Value Alignment Proposal: ATOM & USDN (Noble Dollar)

Hub Proposals Signaling/Text
1

Change log

  • 2025-04-04 Created initial post

Summary

This signalling proposal intends to garner the support of ATOM holders to integrate USDN into the ATOM economy via “composable yield” which allows the Cosmos Hub community to direct yield programmatically to value-accretive activity.

Background

Noble has been a critical part of the Cosmos ecosystem since our inception in March, 2023. We have brought billions of dollars of transaction volume of native stablecoins to the Cosmos ecosystem, including Circle’s USDC, and most recently Noble’s own yield bearing stablecoin, USDN. Currently, Noble accounts for ~40% of all inflows to the Cosmos ecosystem.

Noble’s mission is very simple: to empower blockchain developers to build scalable applications by providing seamless and safe access to native stablecoin liquidity. In the last year, Noble facilitated over $6.5 billion in volume in the Cosmos ecosystem.

Most recently, we launched Noble Dollar ($USDN): a USD-pegged stablecoin collateralized by short-term U.S. treasury bills via the M^0 Protocol. USDN currently yields an estimated 4.2% APR with over 55 million USDN currently issued and outstanding on Noble. We expect IBC functionality to be available for USDN in the next few weeks and, as part of this rollout, we want to bring USDN to the Cosmos Hub in a way that promotes ATOM value accrual and alignment.

The Interchain economy continues to grow, with new appchains launching every month, and seamless interoperability among appchains via improvements to IBC, such as IBC Eureka. Very importantly, the Cosmos Hub DeFi community is only now starting to emerge as a viable ecosystem of many applications, all powered by ATOM. In this proposal, we seek to inspire the ATOM community to take a bold step in adopting a plan for ATOM value accrual leveraging the unique and composable properties of USDN.

Proposal Details

Integrating USDN into the ATOM economy is the most effective means of distributing yield to important ecosystem constituents - chain builders, validators, end users and token holders - with ATOM alignment. USDN’s product is “composable yield” which allows the Cosmos Hub community to direct yield programmatically to value-accretive activity. This leads to a virtuous flywheel where ATOM value benefits from initial USDN liquidity, setting the stage for increased ecosystem investment (or a wealth effect) that attracts more USDN liquidity and in turn more value to ATOM.

In the next few weeks, Noble will launch IBC functionality for USDN. As a result, any Cosmos blockchain can leverage USDN, a composable yield stablecoin, for its ecosystem and direct native yield in a flexible and programmatic way. For the Cosmos Hub community, we propose that yield derived from USDN held on the Hub directly benefits ATOM stakeholders. In this proposal, we will outline three potential methods for achieving this:

  1. Direct USDN yield to a distribution module

Any yield accrued from USDN on the Cosmos Hub is directed to a distribution module that automatically directs yield to ATOM stakers. If approved by the community, the Noble team would work to implement this distribution module to this specification.

  1. Use USDN yield for continuous buying and burning of ATOM

Any yield accrued from USDN on the Cosmos Hub is used as part of a regular auction to buy and burn ATOM. If approved by the community, the Noble team would work to implement this model into an ATOM-aligned DEX.

  1. Create a limit order for ATOM below a market price threshold to buy and burn ATOM

Any yield accrued from USDN is used to open a limit order for ATOM at a price that is below the prevailing market (e.g., a 20% discount). This would entail the implementation of a system in which purchase liquidity is mobilized to provide downside protection during periods of market turbulence, with the added benefit of burning those ATOM that are sold at prices incongruent with the broader market. This option provides a more novel mechanism for coordinating benefits to ATOM stakeholders from USDN yield. If approved by the community, the Noble team would work to implement this model into an ATOM-aligned DEX.

Conclusion

We strongly believe that an ATOM value accrual mechanism from USDN yield will be value enhancing for Cosmos Hub stakeholders and further supports reinvigorated enthusiasm for ATOM and the Cosmos Hub. USDN is a product that the Noble team has been working on for some time and we are excited to finally bring the benefits of USDN in a way that promotes ATOM alignment via the flywheel that brings increased liquidity, growing application activity and large value accrual to ATOM stakeholders.

Forum post link

IPFS link

Governance votes

The following items summarize the voting options and what it means for this proposal:

YES - You approve the proposal to bring value accrual to ATOM from USDN yield.

NO - You do not approve the proposal to employ adoption of USDN by the Cosmos Hub to bring value accrual to ATOM from USDN yield.

NO WITH VETO - You indicate that this 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.

Abstain: You wish to contribute to the quorum, but you decline to vote either for or against.

17 Likes
2

This is a very well thought out proposal, congratulations to the Noble team for this!

My only recommendation would be to suggest something other than a burn for the accrued ATOM, at this stage. It may make more sense right now to put that ATOM to work in various DeFi functions, to help grow the ecosystem. It may make sense to explore burning ATOM at a later time when emissions/inflation reduce etc.

Love the ATOM alignment overall!

Sincerely
Hesham
Elys Network

8 Likes
3

Thanks for the discussion @Noble.

I do have one question to make sure I understand what we’re talking about here.

Does it mean that any USDN IBC-ed to the Hub will not receive yield directly (users won’t be able to claim), but the Hub itself will receive the yield, and this proposal is for the Hub community to decide what we’d like to do with usdn rewards when sent to the Hub via IBC?

And by extension, if usdn is later routed via IBC Eureka, through the Hub, then the Hub would still receive the yield for all those usdn?

Thank you.

Regards,
arlai

4 Likes
4

I’m a big fan of option 3. A below market limit order.

We’ve seen a bunch of attempts to align USD yield with a token. Putting them in staking reward like DYDX. Burning tokens like Osmo.

None of them have resulted in positive price performance for the token.

I don’t think anyone has really figured out the right formula for aligning cash flows with a token.

Having liquid reserve that buys ATOM during market crashes would be a unique new way to align the cashflows with the token and could create a positive relationship between atom staking and USDN adoption.

3 Likes
5

Using some USDN revenues to benefit ATOM somehow does make sense, but choosing not to pass through some portion of these revenues to applications building on the Cosmos Hub seems like a pretty big miss here.

Application teams on the Cosmos Hub will bear a pretty significant opportunity cost by prioritizing USDN over something like USDC in the form of diminished usage for their protocol (for the cross-chain native ecosystem the Cosmos Hub intends to become, capturing cross-chain stablecoin flows will drive a large share of activity). ATOM-alignment alone probably will not be a sufficient incentive to convince those teams to take such a big loss in utility, and if they do, the nascent Cosmos Hub defi ecosystem will be worse off for it, hamstringing the potential volume flowing through the Hub’s ecosystem before it even has the chance to get off the ground.

If some of the revenue was passed through to these apps instead, it could be utilized to increase usage overall and drive far more USDN TVL than the app would otherwise be able to do. For example, an ATOM-aligned DEX could redirect a portion of the USDN yields as external incentives on USDN and Eureka liquidity pools, which would both make the DEX more attractive overall for LPs and greatly increase overall USDN usage on the hub.

I’d propose something along the lines of 50% to buy back ATOM, and 50% to Cosmos Hub application teams proportional to the app’s USDN TVL on the Hub, although a larger share to app teams down the line may make more sense to encourage more teams to launch on the hub.

Overall sending the yields to stakers seems like the worst option given how sticky staking is currently, and the Hub should be actively encouraging folks to migrate into its new defi ecosystem.

6 Likes
6

Great proposal! Love to see it.

Agree with Zaki, it’s a really interesting concept to hav reserves to buy Atom in Bad Times.

7

Good proposal but, who decides when there is a market crash?

1 Like
8

In full support of this alignment initiative. Looking forward to seeing more community thoughts on ensuring the approach is sound.

9

Thanks for this proposal.

I think the reality is, before the DeFi ecosystem on the Hub kicks off, it’s really hard for us to know where we should put this yield.

Also, I am a little confused on what exactly we’re voting on here - is it a parameter change? Is it a decision on how to use this yield, that the ICL would then need to encode? How does that all work?

We’re days away from launching Eureka, and a couple months away from having a permissionless VM on the Hub to deploy a bunch of new, extremely exciting applications natively on the Hub. A bunch of applications are pivoting to building on the Hub given the distribution power and programmability of Eureka, and the adjacency to ATOM.

Once it’s live and we see how those applications are doing, I think we’ll have a better sense of how to use this yield. I see arguments for using it to buy & burn ATOM, pouring it back into the chain as liquidity, and using it to reward/incentivize Cosmos Hub builders. I’m not sure what the right combination is at the moment.

For now, I think the USDN yield should continue going to its holders. I think this will help adoption of the token on the Cosmos Hub and elsewhere. I think this proposal should be scoped to enable a Hub-governance-controlled address to change where that yield accrues, so that we can update it in the future once we have a defined plan.

I really love the ideas here, and once we ship Eureka and the Hub permissionless VM, let’s chat more about what the best options are.

Mag

13 Likes
10

Specifically to enable USDN over IBC, the Noble needs to send the yield somewhere. Each chain that gets enabled for USDN needs to indicate to Noble where to send the yield. The goal of the proposal would be to indicate to noble the yield should be held on behalf of future benefit to atom holders.

1 Like
11

Ok, so right now should we say: just send the yield to Cosmos Hub gov module address, so governance can later decide what to do with it?

Anyway, at the moment, I don’t see any incentive to hold USDN on the Hub, as you would forfeit your yield basically and give it to the Hub?

1 Like
12

Yeah I’m generally curious to understand the incentive model behind USDN over IBC. What’s the benefit for users compared to USDC if yield is given to the protocol?

5 Likes
13

I have the same questions as @arlai-mk and @Noam, I don’t see the interest for the USDN holder. I imagine that the objective is to create a cost of the IBC transfer on another chain in favor of this chain (here the HUB) and to leave the yield to holders who remain on Noble maybe. I think that this cost should not be the entire yield of the holders otherwise there is no more interest in holding USDN on an other chain. A balance must be found, 100% of the yield is too much if you want adoption on the hub, maybe at least leave 50% to 80% to the holders.

Why not also create a mathematical function, the more adoption there is in USDN on the HUB the more the yield to holders decreases in favor of the HUB with a cap adjustable by governance.

Otherwise, I also agree that directly granting these revenues to stakers or burning atoms is not the right thing to do. I am more in favor of accumulating these revenues in the community pool and waiting for a real need.

1 Like
14

I find that very interesting.
If I understand correctly, USDN tokens transiting through the Hub to Ethereum would accumulate yield for the Hub?
I still don’t really see why USDN without yield would be used instead of USDC.
In addition to distributing yield to Hub holders and future Hub applications, maybe the Hub should also route a portion of the yield to those holding USDN on Ethereum — in the same way Noble would route the yield back to the Hub?

1 Like
15

Excited to see Noble alignment with Atom value accrual.

LFG

16

I don’t want the proceeds to be sent to the DAO or a certain pool. I hope it can directly repurchase ATOM and destroy it. The reason is that this is good for the ATOM price. If we put all the proceeds into a certain fund pool, we don’t know what these funds will be used for. Maybe they will be used to support some insignificant ecological project, and they may be wasted in the end. I hope to see an immediate effect, that is, to repurchase ATOM, which at least will not be wasted. Over the years, various funds of the ATOM ecosystem have been abused, and no returns can be seen after investment. Using it to repurchase ATOM at least has an immediate effect. In addition, in web3, pulling the market is justice

17

The more people hold USDN, the lower the returns for holders. Are you trying to prevent large-scale use of USDN? In this way, USDN will never exceed USDC, because after reaching a certain scale, continuing to hold USDN will no longer be profitable.

18

The ATOM community certainly supports Noble’s value alignment, but we are worried that when the USDN income is transferred to the HUB, where will the income of USDN holders come from? If there is no income, why not use USDC? Only when USDN is everywhere, it seems reasonable to use non-yielding USDN instead of USDC

1 Like
19

I completely understand the concern, and I think a buyback in ATOM is a very good idea as long as the funds are allocated properly, which, I agree, hasn’t always been the case. I also think Rob’s incentive idea is a viable option once there are actual products available on the Hub, which is not yet the case.

That’s why I want to create a reserve first, probably to be used later for economic incentives to encourage the use of the Hub’s products and USDN.

I also understand that USDN holders are concerned about seeing their revenue almost entirely redirected to the Hub just as they leave the Noble chain. I believe this proposal is probably driven by current US regulatory constraints. It should be up to the Hub to decide what tax it wants to apply and how to use it. And I completely agree that if the tax is too high, there will be no incentive to bridge USDN to the Hub. That’s precisely why I was considering a mathematical function to allocate resources based on real demand and market conditions. But once again, I agree with you apart from regulatory aspects, I don’t see why USDN holders should give up their yield almost entirely.

2 Likes
20

Very interesting proposal!

We will support this proposal.

Integrating USDN with programmable yield distribution is a great idea to increase ATOM value and help grow the Cosmos Hub ecosystem. All proposed mechanisms (yield distribution, ATOM buy and burn, limit orders) seem beneficial for long-term support and growth.

We especially support the option to use USDN yield to buy and burn ATOM, as it directly reduces token supply and strengthens the market.

Thank you to the Noble team for this initiative.

2 Likes