Our Thoughts and Background on the Neutron X Duality Proposal
A few weeks ago we reached out to Timewave Labs to collaborate on some product directions and research we had been working on with respect to using the Duality DEX module for treasury management. From there, we began conversations with the goal of figuring out how we could collaborate with one another.
We shared a concern with many Neutron stakeholders - our visions and goals overlapped immensely which could lead to infighting instead of working together, something that would not be beneficial to the burgeoning, but still nascent ATOM Economic Zone.
The vision we shared in our preliminary proposal on the Cosmos Hub forum has not changed in the slightest. We outlined four major goals :
- Growing the Pie : The emerging ecosystems around the Cosmos Hub and the rest of Cosmos will be in the best position to succeed if we put our energy into collaboration, not conflict.
- Liquid Staking Tokens : Liquid staking tokens will unlock an unprecedented level of capital efficiently not previously seen in Cosmos due to most value across the ecosystem being locked in staking for security.
- Unlocking On-chain Exchange : Today CEX volume dominates DEX. If FTX showed us anything it’s that this needs to change - exchange should be done on credible, verifiable venues, not on misaligned, centralized databases.
- Optimizing Interchain UX : IBC is a powerful tool for interoperability at Cosmos’ disposal. It’s a major part of what sets being a Cosmos chain apart from other stacks.
Throughout our initial conversations, the overlap in our visions become more apparent. Neutron’s alignment with those goals :
- Growing the Pie : The Neutron DAO has funded a grants program for the growth of the ATOM Economic Zone, and contributors have presented plans to bring liquidity from other ecosystems into Cosmos and strengthen public good funding in the ecosystem.
- Liquid Staking Tokens : Stride’s liquidity injection of ~$4 million ATOM into stATOM liquidity pools on Neutron and Neutron’s relationship with Lido, position them very well to expand liquid staking tokens and their use cases throughout Cosmos.
- Unlocking On-chain Exchange : The first and most popular application deployed on Neutron has been Astroport. The close partnership between the Astroport and Neutron communities, signals a strong desire to push on-chain exchange and DeFi as far as it can go.
- Optimizing Interchain UX : Neutron is improving interchain UX dramatically through the introduction and prioritization of ICAs and ICQs. They have also outlined plans to work toward improving interchain UX between Cosmos blockchains and rollups.
It was also clear that we shared many of the same beliefs on the future DeFi, DAO management and tooling, where Cosmos fits with rollups and values. After a few discussions we decided to shift focus on discussing what a closer partnership might look like and how that aligns with the vision we set out to realize.
It quickly became clear that deploying the Duality DEX module on Neutron would be push us both closer to our goals :
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Growing the Pie :
a. Instead of spending time and energy competing for the limited liquidity and resources within
Cosmos, teaming up with Neutron will allow us to focus our efforts on bringing in new users. At the end of the day our real competition should not be other chains or rollups, it should be to bring more liquidity on-chain.b. This is a reduction of $500,000 to $1,500,000 in yearly costs for the Hub compared to if we had launched as an independent ICS chain - without removing Duality from AEZ. Capital freed means more freedom to pursue additional growth-driving endeavors.
c. The Hub and Cosmos gain upside from the growth Duality through increased transaction and MEV revenue share from Neutron, and any impact on the future value of the >40,000,000 NTRN tokens to be received by the Cosmos Hub from the Neutron airdrop (not financial advice !)
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Liquid Staking Tokens :
a. Working competitively would fragment LST usage within the AEZ. For example, the liquidity injection in our ICS chain proposal would fragment stATOM <> ATOM liquidity within the ATOM Economic Zone, leading to worse execution for traders, more complex integrations and more expensive routing. Combining efforts improves the positioning for LST adoption within the AEZ.
b. LST liquidity managed within the Duality DEX module will become synchronously composable with other apps on Neutron, enabling rehypothecation, flash loans and more advanced strategies for Lido and Stride’s assets. This will make liquidity much easier to access and integrations more powerful.
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Unlocking On-chain Exchange:
a. Neutron’s partnerships with Astroport, Mars, Timewave and more will be able to enhance the user experience for users of Duality leveraging synchronous composability. These partnerships and collaborations would not be immediately possible without alignment with the Neutron ecosystem.
b. Liquidity in Cosmos is still sparse and bootstrapping a successful DeFi ecosystem around ATOM and the Hub will require concentrating and optimizing the available liquidity. Deploying Duality on Neutron achieves this objective by enabling all of the liquidity in the AEZ and all of the liquidity in the various dApps on Neutron to be concentrated and made available to the entire ecosystem via a unified optimized repository, making the AEZ a prime trading venue in the ecosystem.
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Optimizing Interchain UX :
a. Limiting liquidity fragmentation within the ATOM Economic Zones, improves execution prices and reduces latency and bridging costs.
b. Duality Labs also has experience building bridges (our co-founder and CTO was a lead developer on tBTC, the first decentralized Bitcoin bridge) and with rollups (we were the first external team to deploy a Cosmos SDK rollup on Celestia testnet). Paired with Neutron’s team and resources we will be in a great position to grow the ATOM Economic Zone’s role in improving rollup bridging as well through rollup settlement, ICAs, and ICQs on Neutron.
For those that have been wondering why we pushed the on-chain proposals and launch dates, it was because we wanted to explore this opportunity before moving forward. We feel that this is a great opportunity to continue aligning with the Hub and Cosmos, while drastically increasing our ability to ship products that people will love.
Link to the Neutron proposal:
If you have any questions or thoughts feel free to reach out on the forum or on our Twitter dms.