Hadron Labs proposes to bring Duality Labs to Neutron as a core team and Duality DEX as an exclusive core piece of infrastructure. 2.5% of the NTRN supply would be allocated as a long-term incentives package to the current Duality Labs members with a 1 year lock and 3 year linear unlock. This proposal would reduce cost to the Cosmos Hub’s validator set, empower Neutron’s DeFi ecosystem and cement its position as the leading DeFi hub in Cosmos.
The launch of Neutron, and the recent migration of Stride to Replicated Security, have marked the birth of the ATOM Economic Zone, a cluster of Cosmos blockchains tightly integrated with and around the Cosmos Hub.
Yet, Replicated Security also introduces additional financial pressure for the Cosmos Hub’s validators. If not addressed, Replicated Security could have a centralising effect on the Hub’s validator set. As a result, the Cosmos Hub and AEZ as a whole should approach the technology strategically to limit the burden on validators while maximising payoffs for the Cosmos Hub and its ecosystem. Above all, the AEZ should avoid introducing internal conflict for resources, as it would result in strictly worse outcomes for all projects and the AEZ as a whole.
Furthermore, currently, the Cosmos ecosystem has limited liquidity. This disincentivizes adoption by reducing the appeal and economic opportunities available to builders to bring new products and services to the Cosmos economy. It also leads to poorer execution for trading entities, whether they are individuals, institutions or DAOs. This lack of liquidity is compounded by the competition between applications looking to attract value to their siloed pools.
Merge the Duality DEX module into the Neutron blockchain to bring a state-of-the-art decentralised exchange to the ATOM Economic Zone without launching an additional blockchain, and therefore without any additional infrastructure cost to the Hub’s validator set. This equates to a yearly cost reduction of $500k to $1M for the Cosmos Hub’s validator set.
Duality’s DEX module would become a neutral piece of infrastructure dedicated to empowering Neutron and the wider AEZ DeFi ecosystem. It would enable liquidity to be aggregated into a single framework, minimising liquidity fragmentation and optimising trade execution. Smart-contract dApps would be able to freely leverage and monetize the primitive to build more powerful applications and optimise their liquidity.
As demonstrated by proto-rev on Osmosis, merging the Duality DEX module into the Neutron binary would also enable more granular control over MEV, generating additional revenue which could be shared with Neutron, its smart-contract ecosystem and the Cosmos Hub. With PoB and Multiplicity potentially coming to Neutron in future upgrades, it should be possible to not only recapture internal MEV (as in proto-rev) but also external MEV, which is believed to be orders of magnitude more valuable.
The Duality Labs team would join Hadron Labs and contribute to the continued development of the DEX module and Neutron. This collaborative outcome would prevent internal conflicts for resources and considerably strengthen Neutron and the ATOM Economic Zone’s position as a leading DeFi Hub for all crypto.
The next 3-5 years within the Neutron ecosystem will be focused on 4 items :
- DeFi growth: decentralised finance has emerged as the killer use case of blockchains. Leveraging the Duality DEX module’s application-specific capabilities, DeFi apps of all kinds can be built with the module’s MEV recapturing, flexible, shared liquidity capabilities in a way that establishes a positive flywheel for the ecosystem.
- Ecosystem connector: there is a massive amount of opportunity to be created in becoming a vital centrepiece that connects the emerging rollup ecosystem, the incumbent Ethereum and Cosmos. In addition to serving the liquidity layer for the different ecosystems, the Duality Labs team brings their existing partnerships and expertise within the rollup and Ethereum ecosystems.
- Liquid staking: the introduction of liquid staked tokens within Cosmos has the potential to unlock billions in previously locked liquidity. In addition to Neutron’s relationships with Stride and Lido, the capital efficiency of concentrated liquidity on Duality will be able to support deep, balanced LST liquidity with less capital.
- Governance and Treasury management: the development of the industry has highlighted the need for better coordination and decision-making tools for decentralised communities, and capital management tools for their treasuries. Leveraging Duality’s DEX module would enable DAO/Treasury Management projects to provide more capital efficient services to decentralised communities, attracting more capital and network effects to the ecosystem.
All modules built by Duality Labs will be exclusively deployed on Neutron. The DEX module will be included as part of the next upgrade. Duality Labs will be dissolved and the Duality Labs team will join Hadron Labs as a core team dedicated to the Neutron network
25,000,000 NTRN (2.5% of the supply) will be allocated as long term incentives packages to the Duality team according to the same vesting schedule as founders and backers: 1 year lock and 3 year linear unlock without cliff.
The Duality DEX module will serve as the base liquidity layer for Cosmos Hub and Neutron’s ecosystem. Since any AMM can be replicated on top of the Duality DEX module, without fragmenting liquidity, teams working on AMMs and strategies will work with Duality Labs to integrate them on top of the Neutron Liquidity Layer instead of building them from scratch. This brings a few key benefits to the Neutron ecosystem :
- Deeper liquidity through shared pools: since to approximate new AMMs no new pools need to be instantiated, liquidity can be concentrated into a single venue, making routing easier and cheaper for the protocol. Astroport, Catalyst and other AMMs could all leverage the aggregate liquidity available in the shared pools. They would retain the ability to monetize their share of the liquidity by setting taker fees, and would benefit from reduced technical debt, better trading execution and the ability to focus on liquidity management and user experience.
- Stronger Price Oracles: reducing liquidity fragmentation strengthens the security of TWAP oracles on Neutron, by increasing the cost of manipulation making them more useful for integrations with other protocols such as lending markets (e.g. Mars) or derivatives (e.g. Levana).
- Treasury Management: building the portfolio rebalancer and other treasury management protocols on top of Duality optimises execution, security and profitability of treasury funds. For example, Timewave’s rebalancer could be implemented as a weighted pool on top of Duality. If at some point governance votes to modify this ratio, it can be easily rebalanced without having to instantiate a new pool by just skimming off the top and strategically redistributing to match the new ratio. This integration would have at least four major benefits to the Neutron DAO over the current rebalancer design
- Reduce volatility of NTRN as the treasury would be buying back NTRN as price falls on the open market and selling as the price increases
- Reduce the slippage loss traders incur when buying or selling NTRN
- Strengthening the NTRN-USDC TWAP by further deepening liquidity pools
- Earn the NTRN treasury additional capital from the fees on swaps.
- An orderbook with fine grain control over trading strategies : traders on Neutron will have access to various new order types that allow them to better express their preferences and have a more professional trading experience. In addition to classic limit orders and “swaps”, these order types include :
- Good-til-cancelled : Market makers who don’t want to risk their orders being adversely selected can set a good-til-cancelled order, where they can specify an end block number for when the order automatically rescinds if it hasn’t been fulfilled.
- Immediate-or-cancel (partial fill) : Traders who want to trade for as much of a token as possible below some amount or price can place Immediate-or-cancel orders. This can be useful for traders who want to buy as much of a token they can before others do.
- Fill-or-Kill : Traders who want to trade exact amounts or nothing can place fill-or-kill orders. This can be useful for traders or integrations which prioritise exactness in their inputs or outputs.
It’s worth emphasising Neutron’s base liquidity layer will not be competitive to other DEXs on Neutron like Astroport. There will be no application fees that go to Neutron on the Duality DEX module, allowing teams that want to monetize integrations with the base layer to do so without making users pay twice. The merger would enable Neutron to provide incredibly strong integration support to external teams looking to integrate deeply with the platform, such as Astroport and others, to enhance the product experience they offer users.
For example, Astroport would work with the Duality Labs team to build a vault for LSTs on Duality that accrues value to Astroport LPs and ASTRO holders from performance fees. Such a vault could track the stATOM inflation rate, and automatically rebalance as the price of stATOM increases with respect to ATOM. This would allow the liquidity position to be primarily denominated in stATOM at all times, earning LPs extra yield and requiring them to deposit less capital for deeper liquidity.
Concentrating AEZ liquidity efforts around Neutron will also make it a more optimal place for rollups to settle. They’ll be able to tap into the use cases built on top of Duality as well as the access to various tokens of Cosmos liquidity it supports trading for. It will also make Neutron a more credible liquidity partner for other large scale projects like Celestia. This would enable Neutron to secure critical partnerships and liquidity from emerging projects and critical assets.
The following items summarise the voting options and their significance for this proposal:
YES - You agree with the terms of the proposed merger and want the Duality modules to be added to the Neutron blockchain in the next upgrade.
NO - You do not agree with the terms of the proposed merger and/or do not want the Duality modules to be added to the Neutron blockchain.
ABSTAIN - You wish to contribute to quorum but you formally decline to vote either for or against the proposal.