This proposal aims to outline the integration process of Neutron into Nolus as well as deploy an NTRN/NLS pool on Astroport with initial liquidity provided by the Neutron DAO and the Nolus Liquidity & Bug Bounty supply allocation.
Background on Nolus
The Nolus Protocol defines a money market between lenders looking to yield on stablecoins and borrowers looking to amplify their holdings. For borrowers, the Nolus DeFi Lease provides up to 150% financing on the initial investment with a lowered margin call risk and access to the underlying leveraged assets through whitelisted strategies.
The protocol utilizes an application-specific blockchain built using the Cosmos SDK and a WASM smart contract engine focusing on interoperability, security, and performance. Interoperability, in particular, is at the core of Nolus’ offering as the Protocol utilizes IBC and Interchain Accounts to tap into a diverse set of liquidity hubs without creating fragmentation across chains. Each DeFi Lease position is a separate smart contract instance on the Nolus chain that registers an Interchain Account on a host network and facilitates swapping via an integrated exchange where the assets in the lease position are kept in the Interchain Account.
You can read more about Nolus here: https://hub.nolus.io
Nolus & Neutron Integration Details
Currently, Nolus is integrated with the Osmosis DEX, offering DeFi leasing for 12 different assets there. As a next step towards fulfilling its fully cross-chain vision, Nolus aims to expand to the Neutron network by integrating with Astroport which is currently the most liquid decentralized exchange, boasting a TVL of above $22M.
The steps to integrate with Neutron are as follows:
A new lending pool with Neutron axlUSDC (the most liquid stablecoin on Astroport currently) will be initialized on Nolus and incentivized with NLS tokens;
A standard IBC transfer channel will be created between Neutron and Nolus to facilitate transferring of assets in both directions;
A NTRN/NLS standard constant product pool will be initialized on Astroport. It will be utilized by the Nolus Protocol to perform buybacks using the protocol revenue generated by the leases;
The most liquid volatile assets on Astroport will be supported for leasing on Nolus - e.g. NTRN, ATOM, thereby contributing to the overall volume on Astroport and respectively Neutron.
In addition, Neutron users would be able to take advantage of the currently ongoing 0% interest initiative on Nolus, meaning that borrowers would not be required to pay any interest on their active lease positions until the 31st of January, 2024.
With this integration, a standard constant product (x*y=k) NTRN/NLS pool will be initialized on Astroport. The Neutron DAO will allocate $100k worth of NTRN to that pool which in turn will be matched with $100k worth of NLS tokens from the Nolus Liquidity & Bug Bounty reserve to establish the initial liquidity.
Over all great proposal and I will be supportive of it. My concern is these pools are at risk of impermanent loss. I much rather open a lease on Nolus for Neutron as I am extremely bullish on what Spaydh and team are building at NTRN. I personally won’t be providing to these pools due to risk of IL. So I think effort should be made to make NTRN available for lease on Nolus. Incentives should be more defined. If there is high APR/APY with incentive of NTRN and NLS, yes I will think about it. So please provide details of APR/APYs expected for folk who will risk IL by making LPs
We generally write long posts to explore the depths of each proposals, this one is just a no-brainer !
For the time being, no external incentives are being planned with the launch of the pool. This might change at some point but it is not a subject of this proposal. So, in the beginning, it would likely be just trading APR. Usually, in my experience, incentives go with a separate proposal.
Sure and thanks for clarification. All the best and I look forward to these pools and also Nolus growing as a protocol
WHy dont u support noble USDC?
Currently, axlUSDC is the most liquid stablecoin on Astroport. Otherwise, we would definitely love to support noble USDC and plan to do it once there is in fact sufficient liquidity.
Thats a pretty shallow way of looking at it. Noble USDC has unlimited buy liquidity with no fees as you can directly mint it, compared to axlUSDC which is bridged with a very high cost.
I understand your point, really, but from a DeFi protocol’s view, liquidity in existing pools is paramount. Nolus utilizes decentralized exchanges and as such is dependent on the liquidity there. Currently, there are 0 pools with Noble USDC on Astroport. Once there are such with sufficient liquidity, Nolus will be able to migrate to them in as seamless as possible for the users way.
I think that is a great step for Nolus and for Neutron. 100% ok with this proposal
Likewise bullish on this proposal
Who owns the LP interests at the end of the day?
Should the market price be updated to something more current?
If your question is related to the trading fees accumulated, then liquidity providers receive them automatically as it is with each AMM out there (excl. part of them which go to ASTRO stakers - xASTRO holders).
As for the market price, $100k worth of NLS/NTRN (each) would be deposited based on the market price at the time of depositing. Any leftover funds would be returned to the Neutron DAO.
But who owns the $200K LP position? The Neutron DAO? Question is in the event liquidated who gets the proceeds??
A newly established Neutron <> Nolus multisig DAO for protocol-owned liquidity will receive NTRN tokens from the Neutron DAO and NLS tokens from the Nolus liquidity and bug bounty supply allocation should the prop pass. These tokens will be deposited into a newly created NLS/NTRN pool. The owner of that liquidity will be the 3-of-4 multisig. Btw, the proposal is live and you can read a bit more details here: https://governance.neutron.org/proposals/22