Summary
This is a joint proposal prepared by the Neutron and Mars Protocol Foundations for the consideration of their respective communities. The proposal seeks approval to execute joint liquidity provisioning for the $MARS and $NTRN tokens as protocol-owned liquidity (POL) on Astroport (on Neutron) as follows:
| Source | Tokens Provided | Value |
|---|---|---|
| Mars Protocol Community Pool | XXX,XXX $MARS * | $100k* |
| Neutron Main DAO Treasury | YYY,YYY $NTRN * | $100k * |
| — | — | $200k * |
(* See Execution Process)
Mars Protocol will provide tokens to the value of $100k to be matched with NTRN to the value of $100k for total liquidity of $200k. These tokens will then be paired and deployed in the NTRN/MARS Liquidity Pool (LP) on Astroport (on Neutron).
Mars Protocol will own 100% of the Mars tokens. Neutron will own 100% of the NTRN tokens.
To facilitate this transaction, representatives for Mars and Neutron will form the 3/4 ‘Mars X Neutron POL’ Multisig DAO on Neutron as follows:
- Multisig address: neutron1l5f5pxsnj5kka2n2tc392dap7mtagdg07x08wn9v0mc9uwcddntshuv9kw
- Signers:
- Davide (Mars) (25%) neutron1zqpm3gjc7eafgrrjjdjurjg62qdedavjzmfd9l
- Dane (Mars) (25%) neutron1ndu2wvkrxtane8se2tr48gv7nsm46y5gcqjhux
- soi2studio (25%) neutron17s76s29nyuu5p6xaqz0sndw3sgl78hy4gqm342
- Luisqa (Neutron) (25%) neutron1ze09kc5ackut7wc4pf38lysu45kfz3msr98nru
The multisig will handle the initial liquidity deployment to Astroport then handoff the LP tokens to a Valence Covenant so that each protocol has direct control over the assets.
Justification
As part of the recent Neutron and Mars alliance proposal, Mars has committed to moving its token to Neutron by retiring Mars Hub. Most importantly, Mars has pledged to release its end-state vision of its product, focusing deeply on Neutron. Essentially, Neutron will become the home for Mars to achieve its mission of “Becoming the best place to trade on leverage in crypto.”
Mars is in the process of releasing its Credit Accounts functionality on Neutron, including direct integration with Astroport LPs and, most notably, its Oracle-Based Perps integration. Currently,
Following the Mars Tokenomics proposal and with the launch of Perps, $MARS expects to create substantial volume through its ‘Buy & Burn’ and ‘Buy & LP’ on-chain mechanisms through perps trading fees. Low liquidity would be unfavourable for $MARS token holders.
$MARS liquidity on Neutron is currently very shallow, making it difficult to take on large positions and limiting both sellers and buyers. Small trades have the potential to significantly move the price.
The end goal is to make Astroport on Neutron the premier trading venue for $MARS; befitting of Neutron being the Mars home chain. Neutron Foundation is currently conducting a review of previous POL deals, with a view to implementing a robust framework to ensure that this method of bootstrapping liquidity is cost-effective. With Mars v2 launch on Neutron approaching, and considering the importance of establishing Astroport as a viable trading venue for $MARS, this proposal seeks to establish initial liquidity, whilst allowing time for an extensive review before committing larger amounts of NTRN to POL.
Impermanent Loss Risk
As the token of each party is paired against that of the other, fluctuations in price will result in variations in token numbers of each token within the LP position as the stronger performer is sold for the weaker to maintain a 50/50 $ value ratio within the pool. The stronger performer of the two tokens will suffer ‘Impermanent Loss’ in the pool - a decrease in the number of tokens. If either party were to execute a withdrawal whilst in such a position, it would realise this loss.
Timeline
The proposed execution timeline is as follows:
- Minimum 5 day forum period for community discussion.
- Neutron Foundation places a proposal on-chain to provide $NTRN tokens to the Mars X Neutron POL multisig.
- Mars Foundation makes a formal proposal timed to finish not later than the end of the Neutron voting period of 14 days. Mars protocol voting period is 3 days.
- Mars X Neutron POL multisig convenes on receipt of tokens to enact the will of the community i.e. provide liquidity to the MARS/NTRN pcl pool on Astroport.
- The entire process is estimated to take 3 weeks to complete following community approval.
Execution Process
After addressing any questions or concerns from the community, and being approved by governance, the liquidity provisioning process will be as follows:
- The number of tokens to be provided will be based on a 10-day TWAP, based on Coingecko Price Data, to be updated for both tokens prior to the Neutron on-chain proposal date, and confirmed in the on-chain proposal.
- Due to price volatility during the voting period a 10% volatility buffer will be applied to the total tokens requested. Any unmatched funds left over at the end of the token swaps will be returned to the respective DAOs.
- Mars Protocol Community Pool sends $110,000 of $MARS tokens to the multisig.
- Neutron Main DAO Treasury sends $110,000 of $NTRN tokens to the multisig.
- The multisig convenes at its earliest convenience following Neutron governance approval to provide $MARS and $NTRN tokens as liquidity in the MARS/NTRN pcl pool on Astroport (on Neutron) : neutron1p5p0zdaauzr6lf6v75ajwjf6ma9zxl5vcq26hyzetfr5maje9n0sjmnp2u
- The multisig will deposit the maximum amount of $MARS and $NTRN tokens up to $100k value of each token as a two-sided LP deposit into the MARS/NTRN pcl pool, with 1% slippage tolerance.
- After executing the LP deposit, the multisig will return any residual $MARS tokens to the Mars Main DAO Treasury neutron1pxjszcmmdxwtw9kv533u3hcudl6qahsa42chcs24gervf4ge40usaw3pcr (note that $MARS will be the new Neutron based TokenFactory MARS), and any residual $NTRN tokens to the Neutron Main DAO Treasury neutron1suhgf5svhu4usrurvxzlgn54ksxmn8gljarjtxqnapv8kjnp4nrstdxvff.
- Finally, once Mars’s migration to DAO DAO is complete, the multisig will transfer the resultant LP shares to a Valence covenant so that the LP shares are directly owned and controlled by the DAOs.
- Either Mars Protocol or Neutron Main DAO may trigger a withdrawal of the LP tokens anytime by passing an on-chain proposal to do so.
Valence Covenant Security
Emergency Actions
Covenants allow the parties to authorise an emergency committee (EC) to perform immediate emergency actions. The EC cannot withdraw the funds to themselves. The EC can only withdraw funds to the parties that contribute capital to the deal. This EC is important because issues may arise that require action faster than the governance of either/both parties could take given their voting periods.
Covalent DAO will serve as the EC for the Valence Covenant
Upgrades
Admins of the Covenant have the authority to migrate the contracts or upgrade the configs. The admins of the Valence Covenant will be Covalent DAO, Mars, and Neutron with governance as follows:
- Covalent DAO may take action unilaterally
- Mars and Neutron may take action if both parties agree
Disclaimers/Disclosures
This proposal is being made by Neutron Foundation, a Foundation Company with limited liability incorporated in the Cayman Islands. The Neutron Foundation holds NTRN and MARS tokens in its treasury. Certain service providers of the Neutron Foundation may own NTRN and MARS tokens and may have financial interests related to this proposal. All such entities, service providers, and other related persons may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including MARS, Osmosis/OSMO, and Neutron/NTRN. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest. These statements should not be misconstrued as a complete description of all relevant interests or potential conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by any terms of service or disclaimers associated with use of the Neutron Protocol and blockchain. The Neutron Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. The Neutron Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and the Neutron Foundation shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.