[PROPOSAL #44] Migrate delisted ATOM/NTRN liquidity to the latest ATOM/NTRN and dATOM/NTRN pools on Astroport

DAO Governance Main DAO Proposals
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EDIT: Proposal on chain up for voting: https://governance.neutron.org/proposals/A/44

Summary

Migrate NTRN / ATOM liquidity from the delisted Astroport PCL pool towards the latest NTRN / ATOM tokenfactory PCL pool (1/6th) and the NTRN / dATOM tokenfactory PCL pool (5/6th) to sponsor the growth of Neutron’s LSTfi ecosystem.

Proposal

In 2023, the Neutron DAO launched after the completion of Neutron’s Genesis event. As part of this event, users contributed to bootstrapping two liquidity pools: NTRN / USDC and NTRN / ATOM. As a result, the DAO currently owns ~$6M worth of NTRN / ATOM, which is currently sitting in a delisted Astroport PCL pool following the migration to the new tokenfactory LP standard.

Traditionally, most DeFi ecosystem concentrate liquidity across native asset pairs, with LST liquidity as an after-thought that gets tacked onto the existing liquidity graph. In a high staking rate environment such as the Interchain, this results in a high incentives budget due to the need to compensate LPs for the opportunity cost of lost staking rewards.

Thanks to its unique history and positioning as a large LP itself, the Neutron DAO has an opportunity to innovate with its liquidity graph by moving towards a paradigm in which liquid staked assets are seen as the canonical, yield-bearing representation of their underlying asset.

The benefits of this approach include reduced incentives costs for a given amount of liquidity, more reliable LST liquidity through the increased volume and utility of the pools and deeper DeFi permeation since the aggregate liquidity contributes to enabling leverage protocols such as lending/borrowing, margin and perpetual protocols to provide more capital efficient listing parameters.

Through this proposal, the Drop Foundation seeks approval from the Neutron DAO to migrate its NTRN / ATOM LP holdings from the delisted pool to the following positions and proportions:

This will sponsor the growth of Neutron’s LSTfi ecosystem while ensuring there is sufficient direct liquidity connecting NTRN / ATOM to preserve existing integrations.

Implementation

Given the technical complexity and slippage risk associated with a trustless migration, this proposal seeks the Neutron DAO’s authorization for LiquidSig, the Neutron DAO’s incentives committee, to perform the migration. No funds will be transferred or controlled by the Drop Foundation as a result of this proposal.

If approved by the Neutron DAO, the liquidity migration process would be as follows:

  • The executable proposal transfers the NTRN / ATOM LP tokens from the Neutron Treasury to LiquidSig.
  • LiquidSig withdraws the liquidity from the delisted NTRN / ATOM pool.
  • LiquidSig provides 1/6th of the resulting tokens to the latest NTRN / ATOM pool.
  • LiquidSig liquid stakes the remaining ATOM with Drop
  • LiquidSig provides the remaining liquidity to the NTRN / dATOM pool
  • LiquidSig returns the resulting LP tokens and any left over tokens to the Neutron Treasury.

The DAO’s liquidity will not be staked so as to not dilute incentives to other DeFi participants. If the exchange ratios between the source and destination pools do not match, excess tokens that cannot be provided as liquidity without incurring > 2% slippage will be sent back to the Neutron Treasury.

Composition of LiquidSig

LiquidSig was created by Proposal A11 to oversee Neutron’s pilot incentives program. Its address is: neutron1tthvu9rswd95a5hjryx9e2k39npnqffmkf6wlxr8qg8586rjvxhsrhvmk3

The committee is composed of the following signers:

  • Spaydh (Neutron)
  • Udit (TimeWave)
  • Rarma (Community Oversight)
  • Andre (Astroport)
  • Dane (Mars)
  • Luisqa (Neutron)
  • soi2studio (Neutron)

Timeline

  • Proposal published for community discussion on the Neutron forums (Aug 27).
  • Drop team will post the proposal on chain (Sep 1)
  • Multisig will perform the corresponding transactions to liquid stake, provide liquidity and return the LP tokens to the DAO (Sep 15)

Tx Message:

{
  "wasm": {
    "execute": {
      "contract_addr": "neutron1v7wg4ur36ggwd6z64vzye3ccamehks2x9arv4pafhwmhlcljftks6f2z44",
      "funds": [],
      "msg": {
        "transfer": {
          "amount": "1927955909898",
          "recipient": "neutron1tthvu9rswd95a5hjryx9e2k39npnqffmkf6wlxr8qg8586rjvxhsrhvmk3"
        }
      }
    }
  }
}