Hey, Patrick here from the Hydro team! This is a proposal draft. We’d like to get some feedback from the Neutron community here on the forum before we publish it on-chain. Thanks to Spaydh and luisqa for their initial feedback on it!
Summary
This proposal aims to start a NTRN liquidity bucket on Hydro, a decentralized liquidity management platform built on Neutron. Hydro deployments will incentivize NTRN staking and lockup and generate additional yield for participating NTRN stakers. We propose deploying 4,000,000 NTRN.
Hydro has a short but solid proven track record, having successfully completed five rounds of ATOM liquidity deployment to 13 DeFi protocols, including Astroport, Nolus, Mars, Drop, Demex, Neptune, Shade, Stride, White Whale, Phoenix Directive, Margined, Inter Protocol, and Amulet. These deployments can be seen on Hydro’s metrics page . All of these protocols would be eligible to bid for NTRN if this proposal passes, as well as any other IBC-connected DeFi protocol that meets our whitelisting requirements.
Hydro has been focused on deploying the ATOM from the Cosmos Hub community pool, but it is also looking to support other assets. A recent Cosmos Hub proposal allocated some USDC to Hydro, which we will begin deploying soon. We also have a proposal up on the Osmosis forum to allocate some BTC to Hydro. With Neutron’s move to become a sovereign chain, DeFi protocols having access to NTRN liquidity is going to be an important part of the success of the NTRN token.
How Hydro Works
- NTRN from the Neutron DAO treasury is transferred to the custody of the Hydro committee . We currently use a multi-sig involving these parties for most deployments, but will be moving to using Valence soon, and have already started using it for deployments to Astroport.
- DeFi projects (pre-approved by the Hydro committee based on a risk assessment) bid for this liquidity. They bid by requesting a minimum amount of liquidity that they’d like to receive, and offering a “tribute” in return, which is typically paid in the project’s native token.
- Hydro users vote on projects by staking and locking eligible tokens. We intend to make dNTRN the voting token for Hydro’s NTRN deployments.
- At the end of an auction round, liquidity is deployed to the top voted projects, and Hydro users that voted for the winning projects are awarded the tribute. This means that Hydro users earn both staking APR and tribute APR on their locked tokens.
- Liquidity remains within the custody of Hydro for the duration of the round’s deployment period, after which it is withdrawn and becomes available for further bids.
- The liquidity can be returned to the Neutron DAO treasury at any time the community wishes via a signaling proposal.
For more detailed information about how Hydro works, see the website and documentation.
Why Hydro?
Using Hydro to manage liquidity deployments presents several major benefits over traditional methods of treasury asset management:
- Dynamic & competitive: NTRN stakers choose which projects will receive the liquidity, metrics are provided to show the yield generated for holders, and liquidity can be distributed to a different project in the next round of bidding.
- Automated: Hydro automates the process of deploying and retrieving liquidity from DeFi protocols. Rather than dealing with multiple on-chain governance props, involving multi-sigs with multiple parties that must be trusted, the Neutron community can deploy liquidity to Hydro once, and let it manage ongoing deployments over time.
- Secured: With Hydro, assets can easily be clawed back if necessary, so limited trust in the DeFi protocols receiving the liquidity is required. The Hydro committee performs a risk assessment on all DeFi protocols before allowing them to bid, and sets restrictions such as the maximum percentage of a liquidity pool that deployed assets can make up, to ensure that assets are at minimal risk of things like impermanent loss.
Hydro also has several benefits for the health of the NTRN token:
- Reduced sell pressure: NTRN holders are incentivized to not only stake, but also lock-up their staked tokens on Hydro for a period of time, in order to earn
- Extra yield: The NTRN stakers who participate in Hydro get an additional yield on their staked NTRN - so far the additional Hydro APR has always remained above 10%
- Expansion: Deploy NTRN liquidity across Cosmos DeFi protocols, ensuring efficient markets and DeFi opportunities
Implementation
- Transfer 4,000,000 NTRN from the Neutron DAO treasury to the Hydro committee’s address: neutron1w7f40hgfc505a2wnjsl5pg35yl8qpawv48w5yekax4xj2m43j09s5fa44f
- Begin the Hydro bidding process, allowing protocols to compete for this liquidity
- Monitor and assess returns generated through tributes and rewards
- Provide the community with a quarterly report on performance
Governance
Yes: You approve the transfer of 4,000,000 NTRN from the Neutron DAO treasury to the Hydro committee for deployment into Interchain DeFi applications via the Hydro protocol.
No: You do not approve the transfer.
No with Veto: You indicate that this proposal either (1) is deemed to be spam, i.e., irrelevant to Neutron, (2) disproportionately infringes on minority interests, or (3) violates or encourages violation of the rules of engagement as currently set out by Neutron.
Abstain: You wish to contribute to the quorum, but you decline to vote either for or against.
Let us know if you have any questions or comments on this, thanks! - Patrick