Dear Neutron Community,
Per Neutron prop 19, which initiated a long-term collaboration between Timewave and the Neutron community, our team is responsible for providing a quarterly update on our key activities. It has been three months since we formalized our partnership together and we are pleased to report that we have been keeping busy. We hope that this progress update inspires you to get more involved with the community and gives you a sense for how we intend to leverage the tools that Neutron provides to build one of the world’s first integrated applications.
Highlights
- Covenants
- Covenant v1 audited
- Covenant v2 currently being audited
- Rebalancer
- Rebalancer v1 audited
- Public goods
- Built Interchain Guild proof of concept
- M&A
- Advised on the Neutrality merger
- Miscellaneous
1. Covenants
Problem
IBC-enabled chains are natively interoperable, but the scope and scale of this interoperability is limited. Most chains are trying to maximize flows to their own chains and minimize outflows, which hinders interchain activity because the chains are playing a zero-sum game. Also, IBC is used almost entirely by individuals, not by the chains themselves.
Solution
Covenants are a way for crypto-native organizations such as blockchains, dApps, and protocols (i.e. DAOs) to transact with one another. Covenants make interchain transactions positive-sum by making it possible for chains to send assets conditionally and to use those assets to provide liquidity for one another.
Status
Prior to our partnership, we had just completed Covenant v1, which was audited by Informal Systems with zero critical, high, or medium severity issues found. Covenant v1 was built to handle the cross-chain workflow necessary for the Hub to deploy 450K ATOM in protocol-owned liquidity into the ATOM-stATOM pool on Astroport (Prop 800). Currently, a multisig handles this deal—the Hub needs an interchain account (ICA) controller in order to migrate off of the multisig and move onto Covenant v1. The Hub is on track to have an ICA controller once it passes its next upgrade, which is likely to happen within the next couple months.
Since building Covenant v1, we have gone on to build Covenant v2, which is more generalized and feature-rich. Covenant v1 only works for the specific path between the Hub, Stride, Neutron, and Astroport—it would not work for any other liquidity providers, DEXs, or liquid staking protocols. Covenant v2 supports any chain with an ICA controller to deploy liquidity and to do so on both Astroport and Osmosis. It also supports not just Stride’s liquid-staked assets (e.g., stATOM), but also Persistence’s liquid-staked assets (e.g., stkATOM). Covenant v2 also has additional features, such enabling token swaps, setting minimum LP hold durations, and enabling ragequitting for a fee.
Covenant v2 will be able to handle the Hub’s 600K ATOM POL deal with Persistence (Prop 853) and 900K ATOM POL deal with Osmosis (Prop 858) once the Hub has an ICA controller (expected in the next Hub upgrade). Covenant v2 is currently under audit by Oak Security. We are always happy to speak to new community members who want to know more about protocol-owned liquidity, and how they might employ a Covenant for single or multi-party liquidity sharing!
2. Rebalancer
Problem
DAOs with on-chain governance and transparent protocols more broadly face structural disadvantages when participating in financial markets because anyone can front-run the DAO. An additional structural advantage is that the DAO moves slowly, missing opportunities that would require action faster than the DAO is able to vote (or even the multisig is able to assemble the necessary signatures).
Solution
The Rebalancer is a balance sheet management tool custom-built for DAOs. It enables DAOs to set a target portfolio (e.g., 75% native token, 25% stabletoken) and automatically rebalance their treasury to remain at the desired construction as prices shift. The Rebalancer makes portfolio adjustments gradually via dutch auction, which minimizes the slippage incurred by the DAO. Using a PID controller, the Rebalancer allows each DAO to determine how aggressively or conservatively it wants to react to price movements.
Status
We submitted the Rebalancer to Oak Security for audit courtesy of Neutron’s audit sponsorship program (thank you!) and the audit resulted in zero critical severity issues found. The Rebalancer is currently in beta testing and we look forward to making its services available to the Neutron community and wider Cosmos in the near future. We invite any protocol or DAO teams to get in touch if you believe this could be useful to you!
3. Public Goods
Problem
Interchain developers need no reminder about how difficult it is to fund interchain public goods. The problem of public goods funding becomes even more acute when it comes to endeavors that require long-term funding, not just one-off grants.
Solution
Inspired by Ethereum’s Protocol Guild, we built a proof of concept (PoC) for Interchain Guild. Interchain Guild is a collective of Interchain contributors working to boost the incentives around stewarding core protocols by maintaining an on-chain registry of its membership, which allows ecosystem sponsors to directly fund the membership, their work, the public good.
Status
We are actively pursuing potential sources of funding to develop Interchain Guild from a PoC to a full-scale solution for long-term public goods funding throughout the Interchain.
4. Mergers and Acquisitions
We played a key role in advising both sides of the Neutrality (Neutron + Duality) merger by helping the parties understand the synergies that are possible by working together. The process has gone relatively smoothly and we look forward to exploring ways to leverage Duality’s technology to improve the Rebalancer.
5. Miscellaneous
In addition to the major categories above, we have made ourselves available to support core Neutron initiatives. Timewave has a weekly call with core Neutron contributors, we were in the war room during the difficulties of the Neutrality upgrade, and we’ve provided feedback to the engineering team that will lead to improvements in the developer experience that were only possible to identify by pushing Neutron’s technology to its limits. Additionally, Timewave has provided operational support with a series of Covenants that we look forward to announcing soon™.
Wrapping Up
We are a new team and this is just our first quarter working in collaboration with Neutron. We look forward to deepening our partnership in the months to come and producing results that are uniquely possible by bringing out the best in each other. Onwards!
Cheers,
Timewave