Value Alignment Proposal: ATOM & USDN (Noble Dollar)

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…

Excerpt (1198 of 5422 characters). Read the whole post on the forum ↗

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

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

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.

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…

Excerpt (1196 of 1769 characters). Read the whole post on the forum ↗

Great proposal! Love to see it.

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

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

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

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…

Excerpt (1194 of 1512 characters). Read the whole post on the forum ↗

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.

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?

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?

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.

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?

Excited to see Noble alignment with Atom value accrual.

LFG

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

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.

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

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. RoboMcGobo: 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. 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…

Excerpt (1199 of 1444 characters). Read the whole post on the forum ↗

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.

Montagu from Citadel One here, Thanks to the Noble team for putting this up. The way I understand it, Noble is proposing to build a governance-controlled distribution module that will direct yield accrued from all USDN held on the Hub towards ATOM-aligned initiatives. Some thoughts: • Does this make sense for the Hub? If approved, the proposal will ( unofficially) crown a canonical stablecoin on the Hub. And considering the upcoming permissionless VM, the drawbacks exceed the benefits as it will disincentivize other stablecoins from expanding/ launching on the Hub. Take Tether’s USDT as an example: with a VM, there is a chance of seeing native USDT on the Hub. But that won’t happen with governance backing another stablecoin. • Why would anyone choose to give away yield and hold USDN on the Hub? The only scenario I could think of is if Apps building on the Hub adopt USDN over other stablecoins such as USDC for collateral/ settlement/ LPing… In which case accrued yield should be fully redirected to Apps instead as incentives. Apps are the ones bearing the cost here, in term of adoption, liquidity as well as additional trust assumptions ( Wormhole and m0) so it…

Excerpt (1194 of 1577 characters). Read the whole post on the forum ↗

I want to follow up and say that I am EXTREMELY excited about USDN, and think it has a shot at being a massive accelerant to the Cosmos Hub. All these options of where the yield go are better than having no yield - as it is with most other stablecoins - and Noble has been an incredible partner to work with.

Highly in support of this idea and proposal in general, and we at the ICL will put in effort to make sure USDN is deeply engrained in Hub DeFi.

I am very excited about your proposal to give value to ATOM.
However, if all the yields are currently used for burning, etc., there will be no incentive for us as individuals to send USDN to COSMOS Hub, and it will not actually work. As mag has proposed, a mechanism to distribute it to each position seems realistic.
Alternatively, I think it would be good to convert some of the surplus funds from community pools, etc. into USDN and use the revenue from that as the source of funds. Of course, this is just my amateur opinion, as I don’t know anything about the current financial situation or legal issues.

First and foremost, we commend the team for taking meaningful steps toward deepening integration with the Cosmos Hub. At Govmos , we’ve been closely following Noble’s expansion and believe the time has come for the project to realign with the broader Cosmos vision. With shared security models evolving into product-based alignments, it is entirely logical to see Noble offering USDN through the Hub . The offer to share yield presents a pragmatic foundation for such an agreement. On Yield Distribution: From our standpoint, defining a destination for the yield at this early stage is premature. Proposals to buy back , allocate , or redistribute yield are certainly worth exploring—but they lack sufficient context and data for effective decision-making today. We strongly recommend postponing any final decision on yield distribution until enough empirical data is available to guide the process quantitatively. On Political Implications: That said, the proposal also carries some political assumptions that deserve to be addressed. As @JohnMontagu rightly noted: “Adopting a canonical yield-bearing stablecoin for a chain and redirecting the yield to the right actors is a powerful…

Excerpt (1197 of 2536 characters). Read the whole post on the forum ↗

• Whether it is for compliance purposes or to facilitate integration between different ecosystems or to attract resources to promote USDN/ATOM, we should first establish that the decision-making authority for such benefits should be performed by the DAO. This is the most consistent with the logic of multiple parties and the direction of compliance. So it may make the most sense to have one contract address hold the proceeds until the ATOM VM is up and running. • we can confirm in the ballot proposal that all distributions of USDN proceeds will have at least a corresponding percentage to USDN holders. There could even be a vote to confirm this, followed by a vote on the transfer of USDN proceeds to the ATOM DAO. • Other different ATOM ECO chains could then initiate an ATOM proposal on how the proceeds of the USDNs that need to be distributed to be retained on their chain should be distributed and voted on by the ATOM pledgers. Subsequent similar proposals and presentation of data could be done using a separate web tool.4. In this way, the governance function of the ATOM, like the DA, is instrumentalized, and the cost of using this governance/hosting function is the value provided…

Excerpt (1199 of 2109 characters). Read the whole post on the forum ↗