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:
- Add prelude to give context to feedback received and changes made
- Clarify scope of partnership to make Neutron the default home for all of Timewave’s flagship products, including the Interchain Allocator
- Add Timewave’s role in facilitating public goods funding on Neutron via something similar to Protocol Guild
- Add KPIs to further clarify value Timewave provides to Neutron
- Update partnership terms to include 12 month cliff and 20% revenue share for 36 months
- 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