What do we do with the Neutron airdrop?

Soooooo, we just got ~32m USD airdropped into the Hub’s Community Pool account. What do we do with this? I was hoping we could use this thread to discuss a few ideas. We have some rules to stick to: • Do no harm to Neutron • Use the tokens to benefit both the Hub & Neutron We don’t have to make any decisions right now, but I think it’d be good to explore a few options. Before we get everyone to jump in and say “airdrop it to ATOM holders!!!” , let’s cover the math on that for a second. There are currently ~243m ATOM tokens staked, and we received ~42.7m NTRN tokens. That amounts to ~0.17 NTRN per ATOM, or at current prices, roughly $0.13 for each ATOM you own, which is kinda like earning ~1% interest on your ATOM. I personally think that wouldn’t be the best use of this money. Furthermore I think something like this breaks the rules laid out in prop 835 , the ones I quickly summarized above. So what can we do? Four things come to mind: • Use some of it for Liquidity-as-a-Service : we have a chance to increase NTRN / ATOM liquidity on Astroport, Osmosis and other DEXs. More liquidity = more frictionless economy in the AEZ. This also ties into the ATOM as interchain…

Excerpt (1197 of 2872 characters). Read the whole post on the forum ↗

Noam:

Use some of it to pay validators

This is a good idea. I’d argue we need to turn off the opt-out if we go this direction, though. Otherwise, what are they being compensated for?

Good point. Could just pay out only to those who run Neutron nodes for example.

NTRN/ATOM liquidity pools and then in about 18 months start to convert to USDC. Fund the smallest validators with the fees generated from LPing. No grants.

Noam: Use some of it to pay validators : a common concern with consumer chains right now is that the operational costs that validators incur aren’t being covered by the revenue generated. We could set aside a portion of the NTRN tokens and set a time period (3 years?) in which we pay out a flat fee to each validator in the active set. If we were to aim for $500 a month per validator, we’d end up with a total cost of 3.24 million USD over the course of 3 years. Something I think is quite manageable. An idea of what to do with part of the NTRN token similar to this one has been discussed already before with @jtremback and he was actually planning an on-chain proposal about this: CHIPs discussion phase: Optimizing ICS reward distribution with per-chain commission - #6 by jtremback I agree about the same amount for each validator, since the costs are similar for all validators. The specific amount needs to be discussed, and whether this is just for Neutron costs or for other consumer chains. Potentially, the top ~50 validators could be excluded and a higher amount given to the rest of validators. The top validators have large revenues, more than enough to cover consumer…

Excerpt (1197 of 1948 characters). Read the whole post on the forum ↗

I think this is timely conversation and will go ahead and do a brief brain dump : First and foremost, relationships are repeated games and as such it’s in the Cosmos Hub’s best interest to use it’s NTRN in a way which is long term aligned with it’s own interests - growing ATOM as money and the success of ICS - which were what led to the airdrops reception in the first place. Thinking about this as a repeated game makes me weary of anything that can be viewed as adversarial since 1) it’d discourage future participation in ICS and the AEZ and 2) it’s directly against the ‘no harm’ clause that was specified as part of the transfer. Now some more specifics. • Use some of it for Liquidity-as-a-Service : we have a chance to increase NTRN / ATOM liquidity on Astroport, Osmosis and other DEXs. More liquidity = more frictionless economy in the AEZ. This also ties into the ATOM as interchain Money narrative. Stride made an interesting proposal on how to approach this and what the benefits would be here . If Neutron is willing, I think we could figure out a mechanism where the LPed NTRN tokens would allow the Hub to maintain its voting power. The AAT would be part of that mechanism.…

Excerpt (1197 of 4533 characters). Read the whole post on the forum ↗

Cosmic_Validator:

this one has been discussed already before

Too much Hub activity I can’t keep track anymore. Bullish.

What is the general consensus in investing in businesses other than online blockchain apps? I think there is a huge opportunity to build DAO businesses that are more in the manual labor / robotic and automation sectors with a management structure.

• Construction
• Lawn Care
• Window Cleaning
• Mobility
  …there are others.

There is obviously business development work and overhead associated, salaries for management team ect… with this strategy, but profit sharing and experimenting with this strategy would be an interesting social experiment. Part of the business development could include contacting business already established and invest in autonomous equipment with legal agreements on what the profit sharing structure would look like.

Just some ideas, for what it’s worth.

• Farming

And the kinds of collabs that can be done with chains like Regen and other businesses in this sector.

Just throwing this in, but David has a simple solution. We can afford to be patient with this big warchest and make calculated decisions that enhance the flywheel we’re trying to build.

Will be good to have a diversified treasury of blue chip projects.

https://x.com/davidfeiock/status/1734654454157488634?s=20

Thanks for starting this conversation @Noam . The focus of these funds should be long term alignment, and continuing to deploy useful liquidity throughout the AEZ & Cosmos ecosystem. Although this could be a boost to things like validator revenues to help some of the smaller operators like myself and fund more grant proposals, I do not believe we should pull the trigger too early and spend too much on short term initiatives. We would hate to look back and regret it if the funds meant for the hub to see long term alignment with the upside of Neutron were all spent in the early days. The $3M number for validator subsidies actually doesn’t seem like too much of the total especially over a few years, so as long as we responsibly choose a number and a distribution process to not add too much sell pressure. Validators using the soft opt-out would probably need to be ineligible for this payment if we do go this route. It does make sense to spend some of these funds, but I am largely in favor of deploying this liquidity in useful ways that doesn’t relinquish ownership from the Hub. We have the AAT coming which will allow for a more flexible and comprehensive deployment strategy.…

Excerpt (1195 of 1642 characters). Read the whole post on the forum ↗

Hi Thanks for sharing. Plenty to unpack here. I like and makes sense based on agreement: • Do no harm to Neutron • Use the tokens to benefit both the Hub & Neutron A. Airdrop to atom stakers - makes little sense, agree. No benefit to Hub nor NTRN B. LaaS NTRN/ATOM. Do we need it now? NTRN does not have much economic activity. Providing liquidity seems premature. And impermanent loss would be massive if either of tokens do not move same. Liquidity without loss could be interesting. LPing benefits NTRN more than the Hub as it takes the loss. C. UBI to validators. WHY? Validators are businesses and they accept to be part of ICS, if can’t make ends meet they should exit. Revenues should be assessed including revenues from Hub as it is one pool. Makes no sense to separate. If we need to support, means NTRN should not be on Hub. Also, if we haven’t received NTRN on Hub, we would not talk about it at all. So this is ‘nice’ to have than a must. This benefits NTRN, damages Hub by extracting value from it as a cost with 0 upside. D. Grants are good if we can create value for both NTRN and Hub. We could choose some niche that is not covered by other grant programs. Grant…

Excerpt (1199 of 1725 characters). Read the whole post on the forum ↗

Elijah:

so I’m not sure your claim is true about ATOM

My usage of a double negative may have been confusing. I also believe NTRN will outperform ATOM, specifically in a bull run. But the presumed higher volatility makes me believe it will also depreciate faster than ATOM come next bear market.

However, I think USDC conversion could still fit the do not harm Neutron rule. I mean, it’s a tough rule if we imply that any negative (like affecting NTRN price) couldn’t be balanced by a stronger positive (more funds available during a bear market).

I generally consider this approach as a sensible financial management tactic to employ. Imo the same should be done with ATOM (convert some to USDC in the bull market). We see foundations of any blockchain ecosystem do exactly the same thing, and I think we have a unique opportunity here to see if this amazing ATOM governance experiment could achieve similarly rational financial goals.

We could also consider buying back NTRN in a bear market with the USDC we saved, which I believe would be a net win for all stakeholders.

Can we find any OTC buyers?

My 2 cents: It has to be used solely with the benefit of NTRN and ATOM in mind. • provide flat fee for each validator in active NTRN set excluded 50 top as @Cosmic_Validator suggested • provide liquidity as a service. This will be beneficial and stabilising for the whole Cosmos ecosystem. maybe exclude Osmosis because they are already getting 900k ATOM prop 585 and pStake - 600k ATOM prop 853 for exactly this purpose. Because this will bring back fees to the ATOM hub this will cement the close relationships between ATOM and the rest of the cosmos and is in line with the service provider ATOM theme, same as prop 583 and 585. Extra Grants: Not good idea. We already have the normal grants and comm p grants mechanisms in place. Accountability for the comm p grants as we have seen is mostly: “trust me bro”. While some grants are well spent and very good value for money for the hub/ATOM and teams/projects are sometimes very honorable and give account, experience teaches: many are not. This now sudden extra free money from the ATOM comm p without accountability will be money grabs and fights for who gets the money. Should be standard ATOM hub policy in general: before any…

Excerpt (1196 of 1561 characters). Read the whole post on the forum ↗

can the cosmos hub have a voting power on the neutron governance ?
keep the neutrons to buy neutron in the future ? Merge later ?
AAT ?

My usage of a double negative may have been confusing. I also believe NTRN will outperform ATOM, specifically in a bull run. But the presumed higher volatility makes me believe it will also depreciate faster than ATOM come next bear market. Ahh yes I was confused by your double negative. However, I think USDC conversion could still fit the do not harm Neutron rule. I mean, it’s a tough rule if we imply that any negative (like affecting NTRN price) couldn’t be balanced by a stronger positive (more funds available during a bear market). I have a hard time seeing how selling NTRN to hedge because it’s going up more than ATOM is not harmful to NTRN. I think it communicates the wrong things for how the community sees its partners. But if for example, it was instead going to fund a grants program to expand ATOM’s use cases on Neutron (e.g., an ATOM and stATOM backed stablecoin), I’d say you’re probably right that this doesn’t break the ‘no harm’ clause (or if it was used to fund validators operating Neutron). But this isn’t really what you proposed to be fair. I generally consider this approach as a sensible financial management tactic to employ. Imo the same should be…

Excerpt (1197 of 2923 characters). Read the whole post on the forum ↗

Pookybear:

It has to be used solely with the benefit of NTRN and ATOM in mind.

• provide flat fee for each validator in active NTRN set excluded 50 top as @Cosmic_Validator suggested
• provide liquidity as a service. This will be beneficial and stabilising for the whole Cosmos ecosystem. maybe exclude Osmosis because they are already getting 900k ATOM prop 585 and pStake - 600k ATOM prop 853 for exactly this purpose. Because this will bring back fees to the ATOM hub this will cement the close relationships between ATOM and the rest of the cosmos and is in line with the service provider ATOM theme, same as prop 583 and 585.

I think the analogue business approach would create more economic churn than fees in providing liquidity. Billions of dollars in annual potential economic value, not to mention the additional benefit of educating outside participants about the ecosystem.

I have some legal docs and a fun marketing approach for a couple of the industries listed above.

I disagree with “exclude Osmosis”. Osmosis should be a focal point of the LaaS offering as the leading IBC token exchange. Osmosis is the exchange utilized in the Fee Abstraction Module and as such providing the most liquidity there and reducing trading spreads is important.

This makes no sense. If you are working in the best interest of the Treasury (the community pool), you absolutely must sell NTRN high and buy it low. If the community pool represents financial capacity, if you allow massive downside volatility, you impair the ability of the treasury to finance the projects you are talking about. When Noam talks about swapping NTRN for ATOM he is talking about replacing a higher volatility token with a lower volatility token which is how you reduce volatility in a portfolio. Obviously, volatility is measured against USDC (or at least most people living in the West) so when you swap to USDC, you reduce volatility to zero which is an appropriate thing to do if negative volatility is projected to increase (which it always does at some point). Generally speaking when volatility of some instrument reaches the lower 5% of the historical distribution and the instrument is trading at the high end of its historical price range, you need to start going to cash. Not in one trade but over time in small increments over a few months. In terms of “no harm”, the Cosmos treasury must first not harm ATOM stakeholders. Neutron stakeholders are a secondary…

Excerpt (1189 of 1472 characters). Read the whole post on the forum ↗

My suggestions and priorities:

1. Fund onboarding to the AEZ, people have to be able to join from every ecosystem with a click and they can instantly use the protocols.
2. Liquidity as a Service
3. Use it to aquire protocols for the AEZ
4. Pay validators (only the bottom validators), the top validators earn enough already

Firstly, we express our gratitude to @Noam for initiating this crucial discussion, and a special acknowledgment to @Elijah from the Neutron team, whose participation is vital in finding mutually beneficial compromises. Our feedback centers around two key aspects: cross-chain governance and financial management. Regarding the proposal to compensate validators, we have posted our feedback in this post . Grants, in our view, fall within the domain of the AADAO and should represent a minority share of the Hub’s provisions in NTRN tokens. GOVERNANCE: In addressing governance, we appreciate some proposed suggestions, particularly the concept of a Governance Vault tailored by Neutron. This innovative approach allows Neutron tokens held by the Hub to participate in governance while remaining deposited in LPs. We recognize the complexities involved due to the underlying asset’s volatility and offer our assistance in designing such a vault, leveraging our expertise in financial risk management. Overall, we strongly support this initiative. CAPITAL EFFICIENCY: Turning to financial risk management and arbitrage opportunities, we advocate for a meticulous consideration of this topic.…

Excerpt (1199 of 1789 characters). Read the whole post on the forum ↗

Keeping it as a warchest and using it as governance alignment? Bit unmoral hijacking governance with gifted tokens e hough. We should keep most and decide about this in next two years or more. We can use some for funding hub security/bounties.

This makes no sense. If you are working in the best interest of the Treasury (the community pool), you absolutely must sell NTRN high and buy it low. ‘Buying low and selling high’ is not easy - if it was simple to time the market we’d all be richer. I also acknowledged that swapping into USDC would make more sense than buying ATOM doesn’t under Noam’s point. And Noam’s original point wasn’t about buying NTRN low and selling it high - his original point was to just sell it for ATOM (to induce short-term demand) or USDC (to cover bear market costs). I think defining an objective is important, which is why I said : " if for example, it was instead going to fund a grants program to expand ATOM’s use cases on Neutron (e.g., an ATOM and stATOM backed stablecoin), I’d say you’re probably right that this doesn’t break the ‘no harm’ clause" Because I think the objective is important to define before deciding to just spend the tokens. If the goal is to dampen the volatility of the community pool or buy back Neutron in the bear than there should be a proposal with that objective that outlines how exactly how it achieves that and why it’s helpful within the bounds of the original…

Excerpt (1194 of 3950 characters). Read the whole post on the forum ↗

I think we are more or less saying the same thing. We all agree that for the most part the NTRN will be used for LPing and then the proceeds from there will help small validators make up for losses running Neutron. Hopefully, at some point Neutron is successful enough that these losses are no longer an issue. However, I don’t want managing portfolio volatility to be misconstrued as timing the market. There are established portfolio management strategies that use volatility (see “risk parity”) to programmatically reduce risk in portfolios that are incredibly successful and behind the success of some of the biggest hedge funds out there like Bridgewater or AQR. I would advocate for utilization of some basic risk parity strategies to reduce portfolio risk - they are very quantitative and can be automated. I think Noam views ATOM as “interchain money” or I would paraphrase that as “interchain reserve asset”, in a sense as the BTC of the Cosmos ecosystem so swapping NTRN for ATOM is a risk/volatility reduction move in his mind. Obviously, Neutron and ATOM are all crypto tokens and they all respond similarly to macro driven selloffs so selling for USDC is certainly the better risk…

Excerpt (1195 of 2215 characters). Read the whole post on the forum ↗

If our ultimate goal is to make ATOM interchain collateral/capital/money, the optimal usage of this NTRN is to pair it with ATOM (i.e., liquidity-as-a-service) to increase NTRN-ATOM liquidity. ATOM liquidity supports the following flywheel: The biggest fear people have with regard to providing liquidity is the impermanent loss, but let’s actually walk through what happens in each scenario: A) NTRN goes up in value relative to ATOM For the sake of this example, let’s stay ATOM is worth $10 and NTRN is worth $1. The Hub puts in 1 ATOM for every 10 NTRN into the ATOM-NTRN pool on Astroport. If Neutron doubles in value to $2 while the value of ATOM stays the same, an arbitrage opportunity is created on the DEX to shift the ratio of ATOM:NTRN from 1:10 to 1:5. This puts pressure on investors to buy ATOM so that they could use that ATOM to buy the underpriced Neutron on the DEX. This results in upward pressure on ATOM, which is a good thing! In TradFi, swarms of analysts apply DCF analysis to businesses to ensure that every last cent of value is incorporated into a company’s share price. I have yet to see a compelling model to value cryptoassets. Even if such a compelling…

Excerpt (1198 of 2951 characters). Read the whole post on the forum ↗

Btw: about Liquid as a Service part =>
I think it would be very logical when any chain (incl Osmo/pStake deals that have passed/are being voted on) gets liquidity as a Service from the hub that they accept $ATOM as gas token. Should be standard attachement to any Liquid as a Service provided by the hub deal tbh.

This will be very beneficial for the hub/$ATOM and will bring the projects/chains that request the Liquidity as a Service in much closer bond with $ATOM hub.

Hey folks, Just wanted to share a few thoughts. First, Do Nothing Keeping the NTRN in the Community Pool is a valid option, and is probably the right thing to do for most of the allocation. These tokens aren’t meant to be spent, they’re a yardstick for the value that the cooperation between Neutron and Cosmos Hub generates. Before we do anything with the tokens, we should have a very clear objective, a very clear understanding of why deploying the tokens will achieve this objective, certainty that we’re capable of delivering on the plan, and that deploying the tokens will not harm either network but instead benefit them both. Doing nothing with the tokens is great because it gives us the time to do that. What are our common objectives? I won’t go into too much details here (I likely will in another post) but I think there are a few obvious shared objectives we can rally around: We want to continue building alignment between Cosmos Hub and Neutron. This one is fairly obvious: Replicated Security is such that continued cooperation is a condition for mutual success. So, whenever possible, we should use these tokens in ways that improve our communities alignment and…

Excerpt (1198 of 7180 characters). Read the whole post on the forum ↗

Spaydh: Before we do anything with the tokens, we should have a very clear objective, a very clear understanding of why deploying the tokens will achieve this objective, certainty that we’re capable of delivering on the plan, and that deploying the tokens will not harm either network but instead benefit them both. YES. We need to make sure we have a clear plan here that can go out and be executed. There are short term vs long term considerations here. The Hub is not going to do anything to harm Neutron, especially as the ties get stronger between the two chains. Spaydh: As an example, validators are not yet reaching break even on the cost of their Neutron nodes from Neutron revenue. This is perhaps the largest source of frustration in the current RS set up, and I believe it should be addressed. After all, Neutron needs engaged validators to succeed, and the Hub needs Neutron to be successful to maximize its own expected value. I think this is a low hanging fruit, so I’ve created a dedicated proposal here . This is a quick win that a small portion of these funds can easily solve. It is hard to know what this will look like far out into the future, so I…

Excerpt (1198 of 5028 characters). Read the whole post on the forum ↗

start learning to think long term as a network / collective:

1. propose daos and chains to acquire
2. acquire into comm pool their tokens
3. profit on the bull run and have stake in many chains

Im unsure what is the point of anything else

jasonsprouse: I think the analogue business approach would create more economic churn than fees in providing liquidity. Billions of dollars in annual potential economic value, not to mention the additional benefit of educating outside participants about the ecosystem. I have some legal docs and a fun marketing approach for a couple of the industries listed above. I agree with @serejandmyself here. Here is what is unspoken but should be inferred…billions of dollars in annual economic churn equates to billions of dollars in buy pressure on a coin. A line-item proposal I put together to help someone successfully win a city contract in Austin, TX: Screenshot 2023-12-14 104216 914×484 137 KB My own cost analysis: 319539380_6448813058467570_1956151805621661794_n 1152×2048 156 KB For assets like these, but there is more creative things that can be done: 319323599_6448903425125200_4833903875114615765_n 1152×2048 256 KB There is more additional goals and objectives for my organization that I’ve put together in a form, there is a link there for Facebook horizons if you have a VR headset… https://goodfaith.church/post/food-security/ and this is an…

Excerpt (1194 of 1394 characters). Read the whole post on the forum ↗

Tricky | Cosmos Spaces: How do we balance the proliferation of ATOM as the base pair, without the Hub just granting and subsidizing liquidity for every project? It definitely makes sense for the most proven and the project with the most potential value add, but the Hub will already be deploying large amounts of capital that it has to make prudent decisions. I would love to see the Neutron DAO contribute to these kickstart funds as well and not rely soly on the Hub’s portion of tokens. These tokens will for sure be used to help the AEZ succeed, but that should only be a portion of the funds, not the entirety. The Neutron DAO is already doing this, see the Nolus proposal, so I don’t think it will be a problem at all for it to continue helping bootstrap these pools. The main thing is the Neutron DAO doesn’t have ATOM so for ATOM to really become a base pair, the Hub’s support would go a long way. In terms of balancing, I think the main point is the allocations should be small (50-100k) but numerous (to create many connections/arb opportunities) just to get the pools going. Once they are, organic volume, astro incentives and others should help grow them to a point where…

Excerpt (1198 of 1515 characters). Read the whole post on the forum ↗