[REJECTED] [PROPOSAL #5] Make Neutron Timewave’s Home Through Long-Term Incentive Alignment

Change Log

[June 15th, 2023] Initial post to Neutron Forum, added markdown, and added bold lettering to improve readability

[July 17th, 2023] Changed the following:

  1. Add prelude to give context to feedback received and changes made
  2. Clarify scope of partnership to make Neutron the default home for all of Timewave’s flagship products, including the Interchain Allocator
  3. Add Timewave’s role in facilitating public goods funding on Neutron via something similar to Protocol Guild
  4. Add KPIs to further clarify value Timewave provides to Neutron
  5. Update partnership terms to include 12 month cliff and 20% revenue share for 36 months
  6. Update termination clause to allow Neutron community to terminate token unlocking under
    broader circumstances

[July 28th, 2023] Include full voting power during the token transfer restriction period. Timewave will only be able to vote if/when delegations are enabled.

Prelude to Draft #2

Dear Neutron community,

Thank you for the constructive feedback you shared on this forum, in the Twitter space, in group chats, in DMs, in in-person conversations, and everywhere else. We have heard you and we are gladly incorporating your feedback into this proposal because they improve our incentive alignment and set our partnership up for even greater long-term success.
The largest set of changes we made to this draft were done to clarify that this proposal is for long-term incentive alignment rather than for a short term service agreement. Even though we believe that the first institution we plan on building, the Interchain Allocator, can drive significant value to Neutron, we shifted focus in this proposal away from exclusively highlighting the Allocator to instead also mentioning the value that we as a team can bring to Neutron, which includes our technical interchain expertise, the interpersonal relationships that we have spent years nurturing, and the additional ideas we have to leverage our skills and relationships to support Neutron (e.g., public goods funding).

As you read this updated draft, we hope that you see how this proposed long-term, incentive-aligned partnership between Neutron and Timewave will be mutually beneficial.

Introduction

We, Timewave, are a team primarily composed of co-authors of the Cosmos Hub white paper (ATOM 2.0). There are several Interchain institutions that we are interested in building, including the Interchain Allocator, and we are seeking a community with which to partner to build these institutions and invent new ones. This proposal is for Timewave to enter into a long-term, incentive-aligned partnership with Neutron to make Neutron Timewave’s primary home, which would lead Timewave to work on endeavors that are directly and/or indirectly value accretive to Neutron, such as the Rebalancer, Covenants, and public goods funding infrastructure.

We are reaching out to Neutron with this partnership proposal because of our cultural alignment with Neutron in building robust permissionless software, our belief that Neutron can serve as a best-in-class technical platform on which to build the Allocator, and because a Cosmos Hub-secured Neutron can be an effective attractor of liquidity.

With this proposal, we seek to align on terms and expectations for an enduring partnership.

Summary of proposed terms:

Timewave to:

  • build its flagship products on Neutron, including the Interchain Allocator
  • share 20% of Allocator revenue with Neutron for the first 36 months

Neutron to issue Timewave tokens on the following schedule:

  • 0.00% of Neutron token supply upfront
  • 0.33% of Neutron token supply unlocking at the end of month 12
  • 0.67% of Neutron token supply unlocking linearly over months 13-36

Team

Timewave believes that crypto has laid the foundation for permissionless digital institutions that enable humanity to collaborate with unprecedented scope and scale. We have strong ties to the Cosmos ecosystem, deep knowledge of the tech stack, and are best positioned to execute on the vision outlined here. Our core team includes:

Max Einhorn: Lead architect of Interchain Allocator, interchain maxi since 2017, former financial services management consultant at Oliver Wyman, and Wharton finance.

Sam Hart: Formerly Board of Management, Grants Manager, and Cosmos Stack Product at ICF; wrote ATOM 2.0; currently Head of Product and Strategy at Skip.

Udit Vira: Co-founder at Hypha Coop, leading Replicated Security testnets, managed Game of Chains and helped bring ICS to Neutron’s Baryon and Pion-1 persistent testnets, engineer and governance consultant for many decentralized communities.

Timewave’s First Contribution to Neutron: Interchain Allocator

The Interchain Allocator was initially described in the ATOM 2.0 white paper. The Allocator is an internet-native institution that seeks to play a leading role in advancing crypto as an alternative financial system. Timewave is the team leading the buildout of the Interchain Allocator, intending for it to enable permissionless collaboration with unprecedented scope and scale. In our vision, all who endeavor to grow the interchain are limited not by tools or resources, but only their own imaginations.

The Allocator is initially composed of two components: Rebalancer and Covenants.

Rebalancer: The minimum viable implementation of the Rebalancer will enable protocols to set a desired portfolio construction (e.g., 75% native token, 25% stabletoken) and automatically rebalance the portfolio to remain at the desired construction as prices shift.

Covenants: The early implementation of the Covenant system will enable protocols to 1) swap tokens, 2) convert tokens into liquid-staked tokens, and 3) create liquidity provider (LP) tokens with a timelock.

While these two primitives start simple and independent, we intend for the primitives to evolve toward one another. The Covenant system will become a general-purpose initiator of DAO-to-DAO economic relationships while the Rebalancer allows DAOs to more easily manage internal resources and foreign economic policy. The primary form of economic relationship the Allocator seeks to foster is liquidity sharing between DAOs (e.g., Cosmos Hub lending ATOM liquidity to Neutron).

Note 1: The Interchain Allocator is an inherently multichain institution. As such, pieces of the Allocator may be built in the Cosmos SDK or outpost contracts on other chains. Timewave commits to making Neutron the default chain upon which to build Allocator components and only build elsewhere when there is a positive-sum reason to do so.

Note 2: Components of the Allocator generate network effects, benefit from liquidity aggregation, and will be difficult to effectively fork elsewhere. While we’re interested in a long-term partnership regardless of what we build, these characteristics of the Allocator make a long-term partnership even more appropriate.

Allocator’s Value Proposition

The Allocator will add value to Neutron in the following ways:

1. ATOM liquidity

Attracting ATOM liquidity would enable Neutron to outcompete incumbent Cosmos power centers that already have significant liquidity. By using the Allocator to develop economic ties with the Cosmos Hub—the chain/community with the most liquid and valuable token—Neutron increases its chances of success.

By building the Allocator on Neutron, Neutron would be well positioned to lobby the Cosmos Hub for ATOM liquidity. In return, MEV originated by the Allocator is shared with ATOM stakers as per the replicated security agreement between Neutron and the Hub.

2. Increase Neutron MEV revenue

While we will prioritize our customers by doing everything we can do to get them the best possible execution, some transactions will inevitably result in MEV opportunities. As currently designed, the Rebalancer will host regular Dutch auctions to rebalance treasuries to their desired compositions. By building the Allocator (including the Rebalancer) on Neutron, we would route all of the orders to auctions that take place on Neutron, thus increasing the value of Neutron’s blockspace and increasing MEV opportunities.

MEV is especially valuable because replicated security is unprofitable for some validators. Increasing MEV opportunities would decrease pressure on Neutron to subsidize validators with Neutron tokens.

3. Solidify Neutron as Cosmos power center

The Allocator was one of the most popular elements of ATOM 2.0 and the first piece that Polkadot embraced. It is widely considered to be the next natural step in the story of the ATOM Economic Zone. By choosing to build the Allocator on Neutron, the Allocator will act as a powerful social signal as Neutron seeks to recruit blue-chip projects. The Allocator validates Neutron as the premier DeFi platform of the Interchain.

4. Attract new capital to Neutron

The Allocator not only seeks to improve protocol-to-protocol coordination and treasury management—it also seeks to become the primary entry point for new capital to enter the Cosmos ecosystem. New non-retail capital primarily enters Cosmos via venture capital investment into new projects or follow-on investments via growth capital. Venture and growth capital are two small sources of capital relative to the financial markets as a whole and there are not enough viable venture- and growth-style investment opportunities to absorb the many billions of dollars seeking deployment into crypto. The Allocator is an excellent tool for anyone to use to structure new financial products that cater to new funding sources.

5. Demonstrate Neutron’s capabilities

One of Neutron’s key advantages relative to incumbents will be cutting-edge cross-chain features, such as interchain queries. The Allocator is a set of inherently cross-chain primitives. By building the Allocator on Neutron, Neutron would immediately have an experienced team building a flagship product that demonstrates the capabilities that are available for teams that choose to build on Neutron.

Example of Timewave’s Value Beyond the Allocator: Public Goods Funding on Neutron

As an early example of the value that Timewave seeks to bring to Neutron beyond the buildout of the Allocator, Timewave is collaborating with core Neutron teammates and other Cosmos core teams to make Neutron a major home for Interchain public goods coordination and funding. Timewave is helping to make this happen by architecting a public goods funding solution that is inspired by Protocol Guild. By making Neutron the primary home for a Protocol-Guild-like solution, Neutron would ensure that its voice is heard when seeking to build public goods that Neutron is especially interested in and Timewave would benefit by gaining additional users for the DAO-to-DAO tooling that Timewave is developing via the Allocator.

The Allocator and this public goods funding solution are just the first two ideas that Timewave is bringing to Neutron. By entering into this partnership, Neutron would attract Timewave’s mindshare, which would likely lead to new ideas and products that are uniquely enabled by working together.

Key Performance Indicators (KPIs)

1. Covenant

a. Number of covenants made
b. TVL of liquidity shared via covenants
c. TVL of liquidity shared via covenants on Neutron-based DEXs
d. TVL of NTRN-paired liquidity shared via covenants
e. Market share of blockchain-to-blockchain liquidity sharing

2. Rebalancer

a. Number of DAOs using the Rebalancer
b. Volume of swaps made via the Rebalancer
c. Net purchase of NTRN made via the Rebalancer
d. Market share of DAO treasury management
e. Execution quality relative to other Cosmos DEXes

3. Public goods

a. Number of grants made via Neutron-based funding system
b. Amount of public goods funding directed via Neutron-based funding system

4. M&A

a. Number of M&A deals facilitated by Timewave teammates
b. Size of M&A deals facilitated by Timewave teammates
c. Number of developers attracted to Neutron to build upon the Allocator and other Timewave-supported institutions

Proposal Terms

Timewave to:

  • build its flagship products on Neutron, including the Interchain Allocator
  • share 20% of Allocator revenue with Neutron for the first 36 months

Neutron to issue Timewave tokens on the following schedule:

  • 0.00% of Neutron token supply upfront
  • 0.33% of Neutron token supply unlocking at the end of month 12
  • 0.67% of Neutron token supply unlocking linearly over months 13-36

Timewave will have full voting power during the token transfer restriction period. Timewave will only be able to vote if/when delegations are enabled.

Termination Clause: The Neutron community may terminate the vesting of tokens to Timewave if Timewave leaves the Neutron community, builds core Allocator components on other chains that it could have built just as easily on Neutron, terminates revenue share, or fails to generate meaningful value for the Neutron network. Deploying components such as outposts on other chains would not qualify as a breach because they add value to the Allocator, thereby adding value to Neutron. If Neutron terminates prior to the end of month 12, Timewave will still receive 0.33% of Neutron token supply at the end of month twelve. This compromise addresses Neutron’s concern of preventing early token dumping while also helping to strengthen Timewave’s negotiating position with investors in case Timewave is unable to secure a grant to pay for the first 12 months of development.

Note 1: Cliff, vesting, and revenue share begin as of July 6, 2023

Note 2: Timewave’s revenue share exclusively applies to revenue generated from usage of the Allocator (e.g., Rebalancer fees and Covenant fees). This excludes grants, investments, and other income that Timewave may receive.

Conclusion

Thank you for considering our proposal to enter into a long-term, incentive-aligned partnership. We hope that we have clearly articulated why it is in both of our best interests to work together and that you agree that we have proposed fair terms. We welcome any questions you may have.

Cheers,

Timewave

Max Einhorn: @max_einhorn

Sam Hart: @hxrts

Udit Vira: @uditvira

10 Likes

Interesting prop!
Much to discuss on spaces this week…
Thursday 29 June 18:00 UTC
https://twitter.com/i/spaces/1eaKbrnArbBKX

3 Likes

Hey

Really hyped by this.
Will follow the space to learn more.

What’s the approx ETA for shipping the Rebalancer if the proposal passes ?

o/

3 Likes

So the Rebalancer is basically… a liquidity pool?

If, for whatever reason, a Neutron sub-DAO wanted to maintain a portfolio of 50% USDC and 50% NTRN, it could simply LP the USDC/NTRN pool on Astroport. As opposed to the Rebalancer, the liquidity pool approach would have the added benefit of providing trading liquidity for Neutron DeFi.

3 Likes

I think many will need some more practical examples of the Rebalancer flow, potential revenues, how it will scale, etc. It’s a unique offering, but hard to quantify the true value of it alone, imo. MEV capture is the next frontier toward more sustainable hub economics, but I’m curious if you’ve run some simulations on the revenue potential and how it can be expanded in to other financial products.

Also for the nerds like me, maybe you could dive in to the tech a bit to describe how it works for the chain using the service and how the rebalancer does what it does. ICA’s, ICQ’s, etc?

3 Likes

Not sure what they asking 1% of total supply for, but this is the way to much! Even seeing that 1% is actually 10.000.000 NTRN and not 100.000.000 NTRN!

At Current price, 10.000.000 tokens have a value 4m$ of which 1.3m$ are requested to distribute upfront without any delivery! If you want to earn money, you should delivery something before! Like it is in real live!

Further: we all expect neutron to increase in price, so basically this guys requesting even more, i assume the value they request is 10m$.

Seeing current tokonomics, and release schedule they requesting an enormes amount of NTRN compared to the circulating supply and as the team and early investors will receive there tokens earliest in 12 months, they will represent a significant porten of circulating supply till may 2024!

Next thing is, we all now the three persons requesting it and we all know that they already made a fortune and willing to dump a project (stargaze) if they want to.

If we really need this they shall get paid:

  1. NO Upfront
  2. a equivalent of 100.000$ in NTRN
  3. 50% in a milestone based payment
  4. 50% of the total payment once they delivered a fully functional product!

And again! 4m$ iin NTRN or 10.000.000 NTRN is compared to the total supply, current supply and eying the future value ausblutelly over any realistc value!!!

NO with VETO if this comes wents thru!!!

3 Likes

Further:

  1. The Team shall setup a milestone based project plan when what will be delivered
  2. The Team shall setup a business case, showing how the rebalancer will deliver a return on investment against the 10.000.000 Neutron they requesting! Means in what time under what assumptions will the Neutron community recover the Investment you requesting! (MOST IMPORTANT)
  3. the Team shall deliver a plan how the 10.000.000 NTRN is calculated and how it will be spent and what plans they have for swapeing them into USDC or other assets!
3 Likes

I agree, a lot of project take atom another a lot of value token after that a little project have good utility

2 Likes

Great idea.

However the execution plan and background seems hyper theoretical.

couple of questions.
What type of risk return profile have you had in your team’s past treasury management?

Since products like ICHI are already built, should we not try to get a proposal from them on their concentrated liquidity downside protection vault?

Since front running and MEV is inherently illegal in most jurisdictions, isn’t the strategy full of regulatory risk?

What’s the price of the full solution? The proposal states this is only half of the solution, what’s the expected rate of return on half of a solution?

The value prop section seemed a bit theoretical as well.

  1. How much ATOM liquidity will come?
  2. How much MEV in terms of rev today? How much MEV rev projected into the future?
  3. Social Signal? Which blue-chip projects will come? Who is validating Neutron if Rebalancer comes?
  4. How will new capital Enter Cosmos? Which VCs are looking to invest into which projects? Who specifically has committed to build structured products on the Allocator?
  5. Why can’t RPCs be used for interchain queries?

This project has major potential however very hypothetical. The clarity of the value proposition and customer base that will use the product is unclear. As well as total cost is unclear. The first use case of the Rebalancer is unclear.

3 Likes

It seems that you are a bit more an expert on the topic. Are there already solutions on the marked? And could we not reach out to them to place an offer? Anyway, i guess we should make a tender to let dev team apply for this…

2 Likes

We need more explanation why 1%

30% up front = 1.2M.You need to explain how it will be use

Timewave will work for neutron and might also ask $$ from the hub. How many people will be working for neutron?

1 Like

The proposal is exciting and participants in the Neutron community would welcome the opportunity to build the rebalancer with strategically aligned goals.

Nonetheless the economics of the grant proposal are too rich. Investing and building in this ecosystem requires long term alignment and given some proposers have full time jobs it is too skewed toward near term liquidity and too large a notional stake for the foundation to use its resources effectively over the long term.

It is my understanding that despite these outside obligations the scope of work is months not years and does not require additional headcount (as Neutron devs have offered to support as well). Throughout the document it is noted that the covenant system is separated out (and there is a risk that it gets funded at all plus an unknown timeline).

Additionally, the proposal does not specify long term dedication to preferencing Neutron and while it will be acceptable to build outposts on other chains, there should be clear bi-lateral arrangements, the contract should be terminated if Neutron:

  1. is not the primary chain and focus for the reblancer in the future.
  2. if there are bugs and errors in Timewave’s codebase that lead to economic losses for Neutron ecosystem applications and users
  3. if the product is not maintained to acceptable standards throughout the vesting period

While Cosmos is one of the oldest ecosystems and development environments, it has struggled with cohesion amongst its core developers and leaders. With Neutron we finally have the opportunity to right the ship but we must approach the coordination and incentives carefully and with precision. Only through a huge open source community will we unlock the large outcome we’re here to create. The competition from other ecosystems is moving quickly.

Suggested Modifications:

  1. Economics of 0.2% of supply vested at most on same terms as the team and early investors which means that work must be completed and certified before 1 year cliff vest
  2. Clarify bi-lateral requirements through affirmative covenants to include: (1) negative sum view on technical issues experienced by community relying on rebalancer, (2) an economic concession if covenant system is not funded by the Hub or key persons from Timewave go on to do other things (3) assertions that include a preferential focus on core development for Neutron during the entire life of the vesting contract plus (4) maintenance and improvements to the rebalances as needed or realized by Timewave team or the community (5) delivery within a year but realistically sooner

In the proposal it would be helpful to outline why the risk-reward skews so heavily in Timewave’s favor (or if cash for the work vs Neutron tokens is acceptable). Why shouldn’t there be reciprocal economic alignment through a promise of future tokens/equity to Neturon DAO if/when Timewave seeks to formalize their business model. If the economics asks remain high it may make more sense for Timewave to raise VC funding instead, and Neutron DAO could participate in the round.

4 Likes

really exciting to see this project so alive

2 Likes

first days of the forum, first ad hominem attacks with no clue

could we from the start clean the forum up from shitty conspiracy theories?

2 Likes

Man, not sure if you are involved, but does it not make sense to challenge the amount they request? Do you think 4m$ (actual 4.3m$) is the fair value? Dont you think that for such an amount of money they have to deliver more details? ^^

1 Like

challenging the amount is not a problem.
doing so as you did with “thEy haVE alREAdy mAdE a fORtuNe thESe gRiFTeRs” is a problem.

ad hominem attacks should be prohibited. period.

2 Likes

As the idea of the interchain allocator is community-owned and a concept supported by multiple different parties in the Cosmos ecosystem, maybe it makes sense instead for Neutron to release an RFP that looks for multiple organizations to create proposals to build out the concept?

I am sure a lot of the commenters here love the interchain allocator idea and want to see it happen, but they might just have issues with the specific terms of this proposal.

We can look at a recent example here, from one of the leaders of DAO treasury management and governance, Optimism:

They created an RFP for creating a ZK module for the OP stack, and it already has received multiple high profile submissions from very talented teams.

This way we would make sure that we weigh the different options for who could build this, and the community will feel that they had the appropriate due process done for funding the project.

Additionally, if this was funded via an RFP, it could receive cofunding from other funds, such as https://atomaccelerator.com/ for example.

3 Likes

Agree this is the best way forward. Having one team get a $4M usd grant by default seems a recipe for disaster.

Would rather we fund a grants program that can negotiate and find the best way to execute this.

After listening and speaking with the team on twitter here: https://twitter.com/i/spaces/1eaKbrnArbBKX

I had this suggestion:

  1. 0.05% unlocked from the start of development and 0.25% vested linearly for a year.
  2. Remaining 0.7% unlocked linearly for 2 years after 1 year lockup.

This maintains long term alignment with time wave and Neutron as well as allow Time wave time to build for Neutron with adequate funding.

Appreciate the space, it was very productive.

3 Likes

I disagree, we even have no valuation why 1% of total supply is requested. The RFP idea ist that what we should heading for, let different teams apply for the project and then we see what the price is.

Nobody have stated how many man days are needed to build this and nobody even said where the 10m Neutron are needed for and what are they going to be spend for.

Sorry, but if you apply for a project you have to deliver a:

  1. a overview of the solution
    • why is this solution the best
    • what is the benefit for us
    • howe are you going to maintain the delivered product
    • a overview of a desaster recovery
    • what licenses are needed
    • ownership of the delieverd product
  2. a milestone based project plan
    • milestones are also payment targets for delieverables
  3. a water proofed business case, showing how the work they do will deliver a return on invest - in this case 4.5m$
  4. a breakdown of man days needed
  5. an overview of the stuff (Senior & Junior) you will allocate to the project (not with some internet pseudonym) . CVs and Skills!
  6. an overview how much time each project member will work on the project incl. the price for each person.

We talking about 4.5m$ (current Neutron Price 0.45$).
If you break this down, you can

  • engage a team of 20-25 Software developers
  • for a man day rate of 1.000$ per day
  • for an entire Year! Full Time on this Projcet!
  • thats 4.500 man days!

I definitely think, this is not needed!

2 Likes

Yes, this proposal has to be significantly improve. Disagree with the RFP though.

  1. no team is building this for cosmos at the moment.
  2. The issue of immediate selling is solved with my suggestion
  3. We have significant amount of time as a community to decide if we want to cancel funding.
  4. This ensures long term work and aligment with Timewave team to help develop neutron.

Personally, would like to see Timewave include delivering on integration with the “Covenants” module when it is released as part of this proposal as well. If the goal is to make Neutron grow long term this should be all but guaranteed.

2 Likes