Neutron <> Osmosis Alignment

Proposal Discussion
1

Hi all,

Osmosis and Neutron are continuing to emerge as leading projects in the Cosmos ecosystem. I believe there is a lot to be gained by strengthening the direct collaboration between our communities and therefore propose to mutually bootstrapping each other’s ecosystem liquidity with valuable native assets.

Summary

Strengthen direct cooperation and the liquidity graph between Neutron and Osmosis by jointly bootstrapping 250K NTRN/OSMO liquidity on Osmosis and Astroport.

Rationale

OSMO and NTRN are some of the most liquid tokens in the ecosystem, featuring high trading volumes relative to their respective market caps and serving as liquidity bridges in their respective ecosystems.

OSMO NTRN
Market Cap $595,386,370 $274,469,652
24H Volume $60,286,759 $82,346,794
Volume / MC 9.60% 30.00%

By bootstrapping OSMO / NTRN liquidity on both networks, we can increase the connectivity between the liquidity graph of each ecosystem and generate new arbitrage and onboarding opportunities, benefiting Osmosis’ volume as well as revenue thanks to Protorev and the Protocol fee.

Furthermore, this seems like a logical continuation of the cooperative history of the Neutron and Osmosis DAO:

As part of its work with Lido, Hadron Labs secured 1,000,000 AXL tokens to be deployed as incentives on Osmosis. Osmosis recognized Neutron’s wstETH denomination as and Hadron Labs prioritized the development on a 1-click bridge flow to Osmosis as requested by the community.

Increasing the direct collaboration between Neutron and Osmosis communities could have significant benefits to both projects. For example, joint grant funding that benefits both ecosystems for a fraction of the cost, and joint research and development initiatives that could result in technologies useful to both Osmosis and Neutron.

Implementation

In the interest of time and simplicity, we propose to start with a minimal solution that can be deployed securely in the coming weeks, according to the following steps :

  • Submit a proposal on Osmosis to transfer $250K worth of OSMO to a joint multisig on Osmosis
  • Submit a proposal on Neutron to transfer $250K worth of NTRN to a joint multisig on Neutron
  • Multisigs transfer 50% of the allocations over IBC
  • Multisigs provide $250K of liquidity to the OSMO/NTRN pools on Osmosis and Astroport

We propose to maintain these positions for a year, but to enable the respective communities to signal their desire for the assets to be maintained as liquidity or returned to the DAO’s Treasuries freely via signaling proposals.

To simplify operations, once the final audit for Timewave’s Covenant contracts V2 has been released, the positions could be transferred to a dedicated covenant.

To perform these operations, we propose to rely on a simple 3/4 committee. We welcome volunteers and signers that the Osmosis DAO feels most comfortable with.

Contributor Project Osmosis Address Neutron Address
Spaydh Neutron osmo1cpy2gpwc8lphzyczderwma2rt5nqdmvtgq9cku neutron1cpy2gpwc8lphzyczderwma2rt5nqdmvtyyl26f
Jeonghwan Cosmostation osmo14zmenvpesn789wc0pl9klksxpxah6rav55qvhp neutron14zmenvpesn789wc0pl9klksxpxah6ravcs67m5
Claimens CryptoCrew osmo1705swa2kgn9pvancafzl254f63a3jda9mn7rwv neutron1705swa2kgn9pvancafzl254f63a3jda9hhy3ze
Keefer Tesselated osmo1ts0yhyxaxc7vzsa9lyzdujygmfky2se88gkpz4 neutron1ts0yhyxaxc7vzsa9lyzdujygmfky2se8tvvnwq
Luisqa Interbloc osmo1ze09kc5ackut7wc4pf38lysu45kfz3ms0pap0f neutron1ze09kc5ackut7wc4pf38lysu45kfz3msr98nru

Liquidity Pool

To ensure the liquidity is provided to the most adequate pool on Osmosis, we would like to gather the community’s preference between:

  • Pool 1046 - NTRN OSMO (xyk)
  • Or a new concentrated liquidity pool.

In the case of the latter, the range would have to be extremely conservative so as to ensure that price does not move out of bound as the liquidity would not be managed actively

Increasing scope

Once this proposal is executed, if there is a desire from the Osmosis community to increase the NTRN liquidity available on Osmosis, a similar proposal to the Neutron DAO will be welcome.

For reference, the forum can be found here, and the governance UI is available there.

Rejection

The Neutron community will remain open to collaborating directly with the Osmosis community in the event that this proposal gets rejected.

Conclusion

We are excited to further the cooperation and economic ties bringing the Osmosis and Neutron communities together.

5 Likes
2

I’m opposed to this proposal, because I don’t understand how it benefits Osmosis.

Osmosis already has a decent amount of NTRN liquidity. This liquidity has never been incentivized; it seems to have appeared organically, due to a strong demand to trade NTRN on Osmosis. Judging by the high APRs, it looks like NTRN liquidity on Osmosis will continue to increase.

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And I don’t see how it would benefit Osmosis to have OSMO liquidity on Neutron. If there were a strong demand to trade OSMO on Neutron, then the OSMO pool on Neutron would be deeper - but it only has $200 of liquidity.

2 Likes
3

I’m somewhat torn on this proposal. On one hand, I do think Osmosis could benefit from a bit more NTRN liquidity. The asset is in high demand, and this could potentially pave the way for some healthy collateral usecases for NTRN on Mars, UX, Levana, etc.

On the other hand, this liquidity would be deposited into a pool paired with OSMO, which is somewhat at odds with the growing strategy to shift to stablecoin-denominated liquidity. As @John_Galt mentioned, the USDC / NTRN supercharged pool is doing really well on its own.

This would only fragment the liquidity available on Osmosis and potentially drive volume away from that pool. On the other hand, however, it could potentially increase volumes a bit with arbitrage activity. I just see this as potentially unlikely given how little activity this specific pool sees on Astroport already. The proposal seems to significantly disproportionately benefit Neutron in this case.

I have to think about this a bit more. I’m undecided right now, but I do have a few specific thoughts:

  1. I think the funds should definitely be added to a supercharged pool. History has shown that supercharged pools tend to attract more swap volume, and this liquidity could eventually be added to a vault using Quasar / apollo / etc.

  2. What’s the framework being used to measure the $250k USD value for each token? I’d suggest something like a 24-72h TWAP.

  3. Does the Neutron / Astroport community have any plans for this OSMO liquidity above and beyond just having it available to facilitate swap depth? Will this help unlock lending integrations on Neutron or anything else like that? Something like this could potentially help tip the scales here.

I would like to see this happen regardless of the outcome of this proposal. I think there are a number of ways to foster alignment that don’t need to be contingent on the results of a treasury swap! Particularly excited about the possibility of collaborative research and grants funding.

Will pop back in and give updated thoughts after I’ve had a bit more time to think through the 1st and 2nd order effects of this. Thanks for putting this up for discussion!

3 Likes
4

Lol, I just saw this on twitter and thought it was relevant to my points above, so thought I’d add it here :sweat_smile:

https://x.com/JohnnyWyles87/status/1735403553257369665?s=20

Could potentially be a benefit to have a supercharged pair denominated in OSMO for cases like this.

1 Like
5

I would say that this proposal clearly doesn’t benefit (or hurts) Osmosis if only Neutron received OSMO or vice versa, but because it’s mutual I think both ecosystems can win.

A quick thought on why :

Current volumes and liquidity aren’t a good metric for whether a mutual LP is worth it. A better metric is what the marginal benefit to each ecosystem would be sub the opportunity cost. One way to think of it might be that another 125k of NTRN liquidity on Osmosis it’s very possible that having a higher marginal benefit than another 125k of OSMO on Osmosis since there is already an abundant amount of OSMO for people to trade but not nearly as much NTRN. There are also intangible benefits, like building and strengthening relationships between the ecosystems. Historically I think Cosmos has been a location for tons of innovation, but also a failure to capitalize on it because of a lack of coordination. In my opinion, as the Neutron ecosystem grows it makes sense for Neutron and NTRN to become a large part of the Osmosis ecosystem, just as it makes sense for Osmosis and OSMO to become a large part of the Neutron ecosystem,

1 Like
6

These are all good points.

To address the more contentious question I saw from my perspective (can’t speak for @Spaydh and Neutron) :

Does the Neutron / Astroport community have any plans for this OSMO liquidity above and beyond just having it available to facilitate swap depth? Will this help unlock lending integrations on Neutron or anything else like that? Something like this could potentially help tip the scales here.

As far as I know this was not discussed when the proposal idea was floated, although I think it’d be smart for apps on both ecosystems to embrace each asset.

1 Like
7

good,please give me :sweat_smile: :smile:

1 Like
8

This is a classic example of whether the “grow the pie” philosophy works.

Yes, Neutron with the flagship exchange AstroPort would surely benefit from this. And Osmosis as well by having deeper liquidity in the pools, making it a better asset to trade or route trades through.

On the other hand it is strengthening a clear competitor which has been growing in the past period and is rivalling the position of Osmosis.

Can you elaborate more on the choice of the size of the request?
Can you also elaborate on how you see joint grant funding? And joint research and development initiatives?

2 Likes
9

Hey Osmosis, Max from Timewave chiming in. The audit that Avril mentioned is scheduled to start in January so we expect Covenant v2 to be ready by the end of Q1. Covenant v2 will enable all of the following features without the need for any human intervention (i.e., no multisig):

  1. swap tokens

  2. liquid-stake tokens

  3. LP tokens

  4. commit to minimum lockup/LP durations

  5. ragequit fees

As food for thought, below is a potential deal structure that utilizes Covenant v2 functionality that could help improve alignment between the two chains:

  • Neutron commits $X worth of NTRN to the Covenant
  • Osmosis commits $X worth of OSMO to the Covenant
  • Half of the tokens are used to create NTRN-OSMO LP shares on Osmosis
  • Half of the tokens are used to create NTRN-OSMO LP shares on Astroport
  • Both parties commit to maintaining those LP positions for Y months
  • At the end of Y months, the Covenant exits the LP positions with half of the NTRN and half of the OSMO going to Osmosis and the remaining halves going to Neutron
  • [optional] Either party may ragequit the Covenant (i.e. early exit from the LP position) in return for a Z% fee that goes from the ragequitting party to the non-ragequiting party

By committing to entering into the same position for the same period of time and receiving the same tokens at the end of the Covenant, both parties will increase their incentive alignment for the duration of the Covenant.

All that said, Timewave is neither for nor against a deal between Neutron and Osmosis. Timewave is a neutral provider of tools for internet-native organizations to trustlessly and permissionlessly enter into economic partnerships with one another. I’m sharing all this proactively since our tools are new and we want the community to understand the new possibilities we are unlocking. DMs are open @timewavelabs.

2 Likes
10

I agree with the points @John_Galt makes here, they’re simple and accurate takes.

Alignment should be explored, but I do not think bootstrapping pools with additional liquidity will lead to more alignment or even practical use for Osmosis in this scenario.

The 2 communities should brainstorm other ways to align, whether that’s community efforts or potentially even on the BD/Growth side.

4 Likes
11

I think it makes sense, if we are actual supporters of growing the pie, to incentivize this. I created the original NTRN pool and even if now it has volume, it has always struggled to gather sufficient liquidity on osmosis, mainly, I think, because a lot of NTRN liquidity stays on Astroport.

For Osmosis, it allows us to have better liquidity depth for swaps, plus improving Osmosis position as a good place to buy/trade NTRN, therefore increasing swap fees for stakers. Funny how some members posting here spout grow the pie and driving volume to osmosis as benefits for THEIR projects but anyone else should get nothing. Hypocrisy is strong with this one.

OSMO and NTRN appear to be heavily correlated so this would minimize any worry of IL on these positions.

2 Likes
12

I gave this some more thought.

Over the weekend, Astroport on Neutron has seen an explosion in volume and activity, largely due to memecoins like $NEWT and $CORGI. I’ve personally had a blast using Neutron and Astroport for a little degeneracy over the last 24h and I think $NEWT has done more for Osmosis and Neutron alignment than any existing initiative on either chain.

All of that said, this weekend has been pretty eye-opening re: this proposal. $NEWT was listed on Osmosis shortly after launch and has facilitated healthy arbitrage volume between the two chains for that asset, despite no initial provision of liquidity. It’s clear that when assets are popular on both chains, we see volume for those assets on both chains.

This weekend saw no significant activity for OSMO on Astroport, despite the popularity of the exchange driving up volumes for many other assets. OSMO simply is not a desirable asset on Neutron. In the last 24h, OSMO has done $1000 in daily volume on Astroport and no new liquidity has been provided, despite a massive APR of 250%.

NTRN on the other hand has done $700k in volume on Osmosis, leading to organic and sustainable TL and making POL unnecessary.

When coupled with the fact that there seem to be no concrete plans surrounding usage of OSMO on Neutron apart from just having the liquidity sit there with little to no volume to speak of, I just don’t see this proposal bringing any real value to Osmosis. To be honest, I don’t see this proposal bringing any real value to Neutron either, and I’m struggling to understand how the proposers think this investment is worthwhile (except to slightly raise TVL numbers)

I appreciate the argument that this will help foster Neutron and Osmosis alignment, but as I said above I think there are better paths forward here. As a member of the OGP, I’d be particularly interested in exploring joint grants funding for initiatives where that makes sense, and would love to open a line of comms to folks with the NGP to discuss (if OGP’s upcoming proposal passes and our mandate is renewed).

However, as to this proposal in particular, I will be voting no.

5 Likes
13

I don’t think the statements/accusations made by @luisqa check out and find them needlessly accusatory. The comments by other contributors on this post all point to reasonable logic.

The main claim from @luisqa that I’d like to reject is:

  • ‘NTRN has always struggled to gather sufficient liquidity on Osmosis’
    – Yet it has grown organically to facilitate useful volume for NTRN of around $400,000 - $700,000 a day atm with around $180-220k in liquidity, while the OSMO pool on Neutron is doing $1000 in daily volume with $300 of liquidity. It is clear there is no demand or organic growth in the OSMO pool on Neutron
    image
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I do actually agree with Luisqa on his comment below

However, an equal sided ask when Osmosis is doing 400-700x the volume for NTRN does not make sense for Osmosis.

2 Likes
14

I think there is ample literature to explain the effect which drove me to write this proposal.

There is no OSMO volume on Neutron currently because the pool is too shallow to do any reasonable trading. Increasing liquidity would result in arbitrage and organic trading picking up. Likewise, increased NTRN liquidity on Osmosis would increase the share of NTRN volume that happens on Osmosis, which is bullish for Osmosis.

I don’t even see it this proposal as an ask tbf - tokens don’t change hands beyond potential IL if prices move. To me it’s just a nice thing that would bring some value to both project and that we can do together easily.

1 Like
15

I have to agree with Spaydh here somewhat. There is no liquidity for OSMO on Neutron, so no trading - why would you trade OSMO on Neutron when you can get a better price on Osmosis? I have run in to this issue when trying to foster the growth of other pools with established alternative trading platforms. XYK pools are difficult to bootstrap unless there is either minimal competition, liquidity incentives, or you have $25k+ of liquidity to start with to allow small traders with minimal impact.

I’m generally in favor of protocol-owned liquidity as a concept, but I think this proposal currently is mostly useful for Neutron and not particularly useful for Osmosis as written. Neutron liquidity on Osmosis has grown rapidly since the NTRN/USDC pool gained some initial bootstrapping liquidity and started trading 2 weeks ago and will likely continue to do so.

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Finally, as others have pointed out, the liquidity efficiency on Osmosis means that any liquidity deployed to NTRN wouldn’t be particularly well used even if there does turn out to be a demand for trading. The most useful reason to deploy liquidity on Neutron would be for usage in Neutron apps, and 250k is probably too little for Mars to use. I’m not aware of any other apps that could tap into this and provide organic volume?

3 Likes
16

I’m all for more collaboration but collaboration should offer mutual benefit and I’m really… really struggling to see how this would benefit Osmosis. It’s very clear though, how Neutron stands to gain.

In addition and as an aside, I’ve been looking at the volume and liquidity activity on Astroport and while I don’t want to make any accusations, some of the numbers being reported are looking pretty sus.

For example, there was one very illiquid token which had $0.57 worth of liquidity and… apparently… the trading volume for that asset was 800K…

It’s a no for me personally.

2 Likes
17

Just noticed that this went to chain yesterday!

If this does pass then a CL position similar to the MANTA/OSMO swap should be used imo.

I still believe that this proposal is far more beneficial for Neutron than it is for Osmosis.

We currently have $250k of NTRN liquidity on Osmosis, growing quickly. Bootstrapping on Osmosis is not needed.

image
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Therefore this proposal is really about whether Osmosis governance wants to bootstrap liquidity on Neutron.

2 Likes
18

This is the real test whether the “Grow the pie” narrative is a real thing or not :stuck_out_tongue:

2 Likes
19

Grow whose pie is the question here though, and I’ll give you the answer, it is Neutron’s, using Osmosis resources.

1 Like
20

Osmosis has ~5% of NTRN volume with 50% of that coming from the CL Pool 1324. Pool 1324’s liquidity has been increasing since this proposal came to forum and is now 10x & APR 165 → 78% what it was in @John_Galt’s message 29d ago (isn’t due to price as NTRN has chopped).
Here’s the liquidity:
image

Now look at the volume as well:
image

Look’s to me like the market still has space to find its yield floor for the pool, a liquidity peak that scales with APR. The problem is now: if this proposal passes, volume will leave Pool 1324 for the xyk Pool 1046, lowering the TVL peak, which directly influences the efficiency.

On the other hand…
Due to Neutron’s current lack of OSMO liquidity, any arb volume for OSMO will route through said pool. Worst case, Neutron fully owns an arb pool with consistent, though not TVL increasing, yield. Best case, the liquidity on Neutron makes enough yield to grow liquidity and attract OSMO trading.

Imo, best case won’t happen, it’ll all be arb. Which means we are trading yield on CP assets to Neutron in exchange for growth friction in a budding, unincentivized Osmosis pair.

2 Likes