchain.
This proposal allocates 1M NTRN to Cosmos Hub validators as a reward for their continued service over the coming weeks to perform the network’s transition. The distribution of the rewards will occur after the upgrade is complete and will be coordinated by the Joint Committee (see below). Rewards will be conditioned upon maintaining > 95% uptime for both block production and price updates and successfully carrying out the migration.
Additionally, this proposal allocates 10.8M NTRN to fund the security budget of the network for the next 2 years and enable the continued payment of the post-migration validator set, composed of leading Cosmos Hub validators:
CryptoCrew, Quokka Stake, Allnodes, Chorus One, cosmosrescue, Cosmostation, Crosnest, Golden Ratio Staking, Hadron Labs, Informal Systems, iqlusion, Kiln, P2P, Polkachu, POSTHUMAN, Provalidator, SG-1, Smart Stake, Stake&Relax, Stakecito.
On-going validator set curation with be carried out by the Neutron DAO and Drop protocol.
Additionally, the collection of validator performance data is being finalized by Numia, and Slinky Beta incentives will be distributed shortly, as planned in Proposal 931.
New Rewards & Opportunities for ATOM on Neutron
This proposal allocates 4,272,795 NTRN to the adoption of ATOM and Cosmos Hub products on Neutron. These tokens will be distributed to ATOM token holders who participate in DeFi on Neutron via dedicated campaigns around ATOM use cases, including liquid staking, liquidity provisioning, lending, borrowing, using ATOM and its derivatives as collateral to trade perpetual futures, tributes, and more.
Once this proposal is executed, the Neutron Foundation (NF) will coordinate with ecosystem protocols to coordinate on-chain campaigns, and NTRN budgets will be allocated by the Joint Committee (see below). These campaigns will provide ATOM holders with new opportunities to use ATOM in DeFi and earn outsized rewards.
Return Excess Tokens to the Neutron DAO
This proposal allocates ~53% of the NTRN currently held in the Cosmos Hub community pool to be distributed to ATOM token holders and validators. The remaining ~47% will be transferred back to the Neutron DAO to fund the continued growth of the network and its ecosystem.
Return Prop 72 ATOM to the Cosmos Hub Community Pool
50,000 ATOM were granted by the Cosmos Hub to contributors of the Neutron Project as part of Proposal 72 and later transferred to the Neutron Foundation as part of Proposal 819. The Neutron Foundation never sold ATOM. Instead, it liquid staked its holdings with Stride, then with Drop to support the adoption of ATOM liquid staking.
In the spirit of fairness, if this proposal is adopted by Cosmos Hub governance, the Neutron Foundation commits to returning the 50,000 ATOM to the Cosmos Hub Community Pool.
Continued Collaboration
This proposal lays the foundation for the continued collaboration of the Neutron and Cosmos Hub teams and communities to create on-chain use cases and demand for the ATOM token and the Cosmos Hub’s products:
- The NF has developed deep knowledge and expertise in ecosystem bootstrapping and will be supporting Interchain Labs’ (ICL) efforts to bootstrap a native ecosystem of new, exciting protocols in and around ATOM and the Cosmos Hub.
- The continued growth of the Neutron ecosystem will drive demand for ATOM and the Cosmos Hub’s bridging, routing, and solving products, driving value to the Cosmos Hub and the ATOM token.
- The NF and ICL teams will collaborate to drive the adoption and growth of the Cosmos developer community, accelerating the growth of both networks.
Implementation
NTRN Allocations
The Cosmos Hub Community Pool received 42,727,950 unclaimed tokens from Neutron’s airdrop. The proposed allocations only concern the airdropped tokens and are summarized below for clarity:
| Item | Amount | % | Destination |
|---|---|---|---|
| Existing programs | 2,160,000 | 5.06% | Already distributed. |
| Migration coverage | 1,000,000 | 2.34% | Joint committee |
| Security budget | 10,800,000 | 25.28% | Joint committee |
| ATOM incentives | 4,272,795 | 10.00% | Joint committee |
| Future partnerships | 4,272,795 | 10.00% | Joint committee |
| Neutron DAO | 20,222,360 | 47.33% | Joint committee |
| Total | 42,727,950 | 100.00% | NA |
Joint Committee
This proposal transfers 40,567,950 NTRN from the Cosmos Hub to an Joint Committee made of representatives from both the Cosmos Hub and Neutron communities. Upon the receipt of the NTRN tokens, the committee will allocate the tokens according to the allocations above.
- 20,222,360 NTRN will be returned to the Neutron DAO
- 10,800,000 NTRN will be transferred to the validator payment module
- 9,545,590 NTRN will be retained in the committee’s treasury to fund ATOM/Cosmos Hub-related campaigns on Neutron as well as the continued collaboration of the network communities.
The Joint Committee is a 3/4 multisig on the Cosmos Hub and Neutron networks, which commands the allocation of NTRN tokens received from the Cosmos Hub community pool and is composed of the following representatives from the Neutron and Cosmos Hub community:
| Signer | Role | Address |
|---|---|---|
| Travis | Cosmos Hub Community Representative | cosmos1hpqgpfsrkqawzjjgql47rrrvkqrry49sxpda7q |
| @agent.kwosh | Cosmos Hub Community Representative | cosmos1945wsvenrnc6vu0p588jswpc56pv27l3kp0aae |
| @luisqa | Neutron contributor | cosmos1ze09kc5ackut7wc4pf38lysu45kfz3ms86w3em |
| @Spaydh | Neutron contributor | cosmos1nu7h4xj3em8mr0huh7906qdv89fnxclr7jy8wy |
The multisig addresses are the following:
- Cosmos Hub: cosmos1fl657t883v2l3s953qngd26wn49v8eddygw9rc44v5ms0cxfwk4qddhuhx
- Neutron: neutron1gxwkypgj884n2gswk3km0ck5js36eqewgx94lxv0pw45w0q6utrsgj4u50
Allocations breakdown
Honor Existing Commitments (Connect Beta + Validator Incentives)
Validator Incentives that have already been allocated to vesting contracts are slated to fully vest on March 26th, 2025.
Connect incentives remain to be distributed. We are finalizing work with Numia to provide the data required to check the validator’s performance and distribute the rewards. Once that is done, we will coordinate with the prop 931 committee signers to execute the transfer.
Fund Validator Operations Leading Up to Migration
Since the migration’s success relies on smooth validator operations, we propose to allocate an additional 1M NTRN to be distributed to validators pro-rata their voting power based on the following criteria:
- ≥ 50% participation on the last 10 Cosmos Hub proposals
- ≥ 95% block uptime on Neutron over the past 3 months, looking back from migration time
- ≥ 95% Slinky uptime on Neutron over the past 3 months, looking back from migration time
- Properly carry out the migration upgrade
Fund Neutron’s Security Budget Following Migration
To migrate from ICS, Neutron will need to bootstrap a sovereign validator set and fund its operations. Most/all of this set will be inherited from the best/most aligned Cosmos Hub validators.
Tokens will be allocated to the Base Comp mechanism to cover validator costs for the first 24 months of the network’s operations as an independent blockchain.
Fund ATOM-related Campaigns on Neutron
To sponsor the continued alignment of the projects and their communities, ~4M NTRN will be reserved for incentives/campaigns tailored to the Cosmos Hub’s assets and community.
- Liquidity incentives to ATOM, dATOM, and other Cosmos Hub assets
- Incentives to cover the opportunity cost of converting from native staking to liquid staking
- ATOM spot and perps trading campaigns
- Other ATOM-aligned campaigns
Allocation for Future Joint Ventures
Tokens earmarked to support future joint ventures benefiting both ecosystems, such as supporting the growth and adoption of Cosmos, joint hacker houses and hackathons, etc.
Return Excess to the Neutron DAO
The remainder will be returned to the Neutron DAO Treasury.
Governance votes
The following items summarize the voting options and what it means for this proposal:
YES - You support Neutron’s migration to a sovereign network, the proposed allocation of Community Pool NTRN, and the return of 50K ATOM from Proposal 72 to the Cosmos Hub Community Pool.
NO - You disagree Neutron’s migration to a sovereign network and/or the proposed allocation of Community Pool NTRN.
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.
ABSTAIN - You wish to contribute to the quorum but you formally decline to vote either for or against the proposal.