Injective x Neptune Finance

Recorded: Jan. 31, 2024 Duration: 0:52:10

Player

Snippets

Hey guys.
Hey guys, let's see if we can get this music off.
Can you hear me well on your end, kid?
Sound good to me?
Awesome, awesome.
Well, I believe this music should phase out here momentarily.
We shall see, but very excited to kick things off.
Is Chase going to be joining you as well, or just you on your side, KJ?
We should be expecting seeds any minute.
Well, with that, let's give one more minute of time for our hosts, our speakers, as well as community members to pop in.
We can get started to really look forward to this one.
There we go.
Well, awesome.
I think we have quite a few community members here on our side of things, and I'm sure Chase will be able to pop in here as well.
But just to get started, super excited to kick off another incredible Injective AMA today.
We're super excited and lucky to have Neptune Finance up here with us today and the founding team members who will get to introduce themselves.
But with that, just to get started, I wanted to note that this is a recorded space.
Our users and community members always have the opportunity to come back and take a listen into what's the hottest and latest new things within the Injective ecosystem.
So with that being said, I want to kick it over to KJ and just allow you to give a brief introduction on yourself, as well as Neptune and the reason for the space today.
Then we can jump into things.
Sounds great.
I'd like to say, first off, thanks for hosting this space and letting people get more educated on Neptune.
We're pretty excited to be working with Injective.
Neptune's been alive for a week, so we're hoping to get more people involved and keep growing it along with the Injective ecosystem.
I can speak to a bit of an introduction to myself.
So I'm one of the founders of the Neptune protocol.
We started building Neptune about a couple of years ago.
But myself, I've been in crypto for about eight plus years.
I'm an electronics engineer by background and kind of started my crypto journey in solar powered mining routes, which was more fun than it was profitable.
But that got me into trading, which then eventually got me into DeFi because I was always interested in this open nature of finance that DeFi had to offer.
We started Neptune with a small team of four people who've been growing since.
Awesome. Great stuff. And I think we're also waiting on the Neptune account as well on Chase's side of things.
But hopefully we can get that sorted out here in the moment.
So, you know, while we wait for that side of things, we'd love to, you know, for our viewers and listeners who are not familiar.
Could you briefly explain kind of what Neptune is and how kind of the Neptune lending protocol works?
Sure thing. To give the quick overview, Neptune Finance in its current state is an advanced lending and borrow market.
So the analogy we always use is like we are the Aave for Injective.
So what a lending and borrow market and money market enables is the two functions of people who use being able to lend out tokens to earn a yield and other people being able to borrow tokens.
People being able to borrow tokens with a collateralized position, meaning you can come to Neptune.
You can say put up your Injective or your Bitcoin as collateral and borrow a position against it.
And there's a whole bunch of different reasons that people would borrow tokens for personal use, for certain trading activities, people chasing yields in other fashions.
But that's what Neptune enables. Like a lending market is one of the DeFi primitives.
And in the Injective ecosystem, the other primitive is swapping.
And the Injective order books and helix have been enabling swapping for a while now, and it does it fantastically.
It's one of the best systems for enabling trading in DeFi.
And now along comes Neptune, and we've enabled the other primitive that was missing, which is lending and borrowing.
So we're really happy to be a part of that synergy for Injective.
Awesome stuff. Yeah, super excited, both personally and also for our entire ecosystem.
I've gotten to head over to Neptune, trial out using the protocol, and think there's some really unique aspects to the product.
They can even take it above and beyond, very similar to Aave as well.
So excited to jump into some of those things today.
With kind of the next question, can you explain the value of lending in DeFi,
and how lending within DeFi works and unlocks the utility for an entire ecosystem, specifically the Injective ecosystem in this case?
Also, Chase, great to see that we finally got you up here. Apologies for any technical difficulties.
Yeah, nice to be here. Thanks, Cooper.
Glad you found it.
Yeah, I can talk to the primitive of lending, which has been one of these fundamental aspects of finance for centuries.
Since money existed, people have lent money to other people as well.
So in traditional finance, with what people are familiar with, lending comes in the form of depositing money in your bank.
You put cash into a bank account, you put it into a savings, and what the bank facilitates is it takes your savings and it lends it out to other borrowers.
And those borrowers may be businesses, it'll be credit card users, it'll be mortgage holders, it'll be private loans, let's say something like a car.
What lending does in DeFi is it codifies the functions of a bank, and it takes out that middleman and makes it trustless.
So what lending enables is people who have access in DeFi.
DeFi is this fantastic system to be able to manage your money freely and have custody over your money.
So money markets like Neptune Finance allow users to be able to lend out and earn a passive yield on their tokens that they're holding, theoretically their savings,
to enable seamlessly borrowers to come into the system and start borrowing, and they pay an interest fee to borrow, and that interest fee is paid back to the lenders.
Because the lenders are the one providing liquidity and enabling this functionality.
Awesome, awesome. Very well, very well explained. So, you know, to talk about that, I think conceptually, I definitely understand it, you know, end to end.
But would love to understand, right, like with that being the case, what's available on Neptune today?
And what types of assets, if I'm a community member, you know, could I go about kind of potentially utilizing with Neptune today as it stands?
Yeah, so Neptune is still very much in its early stage. We are very focused when it comes to risk and growth of the protocol.
We want to make sure it's safe for the users and safe for the protocol as well.
So what we have listed in Neptune so far is just a few assets. We have available the injective token, we have Adam, and we have USDT.
And all of those tokens currently can be lent to Neptune. So you can lend it out and earn a passive yield on that token.
You can also borrow those tokens. Those tokens additionally can be used as collateral.
So theoretically, one of the paths you could take is your lender and you have USDT. It's just sitting in your wallet on injective.
You're waiting for an opportunity to use it. While you're waiting, you can go to Neptune and you can lend out your USDT and you can earn a yield on that while someone else is borrowing it.
And once you find an opportunity to use your USDT for something, you pull it out of Neptune and you go use it and you pull it out with all the interest that you earned.
Additionally, if you're a borrower and say you're an injective holder and you're holding it for the long term and you want to be able to get some value out of your injective without selling it,
you could bring your injective to Neptune and you can put it into the system as collateral.
And this will enable you to borrow against your injective. So you could borrow USDT against your injective or you could borrow Adam.
And then you could go ahead and say one of your use cases is you just need some short term cash. So you borrow some USDT from Neptune and maybe you go buy a car or something for that.
Or you find a yield opportunity in DeFi. It's something you want to jump on. So you go borrow some cash from Neptune and you can leverage your position.
You can get access to more capital through this function.
Yeah, no, great, great example. I definitely personally have seen across the interoperability of different protocols across the injective ecosystem, being able to take advantage of yield without having to swap out of existing collateral.
Definitely think there's a lot of existing use cases there as well. So with that being said, huge congrats on the launch and the awesome launch there of Neptune and all the great deposits you guys have seen as well as the borrows.
What features are available now for main net users and what are some interesting features that we can likely expect in the future?
I think I'll talk to some of the technical aspects of those features and I'll let seeds jump in and talk about how a user can take advantage of those.
So Neptune has quite a big roadmap and it's pretty exciting to be developing those features out for the future.
But what is available there today is users have the ability to lend and in lending an asset, you receive a receipt token and this receipt token will get into a bit more, but it's a yield bearing token for your lending position.
Additionally, if you're a borrower, you can come to the platform and you can lock up your collateral and borrow assets against it.
What Neptune enables is the ability to create cross margin so you can lock up multiple different types of collateral and borrow against them.
And we also enable subaccounts and subaccounts are a feature where traditionally in other lending markets, if you want to have two separate positions that don't affect each other, you have to manage multiple wallets and then you have to manage multiple gas for those wallets.
It gets complicated and messy. So with subaccounts in Neptune, you can create multiple positions.
For example, theoretically, you could have a long term position on Bitcoin and you're using Bitcoin as collateral and you're borrowing a small position against it, but you see a short term opportunity in the market.
So what you could do is create a new subaccount and create a riskier position that if it were to be liquidated, you would not be affecting your original position.
So this allows users to create diversified strategies and how they manage their assets and how they control their risk as well.
Additionally, some more of the backend features going on is one of the biggest innovations that we've brought to Neptune Finance is a PID controlled interest rate.
And what this is, it's a algorithmic controller that actually reshapes the curve in which interest rates are measured against.
And what this curve is doing is it's targeting an ideal utilization. Neptune is built from the ground up to be capital efficient.
And with this curve in targeting an ideal utilization, it's being very dynamic to the supply and demand for lending and borrowing in DeFi markets.
And it's constantly readjusting the borrow rates based on that supply and demand.
And this actually makes Neptune far more competitive in its rates compared to all neighboring markets.
So if you're lending and borrowing with Neptune, on average, you're always going to have a better borrow rate or a lending yield because of this dynamic interest rate.
So with all these functions together, through the front end, the user can be able to perform a lot of actions within Neptune.
But additionally, all these features bring new opportunities for developers.
With subaccounts, you can much easier create secondary leveraged protocols by utilizing Neptune.
And that's a much easier development process for that.
But I think I'll let seeds jump in and talk to how users can potentially find opportunities in using some of these features in Neptune.
Yeah, sure. I am so excited about Neptune being live.
The PID controller helping improve rates is going to create so many opportunities for both lenders and borrowers.
We're only in our first week. One year or even a few months from now, I cannot wait to see what our rates are going to be because that PID controller is constantly tuning itself to find the most competitive rate.
And that creates opportunities for traders and for people who are creating or people who are looking for opportunities for yields.
So one that we came across recently that I am particularly interested in is using Neptune, using something like Injective as collateral, then borrowing USDT against it,
and then going on the Helix order book and making a short position in order to make a yield off of the funding rate.
Now, I've only been testing this for a couple of days, but this is just one strategy of many that seems like Neptune can provide much lower rates on one side and there are opportunities on the other side to use the borrowed tokens.
And we're going to be exploring quite a few more of these, and this is actually what our, in the future, we plan to create vaults that will do these automatically for users.
So excited for not only for users and traders, but also for builders and other treasuries to find these opportunities using Neptune and using their treasury tokens to improve the liquidity in their ecosystems or to just borrow
against a token that they don't want to sell. So I am so excited for Neptune to be alive, and I can't wait to see how many new opportunities our users find.
Yeah, totally. And that PID sounds really novel and awesome stuff, excited to really learn and read up more myself on that.
So with that concept, it seems like kind of the most basic function for a user tuning in today would be lending some assets to Neptune.
And with that, why do lenders receive these forms of receipt tokens that have been previously mentioned, and what are the significances of holding them?
How can they be redeemed? Kind of bring us through for a user listening today how lending works.
Sure. So lending is one of the most straightforward actions you can perform in Neptune, and we wanted to make that as simple as possible because it should be simple.
So if you're coming to the Neptune platform, which is app.net.finance, then you will first be presented with the market overview page where you get to see all the details of Neptune markets.
The next tab is the lending page. From this page, you would look at what assets you have in your wallet. Currently available, you've got USDT, Injective and Atom.
You can simply choose how much you want to lend and deposit that into the platform. And once that's done, you will only yield on those tokens.
When you deposit those assets into Neptune, say it's USDT, in return, you were presented with a receipt token, and we are calling these end tokens or end assets.
And this receipt token represents your position in the lending pool in Neptune, and it's a yield-bearing token. So I think most DeFi users now are very familiar with yield-bearing tokens, especially in liquid staking derivatives.
So if you've got a liquid staking derivative, you know this derivative is compounded in value over time. And that's exactly what's happening with end tokens.
And one of the big reasons we wanted to enable end tokens is to give lenders more use case for their lending deposits.
So we enable, from this primitive, we enable even more functionality. So now that you have deposits in Neptune, in your wallet, you have, say, NUSDT. It's your receipt token to USDT.
What can be done with this USDT is that can be sent to another user. If you're trying to make a payment, say just like you would send money between your banks.
Typically, if you want to pay someone in modern history, you wouldn't pull cash out of your account to get in the cash, and they would put it back into their own account.
Instead, you would send money from bank to bank. And that's what you would be doing by sending an asset to someone else. If you're trying to make a payment to them, you can pay them end assets.
And now they hold on to those lending deposits and can withdraw them at any time.
Additionally, with these end assets, because they're a yield-bearing token, they open up additional opportunities for development on top of these end assets.
You could be using these end assets as collateral in additional money markets or any other systems.
Other protocols could develop a method of, say, your NUSDT, you could lock into that protocol, and the yield generated by that NUSDT could be used to auto-invest into another token or into a yield strategy while maintaining your original capital in that USDT.
But most importantly, what end assets enable is additional functionality within the Neptune protocol itself.
So when you look at common lending markets in DeFi, usually when you want to use a collateral in the protocol, you have to lend by default.
So you've got Bitcoin you want to use as collateral. You have to lend it out at the same time.
This presents collateral users with lending risks.
So what Neptune enables is if you want to bring Bitcoin to Neptune, as collateral, you can either use Bitcoin as collateral on its own, or you can lend the Bitcoin out first, you receive a receipt token, and you use that receipt token as collateral into the Neptune protocol.
This separates the risks of collateral provision and solvency risks when it comes to lending.
So this was an architectural design choice for security, as well as this definitely plays into capital efficiency when it comes to using these receipt tokens in secondary markets and in Neptune itself.
Awesome stuff. You guys really are providing a great context for all of our users in terms of how they can utilize Neptune.
Now to jump over to the next piece is, for users looking to borrow, what are the requirements they should be aware of, what should they be taking into consideration, etc.
Sure. So borrowing, like I was just saying, you go onto the Neptune website, there's a tab there that is labeled Borrow.
This is where you would go to open up a sub-account.
So the first time you borrow from Neptune Finance, you have to create a sub-account and deposit assets into it.
So you would be depositing a collateral asset into it.
Say you're going to be depositing an injective into the sub-account.
You've got a hundred injectives, you deposit it into your sub-account.
That injective is now counted as collateral value in Neptune.
And on the Neptune dashboard there in your Borrow page, you get to see all the metrics of what's the value of your collateral, what's the value of your borrow position, and most importantly, what's your account health.
Your account health is a metric of how close your account is to being liquidated.
And I won't go too deep, but there's a calculation in how that account health is measured against the LTV of the collateral assets.
But the important aspect is keep your account above health one and you're not at risk of getting liquidated.
If it does fall below one, you will be potentially at risk of being liquidated.
So now that you have collateral in Neptune, you can now borrow against that collateral.
So you'll be able to see a list of what's available to borrow in that page and say you want to borrow USDT against it.
So you select USDT, you select how much you want to borrow, say 500 USDT, you hit confirm that transaction and you now have 500 USDT in your wallet.
And now you can do whatever you want with that USDT.
If you ever want to remove your injective as collateral from Neptune entirely, you would first now have to repay your debt in the system.
So you would have to repay that USDT.
And users have to keep in mind as they're borrowing, they're paying an interest rate.
They're paying a right to the privilege to have access to that money.
So when you repay USDT, you'll also have to repay the interest that came with that as well to fully unlock your collateral and withdraw it.
Awesome. Yeah, great stuff there.
Kind of jumping into the next question from here is, you know, how much can a user borrow in this system?
What's the maximum LTV and like also in terms of the caps that can you guys explain kind of the high level of the caps that exist currently and what we can expect in the future, etc.
Yeah, I can speak to a couple of reviews there.
So like I said before, Neptune's still in its early stages and we're still testing along systems.
So a lot of the caps that we have on right now are pretty conservative and we're growing those over time as the limits are tested.
And users can tune into our Discord and our Twitter pages to see when lending caps, collateral caps and borrowing caps will get updated.
So those will be done periodically, you know, a few times a week potentially.
The maximum LTV that a user can take against their tokens is dependent on the token.
You know, each token presents its own risks and its own volatility.
But on average right now, the maximum LTV is about 70%.
So if you've got $100 worth of Adam in our system, you can borrow up to $70 of USDT against it.
That's what 70% LTV measures out to.
But because Neptune is a cross margin enabled system, you are able to mix your collaterals.
So you could mix in USDT as a collateral type with your Adam.
And right now USDT has a higher LTV than Adam does.
So your overall LTV will then be an average of those two, depending on the weight of Adam and USDT in that sub account.
So this is all reflected back in your account.
And that's why we built the account health metric, because this is an easier way to display the leverage against your account as you start mixing collaterals and borrow positions.
Got it. Awesome stuff. Awesome.
And thanks for noting that.
That was pretty comprehensive on my end as well.
Also to get a better understanding in terms of how I can essentially cross collateralize different forms of assets that are being lent to the protocol.
So on to the next question, as Neptune moves to a fresh new phase, is there any exclusive benefit for the Injective Community?
Can Neptune kind of talk about how INJ specifically is helpful within the ecosystem?
Generally speaking, is there any benefit for testnet users who utilize the protocol in some different ways?
Yeah, I can speak to the fact that we're putting a lot of focus on Injective and its functionality inside the ecosystem.
There's a lot of value currently in that token, and what Neptune enables is the ability to extract some of that value and put it back into the ecosystem.
But when it comes to the other communities, I'll let C talk to everyone who we've been working with currently.
Yeah, we had quite a few supporters, both from testnet, both even early in our development a year and a half ago.
There's been people who've been kicking around and providing advice, giving feedback on designs on our app,
and have just been with us for so long that we intend to make sure that everybody who has supported us along the way will get some sort of perk or reward.
We are still working this out, and we will be announcing it likely next week, but we want to make sure that everyone knows that all of the support is very welcomed and we appreciate it.
And we're going to do what we can to make sure that not only are we rewarding supporters, but we're also encouraging adoption and getting more users to come to mainnet, testing out the lend and borrow functions, and being involved in our community on Discord.
These are all great things, and we're going to do what we can to make sure that everyone's rewarded, and we're going to be creating an ambassador program as well to keep those rewards going for those who are contributing the most.
Nice. Definitely some alpha there for our listeners. Thanks so much for that.
So on to kind of the next question is, can you share some use cases and benefits for different types of users that you've mentioned previously?
Specifically, right, like who benefits the most in the next couple months utilizing Neptune? Is it people that are doing things such as lending USDT?
Is it people such as long term holders of different tokens, arbitragers, builders, DAOs, like interoperable as Neptune, and what are the plans and future use cases?
Yeah, I can speak to several functions on that.
So there's a lot of functions that this DeFi proven enables, and we're currently in conversations with a lot of different protocol teams on injective, being able to utilize Neptune and their protocols to enable additional functionality for a greater user base.
But as a straightforward user today, one of the biggest use cases is you're a long term holder of say Adam or injective, and you're going to be holding this thing for the next year, maybe the next decade.
But there's a lot of value in that token, and you want to be able to enable it to do something else.
So the most straightforward use case is you lock that token in Neptune and be able to borrow against it.
So this enables you to extract value against your token that you're not selling, and you can get that value out without having to sell your token.
A big additional use case is arbitrages, and there's a couple different arbitrages here. So I'll first talk about rate arbitraging.
And this is maybe more of a novel thing that's come with the innovations of Neptune's paid control rates in that because Neptune's rates are dynamic and they're constantly changing based on supply and demand.
We open up a lot of opportunity for users to arbitrage rates for two, you know, two competing money markets.
So an example there is it may be very cheap to borrow USDT on Neptune.
And, you know, one of the other planning protocols that recently launched on injected as island or in the Cosmos ecosystem, there's a few other landing protocols as well.
You would be able to borrow USDT from Neptune very cheaply and then go lend it out to another protocol at a higher rate.
So this is the arbitrage rate between protocols, which increases the velocity of money between these ecosystems.
So there's, you know, you're just collecting on the spread during that opportunity.
The other aspect of arbitrages, which most people are more familiar with in finance, is the function of swapping between exchanges.
So, you know, say on on Helix, the price of Bitcoin is cheaper than it is on somewhere on Ethereum.
So what you would be doing is be buying Bitcoin for cheap on Helix and selling it somewhere on Ethereum.
What Neptune enables is these arbitrages may be sitting on a lot of tokens, but they do most of their swaps in stablecoins.
So firstly, these arbitrages can put their assets into Neptune and borrow against them and enable more capital for their arbitrage practices.
And this also works with market makers as well.
There's a lot of market makers in the injected ecosystem who are sitting on bags of injectives so they can put their bags into Neptune, unlock more capital and then increase liquidity in the DEXs in the injected ecosystem for market making.
Additionally, Neptune does enable flash loans, which is, you know, this incredibly novel feature of DeFi money markets where you can take out a loan and repay it in the same block without putting off any capital.
And, you know, the loan doesn't succeed if it's not paid within the same block. So it has to be repaid.
Right now, we haven't opened up that feature for everyone.
It's a privileged whitelist access because it is a process that's been manipulated in the past.
And that's why we're taking a lot of precautions in how we design around flash loans.
And actually, there'll be some creative things around tokenomics and how flash loans plays into that.
But flash loans give arbitrage as access to instantaneous liquidity and ultimately this stabilizes prices within the injected ecosystem for that.
So that's more of the technical traders seeds.
I don't know if there's anyone else to talk to about functionalities in Neptune.
Well, right now it'll be the borrowers will have the biggest opportunities because as Neptune, we've only been alive for one week and we're still finding more and more borrowers.
So our rates are incredibly low. So there are a lot of opportunities for borrowers right now.
And I would like to speak a little bit more about builders because the Neptune protocol is incredibly modular.
We've talked about its efficiency with its PID controller, but we haven't talked about with the modularity of all these subaccounts,
the ability to cross margin or isolate margin, what that means when you're building a protocol on top of Neptune.
And this is how we actually began.
We began creating an integration into another money market.
And this was back when Terra existed and we all know how that came to be, how that ended.
But we learned a lot through that process and we've learned what added value additional builders can create on top of a lending market.
And if there's any builders listening here, I would if you have any ideas of things you wanted to build using Neptune, please join us on Discord and open the ticket because we'd be we'd be happy to chat with you.
And we're excited to get those processes started now that we're live over the next few months to see what integrations we can we can add.
And that could be vaults or some sort of a smart routing system that use borrowed capital and a process of a swap or you name it.
There's there's tons of different things that can be built using our features.
And we're anticipating what's to come.
And I'll just add on to the end of that something we skipped over was the when it comes to DAOs and treasury management on chain.
Previously, there weren't a lot of places to be able to use your tokens on injective that were secure.
As in, you know, there was opportunity to earn yield, but it was a higher risk.
And when it comes to lending, it's a pretty low risk activity.
So if you're a DAO and you're sitting on capital, typically that capital isn't actively used.
And everyone knows with inflation, that's losing money over time.
So if you're sitting on a bunch of stable coins, that DAO can be lending them to Neptune and earning that yield passively while that capital is unused.
So lending is a great passive functionality that makes it easy to earn yields for a lot of different types of communities.
Yeah, awesome. Great notes across the board there.
And now kind of want to get into my kind of favorite personal part of this.
Right. And that's how liquidations work within Neptune.
You know, as many of our listeners know, from an injective perspective, every application in some way is kind of boiling down
and interacting with the native exchange module on injective.
And I think from my perspective, Neptune's case is one of the most interesting.
So kind of wanted you to take us through kind of how liquidations work, how the risk is works relative to liquidations.
Order really plays a role in that and how this partnership with injective is going to continue to grow so bright.
Yeah, we actually have a lot of fun designing the liquidation mechanisms.
We did a lot of study when designing this money market in the impact of liquidations in previous history.
And we've had some quite significant, you know, Black's Law moments in DeFi.
You had the USD-DPEG, you had the SDE-DPEG, you've had toxic assets just go to zero.
So there's a lot of good case studies in what liquidations and, you know, assets rapidly losing value does to money markets and to the greater ecosystem.
So, you know, as we were designing Neptune, our concerns are we want this to be capital efficient and we want this to have a positive impact on the surrounding ecosystem.
So an innovation we brought to liquidations is our dynamic liquidation rate.
And before I jump into that, I'll just talk about how you can be a liquidator.
So Neptune is a first-come, first-served race condition for liquidation.
So if there is a borrower whose account health goes below one, so therefore their account is in a bad position, they are at risk of being liquidated,
which means a liquidator can now come and repay their debt and seize their collateral with a premium.
So that premium is an incentive for a liquidator to perform their job.
And as a liquidator is performing their job, they're keeping the money market solvent.
They're making sure lenders will always be able to withdraw their lending deposits because of this.
We chose the race condition over, you know, lock-up conditions previously.
I'm not sure, like, if you're coming from, say, the terra-classy ecosystem, some users may be familiar with the lock-up condition for liquidations,
where you had to lock your collateral into a protocol and park it there and wait for a liquidation to become available.
We chose not to go with that design because that locked liquidity is, it's unused liquidity.
It's inefficient. It's inactive.
If you want to be efficient in finance, your money should always be doing something.
You know, money makes money. So we were against this.
And that's why we went with the race condition, because if you are an effective liquidator, you're automating a lot of your systems.
And you will be automating, say, you perform a lot of liquidations with USDT, you're probably using your USDT somewhere else.
And once a liquidation becomes available, you move it from that process, you perform a liquidation, you capture your profit, and you put your money back into an active system.
And this increases the velocity of money in the surrounding ecosystem and in an injective.
It makes all that money more efficient. So we wanted to make sure money wasn't just sitting there doing nothing.
To get back to dynamic liquidation rates, as I just explained, as a liquidator performs their job and repays debt, they seize collateral at a premium.
And this premium is typically measured on how much incentive does a liquidator need during a volatile market for liquidating that asset?
Because typically, a liquidator will try and realize their profits immediately.
So if you're paying back the USDT debt and you're seizing an atom as collateral with a premium, typically a liquidator immediately sells that atom on market and realizes it to a stablecoin like USDT again.
So depending how big that premium is impacts the sell pressure on the market during these volatile events.
And that's why we came up with a dynamic liquidation premium.
So how this premium works is that once a user's account health goes below one, the minimum dynamic liquidation premium is active.
And say that premium may be 5%. So a 5% instant profit is a great incentive to be liquidating.
But if the markets are volatile and, say, atoms losing price pretty rapidly, it's hard to realize your profit immediately on that 5%.
So that stops liquidators performing their job, which means this sub account is potentially going lower in its account health.
And as it does that, the premium for that discount starts to increase.
So for atom, it may start at a low of 5% and then increase to up to 15%.
And this makes sure that during volatile events, there is still a profit metric for a liquidator to perform their job.
Because above everything else, we're trying to protect solvency in the network market.
But all these systems combined create a competitive condition for liquidations, which anyone can participate in,
and ultimately reduces the impact during these liquidation events.
Because, say, with Aave, liquidation premiums there are fixed.
And they're typically fixed to the higher rate because they need to make sure during their volatile events, liquidators can be profitable.
So during a volatile event around Neptune, our premiums start low, which ultimately means there is less cell pressure and less impact on the market through these events.
So Neptune avoids enabling these cascading liquidations.
Yeah, and I'd like to add that Neptune also introduces a partial liquidation threshold.
So other borrowing platforms might liquidate your account entirely the second it goes under one or once it's unhealthy.
But with Neptune, for larger accounts, I believe accounts over $1,000 or so, they will be liquidated in tranches.
So it's only going to liquidate you until your account health goes back up to 1.03, rather than liquidating you entirely, taking all the collateral and the account being gone.
And what this does is it helps the ecosystem from having mass cells happening all at once.
So if there's one borrower who's borrowing a ton and it goes unhealthy and then it gets liquidated,
in another system where it takes all the collateral, that would be one massive cell event on an order book or on an AMM of some kind.
And that creates even more volatility and that helps create these cascading events, which we want to avoid at all costs.
So we introduced a partial liquidation threshold, which will also help surrounding markets with the volatility.
And just to add to that, all these dynamic premiums and partial liquidation thresholds we're talking about are all being tested in real markets currently.
So we're doing a good job of collecting a lot of data.
So these will be updated as we get more familiar with how the market reacts around that, too.
Awesome stuff and definitely very interesting on the side of partial liquidations and how those liquidations work.
So great work, team.
For the rest of our listeners, I think we kind of saved the rest for last.
And you guys have an incredible leaderboard, which I've taken a look at on my side of things.
And it's been interesting to understand, as well as several other interesting aspects.
So can you guys comment at all about the possibility of a token in the future?
Is there anything that you guys can say from that perspective in any way?
Just ask as many of our community members are in the chats and channels commenting and asking and wondering those same things.
So any light that you guys can shed.
There's not a ton we can say at this point, but there is some development going on in that realm.
But I'll let Chase speak to what's going on with our leaderboards and how we're going to reward our community members.
Yeah, I spoke to a little bit earlier.
Next week is when we're expecting the announcement on that.
So a little more details soon.
What I can share now is that the main net leaderboard will be weighted much heavier.
It'll be worth a lot more than the test net leaderboard, simply because it is main net.
It's real funds, as well as because it will be running for a little bit longer.
We expect to have the main net leaderboard up for a few months, and we hope to see as many people participate on it as possible.
And like we said before, we're going to try to encourage as many people to be involved with Neptune, use Neptune,
learn how it works, tell their friends, and we're creating all these programs out now.
And I would stay tuned for next week where we could get a little bit more information on exactly what that will look like.
Just to give some alpha around the leaderboard for those who are listening.
So our test net leaderboard was very much designed to get users to teach themselves how to use Neptune.
And the community did an incredible job at figuring out how the leaderboard worked, and they really worked well together.
The main net leaderboard is more of a measure of your activity inside of Neptune.
So you will be rewarded for lending, and you will be rewarded four to five times as much for borrowing.
And this will be a measure of the size of your positions and how long those positions will be in Neptune for.
So just a heads up for those who are currently using Neptune.
Because our taps are low and they're getting filled up pretty quickly, once the leaderboard is active, you'll immediately start earning points.
So if you get your positions in early, you'll probably start ranking up on that leaderboard faster.
Awesome stuff. Thanks so much for sharing that at the end of things as well.
Lastly, as we wrap up the space here and get it to our last minutes here, I want to give you guys the floor to share any additional closing comments or upcoming additional things that all our community members should take a look at or get involved in or be aware of.
Yeah, just to kind of leak some other elsewhere, I guess.
There's probably a few topics we didn't talk to today, but we'll have other spaces in the future where we are working pretty rapidly with other teams to integrate more functionality between our protocols as well as additional token listings.
So users can stay tuned for liquid staking derivatives for injective to come to Neptune, and that's going to be a huge use case in the ecosystem for leveraging your LSDs.
We'll also be listing some of the blue chip tokens like Bitcoin and Ethereum.
We'll be working with the community as well to see where they have demand for what tokens they want to lend and borrow and what are the incentives additional teams want to apply on top of Neptune's lending and borrowing.
As well as a couple of real world asset teams, and that excites us a lot to be able to integrate other ways into the Neptune protocol so you can start using real world assets to access leverage.
Chase, anything to add to that?
I mean, there's a lot that we're working on that we're excited about.
Personally, I'm excited to see some of our first integrations take place.
We will be announcing those when they are available, but we're only a week a weekend right now.
We've got lots of stuff in our docs about future advanced features that we intend to bring to the forefront soon.
Vaults being one of the most exciting ones.
We're not sure if we have a timeline for that yet, as we're still have our main net leaderboard and a bunch of other things to get out of the way first.
But I think you mentioned most of it, the RWAs, the new tokens, and the LSDs as collateral. Those are all incredibly exciting and coming very soon.
Yeah, there's definitely a lot more coming to Neptune, especially as we close the funding round.
We're going to see some pretty rapid growth with Neptune, so stay tuned.
I love it.
Well, exciting stuff ahead.
Again, as noted, there will be several more options that the Neptune team and speakers here will also be in front of our community, whether that's AMAs, Twitter, Discord events, et cetera, et cetera.
So with that being said, I definitely want to note, thank you guys so much for coming on and spending this time with our community.
Looking forward to having you on again and looking forward to all the future of Neptune and what you guys are building.
So again, as we wrap up here, huge thanks and huge thanks for everybody for tuning in today.
Looking forward to another great AMA again coming soon.
Again, pleasure, guys.
Chat soon.
Thanks for hosting us.