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INTRODUCING dNTRN
Recorded: March 20, 2025 Duration: 1:02:25Space Recording
Short Summary
Neutron is set to launch the Mercury upgrade and DNTRN token on April 9th, marking a significant evolution in its ecosystem. The upgrade promises enhanced capabilities, while DNTRN introduces new yield opportunities through liquid staking, positioning Neutron for substantial growth in the DeFi landscape.
Full Transcription
the mic, actually.
All right.
We are live, guys.
We are here in the flesh, human beings.
Ah, Syft, you thought I was a mute.
Exactly, we thought Mitja was made out of water.
Oh, we're changing the backgrounds.
We're switching up here.
Well, cool.
Well, for those that are listening in, thanks for joining.
We're going to be covering a lot in this stream.
Obviously, we had two big announcements that went out this week.
One was the Mercury upgrade and the other
one was DNTRN, which is part of the Mercury upgrade as well. So we've got two of the best
people, probably the best people here to talk about both of those things. Spade from Neutron,
the co-founder of Neutron, CEO of Hadron Labs, which is the development company behind Neutron.
And then Mitya, who is the co-founder of Drop Protocol, which is the liquid
staking protocol for assets like dNTRN, dATOM, dTEA, dE in it as well.
So yeah, super excited to have these guys on to talk about it.
Maybe a good place to start would be, well actually before we jump into things,
just for those that are listening in, obviously in these live streams one of the nice things is
you guys have this chat feature so you guys can send any questions or comments that you guys have
in while we're talking live. I see Suits already sent the first one here. So if you guys have
questions as we go about anything that we're talking about, feel free
to just pop them into the chat.
We will take them as we go, like we usually do.
And also feel free to react to any of the things that we're talking about in the chat
as well.
But maybe a good place to start to kind of set the stage
for us is Spade, if you could give us an overview
of the Mercury upgrade, what is the Mercury upgrade?
What does it entail and how is it related to DNTN?
Yeah, that's a good question.
So Mercury is the most significant upgrade in Neutron's
life. I think most upgrades are generally kind of like table stakes, like marginal improvements
and such. Mercury fundamentally changes what Neutron is, what it's able to do, where it's going, because it does a couple of things. First,
it transition, and this is like the most significant upgrade, like part of the upgrade,
it transition Neutron from being secured by restaking effectively to graduating into
its own sovereign standalone network, basically,
which means a couple of things.
It means that the Neutron DAO now has a lot more
granular control over its validator set,
its model for like, you know, handling staking and such.
And that opens up like a bunch of new avenues
for designing around like, you know,
utility for the token, new use cases on the network.
It creates opportunities for the networks
like validators and development teams to work together
in order to meaningfully improve the performance
and the reliability of the test net, sorry, of the network.
And so all of those things basically
will allow the neutron community to really own
its network, its destiny, and push it forward towards the vision of integrated finance,
integrated applications and infrastructure, which is this idea that, hey, we're building
a network that allows you to tap really deeply into the blockchain and build things you just wouldn't be able to build anywhere
else, right? Like better products, like new things that just wouldn't be possible. And
so like this, you know, pushing like Mercury is basically a way for Neutron to really deliver
on its vision of like enabling anyone to build the impossible. So I think that's like the
main piece. The other nice things that comes with it
are, one, there's a bunch of performance improvements, right? So we're expecting the
throughput of the network to be multiplied by a factor of 11x, making it one of the most
performant blockchains out there in that regard. It's going to help lower block time.
Basically, the DAO will do something that's unique actually in the industry, which is that the DAO
itself is going to be engaged in monetary policy by injecting liquidity into the ecosystem in order
to create markets and create opportunities for users basically. So there's this derivative called the
ntrn that may be coming. We'll hear about this from Mithya I'm sure. And making sure that it's
as liquid and as available and as stable as possible is a great way of maximizing basically
the value of that token and the value of the positions that can be built around it effectively.
And so that's what Mercury does. It fundamentally changes the positions that can be built around it effectively.
And so that's what Mercury does.
It fundamentally changes the way that Neutron works.
It enables it to deliver better on its vision and it provides performance improvements as well as new opportunities for the Interim Token
while enabling the DAO to create these markets directly.
Yeah, I think that's a pretty good summary. In terms of when the Mercury upgrades coming,
Yeah, I think that's a pretty good summary.
we're currently planning on that to happen on April 9th. Is that right, Sped?
That is correct indeed, yes. April 9th. Okay. Part of the Mercury upgrade as well will be like, you know, you were
talking about the monetary policy. Could you talk a little bit about how that benefits the ecosystem?
Obviously some neutron is going to be staked with drop, some of it's going to be providing
liquidity on Astroport, some of it's going to be lent on Mars.
Maybe you could talk a little about what that creates
in terms of ecosystem opportunities.
Sure.
I think there's really two parts.
There's one part that's fundamentally about the security of the network.
And I think that's a whole conversation, actually,
so I'm not going to dive into it right now.
And there's also creating conversation actually, so I'm not gonna dive into it right now. And there's also like creating these opportunities,
which is, the gist of it is one,
the Niu Xiang Dao actually conducted
a pretty interesting experiment
in the sense that if you look at Ethereum, right,
you have this liquid staking derivative
called RAPStakeEath or StakeEath,
that is like by far the leading liquid staking derivative.
And what's holding it
back now is that compared to eath itself, there's very little liquidity for the derivative.
But actually in DeFi, most people would prefer to use red state eath. And so bridging this
gap of, hey, how do we build the liquidity graph around derivatives is something that
hasn't been done anywhere else. But that actually happened for like the atom, for example, on neutron.
And what we've seen is that the volumes actually transition to the derivative as soon as the
liquidity is transitioned as well.
It makes for a stronger peg, it increases volume, it subsidizes the pool because now
there's more volume, so there's more fees to make it appealing to the LPs.
And all of these allow you to have a more viable
basically ecosystem built around these derivatives.
And so we did it with the atom previously,
and we're going to do this with the n-terrain as well,
which means that the most liquid pools
will no longer be for n-terrain,
it will be for d-n-terrain.
But obviously we still want n-terrain to be liquid on the network, right?
And so like, how do we do this?
Well, it's pretty easy.
We can just bootstrap a very large amount of liquidity
for n-terrain d-n-terrain,
and the doubt just so happens to have a large amount
of that resources,
which helps basically bootstrap that liquidity
so that the connections is sort of guaranteed here.
So based on that foundation,
you now have a situation
where you have a very liquid derivative
that's enabling you to collect yield over time.
And you can now start lending, borrowing, you can leverage loop, you can use it as collateral
for perpetuals and other things.
But I don't want to rug me tea out of all of the nice alpha about DeAndean and such.
So I'll keep it at that for now.
Yeah, I think that's good.
Yeah, Mithid, so do you wanna talk a little bit
about DNTRN, like what it is,
like what it's going to enable
in terms of benefits for users,
like and how you see this being integrated
into the nutrient ecosystem?
Yeah, sure. So DNTRN, I think when we started DROP, DNTRN was
something that we kind of dreamed of, but there was no yield
for a neutron, right? So it kind of didn't make sense back then.
But it was always kind of on the radar. So finally we can make it happen.
It's obviously super important for the ecosystem
to have its native token very deeply integrated
into the use cases.
And yeah, so now it's getting real.
I think for Nutrient specifically,
because there's a lot that has
been done in the ecosystem to basically to work really really well with yield bearing assets.
And yeah, I'm really happy to see that now it's now enter and it's going to benefit from
from this as well. Yeah, so deentherine is going to be like liquid state assets as the other drops assets.
It's going to be auto-compounding as well so that GmTorrent's price is going to increase
compared to the Anturen's price over time. And we are working to enable the integrations that
I guess most of you guys are familiar with across S-supports and Mars so that from day one the core use cases that
make LSTs exciting will work well for dn-terran. So basically the killer
use case for the LSTs is leverage looping so that you can take your dn-tran, borrow essentially more n-tran
statement and get more staking rewards in the end. With Mars it can be executed in a very very efficient
way through the Mars HLS strategies. Mars HLS strategies rely on liquidity that is going to be
in s-report but also in duality and this this is why deploying NTRN to S-report
and deploying NTRN to Mars,
so you can actually borrow it at a nice rate,
is very, very important for the ecosystem.
And because we approach it as a,
let's say, joint effort between a few teams,
this is our huge opportunity to actually
bootstrap this ecosystem from the one,
have a lot of liquidity for the assets so that these use cases work really really well for for the users
Yeah, and the good thing about looping is that you can pick your level of appetite
let's say and you can if you
Let's say if you're risk-averse you you can just hold the enter end,
you can LP it and earn something else on the DEX,
or you can then go crazy,
loop it 7x and maximize your staking rewards,
pick your poison. That's what I'm most excited about.
I'm also super excited about integrating deeper into duality. So there's
going to be the product called Supervolts that maybe, I think, Spade, you haven't spoken about
it yet on this space, right? So I'll not steal the pleasure of speaking about Supervolts,
but essentially that will just make everything way more efficient. Like all this, all the good
stuff that I was speaking about for the last five minutes. Everything will become more efficient and yeah it's just better UX for all the
users. Yeah I mean one of the one of the most important things with any liquid staking token
is being able to enter and exit these positions in size right with like minimal slippage and
you know all of what we're kind of talking about here,
all these different use cases,
and the DAO's monetary policy
enabling these different use cases at scale
will enable exactly that.
You'll be able to enter to exit positions very easily,
which is important for all ecosystem participants, right?
Because when you want to exit position,
one of the benefits of holding an LST
is you can exit whenever you want, right?
And so that's also one of the benefits of this as well.
To be very specific as well, right?
If you're like, why are we talking
or excited about this thing, thing? It's just like,
if you look at the market today, doing exactly that is the largest trade in the industry,
by TVL, by volume, by whatever you want. If you look at Ethereum, 50% of Aave's lending, borrowing
business, basically, is leverage looping between ETH and rapAPState ETH. Right? Like that's a massive chunk.
We're talking, you know, like billions of dollars basically.
And if you look at like most of the sort of like alternative ecosystems that are popping
out throughout the industry and such, like the, for example, like SAE, right?
Like SAE was in a really tough spot on chain early on when they had like their Cosmos and
layer and stuff.
And they pivoted to enabling EVM, And since then, they've done better.
You've seen the ecosystem grow to a couple of hundred million
dollars.
And if you look at what that is, actually,
what are people actually doing?
It's very simple.
They're borrowing stablecoins in order
to buy more of the native asset.
Or they're borrowing the native asset in order to get more of the native asset and or they're borrowing the native asset
in order to get more of the LSTs and doing that multiple times. And this is how the vast majority
of the liquidity there is attracted. To make sure that it happens, they're throwing millions of
dollars of incentives at it. But that's an enormous trade basically. And it's one that's very
That's an enormous trade, basically.
And it's one that's very aligned with the success of the platform in the sense that
if you're bullish on Neutron anyway, you probably are holding Antarion right now.
Well, now you get to hold it with yield and you can also even crank it up by considering
you don't have to do this.
But if you're interested in doing this, you can play around with Mars and you can basically
auto leverage it. Where the supervolts are coming into the picture is that
when you're doing these loops, what you're effectively doing, Mars makes it really easy
for you. The high leverage staking strategy basically does all of this in one transaction
for you. But what is happening in the background is you're providing d and t-ren as collateral,
or another d asset, and you're borrowing on Mars the native asset. So like, for example,
n-t-ren, right? You're then taking this and you're staking it with drop for more n-t-ren,
for more d-n-t-ren, which you then provide as collateral and you repeat this cycle multiple
times, right? So you're taking on leverage because now you've borrowed some of your position. But because these are extremely correlated,
the position is reasonably safe. This is why we also see so much of it. Like most of the
capital has a risk of or conservative risk policy in the industry. And so you can take
these reasonably low risk positions that
also magnify your sticking rewards, right? Because like, you know, if you just had 100 DNTRN, you'd
be earning 3% on 100 DNTRN, but with leverage, you're able to earn 3% on, you know, like a thousand
DNTRN basically. And so now your actual yield is like about 30% minus the borrowing cost and stuff.
Sorry. But anyway, right? And
the supervolts matter because when you're getting into the position, it's all well and good because
what you're doing is you're staking with drop, right? So there's no slippage there. You don't
have to care about slippage. The problem is when you exit, right? If when you exit, you're doing
the thing in the other way around, right? So you're taking the DNT-RN you have as collateral,
and now you're exchanging it for NT-RN.
But doing this via drop takes the full unbonding period.
On each one, that will be like 14 days.
That's way too long for you to wait.
If you did 10 loops, you're not gonna wait 140 days
for this to be completed.
So what you're going to be doing is like,
or what Mars automates for you
is that you're selling on the market. But that means that you're taking slippage
on each of these operations. So some of the yields that you might have accrued are going
to be lost to slippage. What supervolts do is that they allow you to have basically almost
no slippage. Unless you're trading billions of dollars, which would be difficult to do
in here and given the valuation is not there. But unless you're trading billions of dollars, which would be difficult to do in Ethereum, given the valuation is not there. But unless you're trading billions of dollars, you're
basically guaranteed to have slippage of five bits, which is so small that you won't even notice that
it won't affect your PLL or something. This is why Supervolts and Mars as a combination are
super powerful, because they allow you to have these like really involved positions that are like really
appealing from a risk reward perspective that make it super easy for you to enter because it's
literally just one transaction and that are super optimized because like the liquidity backbone in
the back end is made so that these things are like as efficient as possible and so that you're losing
as little as possible to slippage. So yeah, synergies.
Nice. I'm also actually looking forward to seeing how it all evolves because, well, there are kind of a few reasons why the interim is different from the other LSTs that we work with,
but it also has, well, there's no inflationron, and the staking APR is very different.
So there is a different balance between the additional rewards that you can get from DeFi,
and it's going to be at 3% APR for the stakers of Neutron.
So basically everything that you do in DeFi compared to the de-enteren staking rewards
is pretty meaningful.
And for instance, there will be kind of more incentives
to provide security to the decks,
even without droplets and any additional incentives,
but there will be droplets, by the way.
So I think that we can see a higher rate of participation
just because it makes more sense.
You're not kind of, my analogy is kind of,
when the staking works in very high,
you almost like swimming against the current all the time
when you do something in DeFi as opposed to staking.
Now this factor is way, way, way lower.
So it's like five X lower than like autumn now
or four X lower than in TIAA.
So it's gonna be a very different environment.
And yeah, we'll see how that goes.
I think it's going to be just a vibrant, vibrant ecosystem.
Yeah, I can maybe share as well. Like I agree with your take, right? Like that's part of the
design considerations that went into it. Yeah. Like, and I actually think this is,
And I actually think this might be something worth explaining to people, because my initial
this might be something like worth, worth explaining to people because like
draft of the Mercury proposal was about 26 pages long.
And then people in the team realized that, hey, maybe that's not the best idea, and who
the fuck has time to read your thing?
But so the team...
That's a white paper.
Yeah, pretty much.
It used to be a thing five years ago. Maybe, maybe I should have pivoted to white paper.
I could have.
So yeah, it still might be useful to explain some of the ideas.
I think the thing to start from is, we're building this a couple of years into the big experiment around POS of like,
hey, Cosmos, like everybody launched blockchains and stuff.
It's very clear that there's a few problems with it.
Like there's a bunch of chains that have completely inflated their token away.
We've seen that in practice.
We've seen also there's some tension around the decision-making and how that happens on
the chains where the validators are both
service providers of infrastructure, but also governance participants, but also they sort of wear a lot of different hats and that makes things difficult to optimize. There's this,
and then there's also, as Mitja was saying, there's the concept of hurdle rate, which is
if the staking rewards are really high, the DeFi rewards need to be way higher than this because you know, otherwise I'll just stay because that's easier, right?
and so
And that's what people do
That's what that's what causes like this issue of like you see across these ecosystems where the vast majority the vast amount of money
That just enters the Seeker system goes into the native token in a lot of cases
And then what they do is then they lock that up.
So they prevent that liquidity from flowing into the application of the network
because it's just getting natively staked, which is basically putting it in a box over here
that doesn't do anything for the growth of the ecosystem that you actually want to grow
because you're investing in the native token, right?
And so it's actually counterproductive. That's crazy when you think about it. No one likes high inflation in the real world.
In crypto for whatever reason, it got normalized for many years.
In crypto, we're pretty autistic about monetary policy. And so we both have the highest inflation
and the deflationary coins and stuff,
and hard money stuff existing in the same ecosystem.
So yeah, that's what we've seen in the industry.
And so trying to learn from these,
I think there's a few meaningful changes
that we can apply from there.
The first one is, what is staking?
A lot of people say staking is a consensus algorithm.
That's not true.
The consensus algorithm is the way
that the machines that are part of the system
can interact, like, so like, tournament or comment
and whatever.
The staking logic is actually different.
It serves a different purpose, which is civil resistance,
e.g., how do I ensure
that the validators in my set are not the same people? Well, I create some kind of economic
gain and whatever. That's the purpose of staking. Now we can solve that problem in different ways.
And in the context of Neutron and most customers chains, we already have on-chain governance.
People are already opinionated about things.
So we can leverage that ability to basically say,
hey, instead of having this entire complicated game around it and such,
we can actually solve civil resistance for the network
by hand picking the validators, the governance, the DAO can come together,
review all of the applications and then say,
okay, you guys, please validate the network,
we'll delegate to you, right?
And so what that does is two things,
like the tilt here basically is that like,
U.S. is a civil resistance mechanism
and economic security to a large extent is a mean.
We've never seen an actual like economic attack
on a network, right?
When Terra was collapsing,
like at some point it cost like a million dollars attack on the network. When Terra was collapsing, at some point it
cost a million dollars to exploit the network, but it still had billions of dollars of ETH
on it. So if you're a rational actor, you attack. Didn't happen. Likewise, like Gravity
Bridge. Gravity Bridge has spent months and months and months in a situation where it
has $60 million of TVL, $10 million of market cap. Rational actor, you attack.
So clearly there's something more that's preventing these things from happening in practice.
And to a large extent, these things more is like the validators and stuff have reputations,
they have legal liabilities, they have a bunch of things. If they hack a network,
they would lose business on other networks that is actually more valuable than whatever they would
be able to get here today, basically.
And so taking into account all of these things, what we can do is like, hey, let's have the
governance or let's have basically drop as a specialist and let's offload validator set
management to drop and delegate to it.
What we do in this way is we're one, ensuring that the validators
that are participating in the network are different entities.
And two, we are ensuring that it is impossible
for anyone in the market to acquire enough tokens
to take over the set, basically to have enough voting power
to take over the network. And so the security part of things is kind of like sorted at this point. Sure, it's not as
permissionless as other alternatives, but the idea is that depending on the objectives of the
network, this is a worthwhile trade off. If you're trying to build a world computer and Ethereum and
like a World War III resistant computer, this is probably not the right trade off. If you're trying to build the best financial layer
that's like extremely optimized, really capable and such,
that is probably the right trade off, right?
So we're doing this.
And now the benefit of this approach is that
we're able to see staking not as necessarily a mechanism
that is necessary for the guaranteeing
of the network security, but more as necessarily a mechanism that is necessary for the guaranteeing of the network
security, but more so as a mechanism that creates opportunities that stimulates activity in the
network basically. And so this is why Neutron has different reward system, like in the Mercury
upgrade at least. Instead of paying, the traditional system of DPOS and Cosmos at least is,
there are block inflation, every block we mint new tokens,
we distribute that to the delegators and then the validators take a cut on this. But really,
the validators are supposed to be providing a service. So we should be looking at are they
doing their job properly? And then we can pay them the cost that providing the service reasonably
cost plus a margin so that they're able
to operate a business, right?
The idea there is that like,
instead of like having these requiring from developers
that they're taking a bet on the project
and whether or not it's going to go up in value
in the future or like losing money throughout the bear market,
we can have them operate reliable infrastructure
all of the time and just pay them fairly.
So that's the thought behind the X revenue mechanism.
And then for stakers, because the whole distribution
of staking rewards is a way of incentivizing
productive DeFi activity in the system,
we're no longer needing to optimize
for maximum amount staked. If no user comes in and stake,
that's fine. The network is going to run, it's going to be secure. And so we're able to do
something different, which is, hey, instead, let's pay a target APR. So the mechanism will adjust
to always be around that value, which is set by governance, which is 3% is the proposed value.
around that value, which is set by governance, which is 3% is the proposed value. And we adjust
the amount of tokens that we pay based on the number of people who are staking to meet this
API rate. And so what that does is it allows the network to preserve the property of, hey, we are
a fixed supply deflationary asset. And it gives enough time, like we're talking like a decade or
so for the network to basically get to the stage whereby it's able to cover this staking
expense with its revenue. Basically, we make enough gas fees and other sources of revenue
eventually to basically pay that out of the DAO's treasury.
I think just one observation on this thing while we're on this topic,
what I like about it is that, like one of the things that I like about it is that it kind of
moves away this conflict between inflation rate and level of rewards and governance that exists in the kind of traditional, let's
say, Cosmos SDK based change setup, where the validators are supposed to vote for the
inflation changes. And it creates such a massive conflict of interest because like short term,
maybe long term, it's actually maybe a good idea for the validators to use the inflation, but short term they kind of would be shooting themselves in the foot because all their revenue
is coming from the talking inflation. So like not having this problem in the system I think is huge
and that's just less headache for everyone. And it's also great for the validators right,
like most of the validators are like amazing like infrastructure providers, but they
they're not politicians right, but they are not
politicians, right?
Like that's not what they created their businesses for.
And so like some of them want to participate in governance, appreciate it, develop specialized
skills and they're welcome to do so on Neutron as well.
But just the difference is that it's not required, right?
They don't get voting power from the delegations of others, but if they themselves have token,
they have voting power just like anybody else. In the future, we probably will see like, you know, Dow-Dow, which is kind of like the
governance framework that Neutron uses for its main on-chain governance, has recently
implemented this like delegation feature.
And we contributed massively to like the specing of that feature because like there's a bunch
of like really interesting things you can do there. So they recently implemented this and so I would consider it fairly likely that this will
go into the Neutron network eventually. And so what that would allow is if you're a validator
and you want to participate in governance, you can just like anybody else, any of the newts
will be able to say, hey, I think that I could be useful in contributing to the decision-making,
delegate your stake with me, I'll be helping make decisions. And, I think that I could be useful in contributing to the decision-making. Delegate your stake with me.
I'll be helping make decisions.
And for you, that's less headache
having to vote on governance.
And for me, that allows me to have more of an impact
as somebody who's really bought into this thing.
But just it decorrelates the roles of node operators
and governance and other functions in the ecosystem,
which allows people to just focus on the things
that they want to do in the first place and what they do best.
Yeah.
Yeah.
And from running a validator from experience, I know that trying to manage governance across
multiple chains is a pain in the ass.
There's too many governance proposals.
The more chains you operate on, the more you have to read these governance proposals and
vote on them.
The validators don't even want to be doing it anyways, believe me. They're going to be happy that they're in a system where it's
direct democracy, where the users, the token holders are actually voting on the proposals themselves.
I think for validators, from my validator experience, the risk of getting into trouble
because you kind of did something wrong with governance is higher than getting kind of
recitation points from being very active.
So that kind of forces everyone to behave somewhat passively in governance, which is
what we see a lot.
And some of the bigger validators actually just don't vote at all because they consider
this a legal risk, which is a separate topic.
So yeah, it's good not to have this.
So yeah, and then to wrap up on this, why does having a 3%... Because people may be wondering,
3% is very low. How is that going to make it
attractive for me to hold an asset that is paying me 3% when there are other assets that are
paying me 20% or 100% or something? Well, a couple of things. The first one is,
first, you're not getting diluted nearly as much as you would on something that inflates
by 100%.
So the token is less likely to just go to zero.
That's a decent argument in my opinion.
The other thing is just like, this is very intentional in the sense that if you look
at the monetary policies that have created the most economic activity in the world, the
general gist of this is to sustain activity and growth
in an economy, what you want is very moderate inflation.
There's new money coming into the system,
which is helping facilitate growth basically.
New people have new money and they're able to spend it
on different services and stuff.
That also works in the financial system.
And two, you wanna have very low borrowing costs, right?
Because if you're able to borrow assets for cheap,
then you're able to take positions
and take risks and stuff, right?
And so this is exactly what's happening with the Dow,
kind of like both setting interest rates,
like well, sorry, like yeah, staking rewards, I guess,
so like the risk-free rate,
but also being able to adjust the borrowing costs by providing
more or less than TRN into the lending markets. And so the idea is like, hey, let's create
favorable economy conditions for the ecosystem by, one, providing these kind of injecting money into
the system, but at a very gradual and moderate path so that you don't have inflation, these dislocations of markets.
And two, let's stimulate activity by making it really cheap to borrow large amounts of these
tokens for leverage looping, for taking other types of positions, for providing liquidity,
for using it as collateral to trade perps and other types of activities, basically.
and like all other types of activities basically.
Yeah, yeah that makes sense. There was a question that came in here from the New
Trend community which was is there a financial incentive for people to seek delegations of votes?
Oh sorry can you say that again?
Is there a financial incentive for people to seek delegations of votes?
So delegations are not part of the Mercury upgrade, right?
So like there's kind of like the design space there is still open.
That can be implemented.
It's not part of the specification that I have because I think there's kind of like.
There's some subtleties about designing this property, basically, like you don't want to.
You don't want wanna create a situation
where people are incentivized to hoard voting power,
but not actually contribute to the network
in any meaningful ways.
So like there's different ways
that like different projects handle this.
Some of them pay a base rate to the delegates.
Basically for your services,
you're paid a fixed monthly amount.
But then if you're not a good delegate,
you'll eventually just like get fired
by people delegating away from you. Some people give them a percentage of whatever rewards are being
paid. All of this is open, basically. And so if you have strong opinions or ideas on this,
you should just go and post something in the Neutron Forum because your thoughts might
basically end up shaping the delegation mechanism in Islamic society.
Makes sense. Which is forum.neutron.org, by the way. shaping the delegation mechanism in Islamic State.
Makes sense. Which is forum.neutron.org, by the way.
Yeah.
Yeah, and if people want to read more about the Mercury upgrade
as well, like if you go to the neutron underscore or Twitter,
in the pinned tweet, you have a link to both the forum post
there, the governance proposal,
as well as the blog post that was written about it.
And then the tweet itself gives kind of a cliffhanger summary of what's coming with
the upgrade.
Why don't we...
Just one more comment on that.
Just a whole kind of de-interering thing that we didn't mention,
is that some of the existing liquidity pools will also migrate to de-enter and instead of enter.
So yeah, I think it kind of makes sense to do, let's say yield bearing by default,
in certain type of the existence at least. So like for Newton that makes a lot of sense.
So whenever, for instance, we have like n-terrain use
DC pair that probably makes sense to partially migrate it
to d-n-terrain use DC, same for I
think there is a d-atom n-terrain pair, which
is pretty strong.
So yeah, d-atom d-n- and would be, but I think today as well.
So just everything becomes yield bearing in the ecosystem, which is good.
There is no good reason not to use a yield bearing assets when you can use it.
And yeah, that's a step in the very right direction.
Yeah. So it's all's a step in the right direction. Yeah.
It's all about that capital efficiency, right?
Like thinking from a macro perspective,
just for people's context, right?
Like why do that, right?
Well, the reality is that like,
if you want to attract liquidity to a specific pool, right?
Which as an ecosystem,
we need to do for a bunch of different pools
in order to enable these assets to be viable here, right?
But if you're looking to attract the quality into these pools, you're competing against
a bunch of other opportunities all across the space, right?
Like there's a bunch of things people could be doing with their money, right?
And so you want to provide the highest risk reward, like the best risk reward possible
for people, right?
That's how they decide to come, right?
And so there's kind of like three levers
that you can have for this. The first lever is like the trading fee. The more organic activity
you have in a specific environment, the more organic fees are generated. The second lever is,
what are the assets you're even bootstrapping liquidity for? If you want like Adam or Bitcoin
or ETH,
you could just like provide the liquid stake derivative instead and so this way, like you're topping up,
you know, like by a few percentage points and stuff
with the yield that's like baked into the asset itself,
right?
So first layer of yield is like these organic trading fees.
Second layer is like the whatever yield sources
is associated and like baked into the tokens themselves.
And the third one is incentives, right? If you look at most of the projects in the space,
like most of them just go ham on the incentives, right? Incentives are simple. It's like, oh,
I take money, I throw it there and like, you know, like the TVL grows. But basically by being more
strategic about these things, we can reduce the cost for the network as an ongoing way.
Eventually the goal is to get to the pulls on Neutron are the best opportunities period.
And the DAO doesn't even have to pay any token for that. It's just that they're more efficient.
There's more organic volume and such. Obviously there's rich trapping. And so we're not there
yet. And so that's why like incentives play some role, but that's kind of like the stack
that we like, the levers that we
have at our disposal, right? And so like moving everything to yield bearing assets like from Drop
and from Lido and such allows us to basically like, you know, get a competitive advantage in
that liquidity acquisition strategy, if that makes sense. Yeah, that makes sense. So the upgrade we're
planning to be April 9th, Mitch, is there going to be a testnet for DNTren before the upgrade?
Is there going to be a testnet? That's a question.
I don't know if it's going to be like a public testnet at the same level that we did for some of the previous assets.
So I'm not going to promise that it's going to be a public one.
There is going to be a decent though.
Yeah.
Okay.
If there is going to be an opportunity for everyone to participate,
we'll definitely announce this.
Okay. Sounds good.
I'm pretty sure it's on the 27th.
I'm pretty sure it's on the 27th.
Maybe.
Maybe.
What is...
Is there anything else on the DNT or inside of things that you guys wanted to cover?
Or on the Droplets side, Mitya?
As you think about the Droplets program with Phase 2.
Yeah. Oh, here about Droplets actually.
Droplets. Yeah, Droplets are gonna be in play as well, for sure.
That's, yeah, that's a part of the Phase 2 of the Droplets program. So we actually taking a step back.
So we announced two more assets in phase two of Droplets.
So here you go.
We have D-ENIT and D-NTRN.
It all happened even quicker than we thought to be honest.
And they're both going live pretty soon.
And yeah, there's gonna be Droplets for DNTran for sure. And there's
going to be some new NFT collections as well. So watch this space. Yeah, we can discuss
in the comments which collections are going to be included. So that's going to be that.
So watch, maybe if you if you not financial advice, but
Are they cute?
Are they cute?
Oh, they can even quark sometimes.
They can do everything. They can swim, they can fly, they can run.
they can fly, they can run.
Yeah, I'm confused.
So more. That was the point.
Oh, actually, I know. I know. I've got it.
Yes. So there will be more collections. So for your context, if you own one of the
NFTs of these collections, then you're subject to some additional boosters in droplets.
We're going to separately announce what exactly are going to be the droplet multipliers,
but just to reiterate how it works, the droplets program is a program where you earn droplets
and the more of them you earn,
the more kind of the bigger part,
the bigger location of the future drop token
and drop you're gonna receive.
And by default you earn one droplet per $1 of TVL per day.
But you can earn multiples of that
if you're doing something interesting in DeFi.
The whole point of drop is that we enable DeFi use cases and therefore you, for
instance, if you now provide liquidity to a correlated pool such as nterrain,
dnterrain, you're earning 10x of your droplets. So that's kind of the benchmark
we will announce additionally what are going to be the exact multipliers for dn to n close
to the launch date.
Yeah, so that's some additional consideration for everyone.
So when you consider your DeFi strategies, droplets is also one of the factors.
Yeah, so that's the plan.
I'll give you some of the strategy that I think could be interesting.
So Neutron is doing surprisingly good on futures on like off-chain markets.
So I think we'll see this being pretty stable on Mars as well, like once the
market, like the purchase market have been bridge stra trapped. And so I think like a pretty good strategy is either one of these two things, like the
simplest one, if you want to be long neutron, if you want to be exposed to the price of neutron,
you're bullish on neutron and you want to express that, is you just go and you do high leveraged
staking on Mars. Like that's great position for this.
The other one is if you don't want to be exposed
to the price of neutral.
You're boosting your staking rewards.
In that world, like you're doing the strategy
that Sveta was describing earlier
where you're boosting your staking rewards
by borrowing more DNT run.
Yeah, that's right.
That allows you to, you can use the leverage multiplier basically and
multipliers taking rewards by it. You take on some liquidation risks and stuff, A for example,
de-entirin, de-pegs for a reason, but the point of the DAO providing a lot of liquidity for this is
to avoid this kind of situation. So it's not impossible but it's unlikely. And okay, so that's
if you're long neutron, you're bullish neutron,
right? But maybe you're like, oh, the market right now, I don't trust Trump, he's going to
go out with a tweet, like, anytime now, it's going to be a bloodbath, right? Like, you know,
that's a reasonable take to have as well, right? And so if you don't want to be exposed to the
price of the aspect, reasonable take Trump's gonna dump the market in one tweet. That's a reason.
You're like, that's a reasonable take.
Trump's going to dump the market in one tweet.
That's a reasonable take.
He's been doing it consistently for the last four weeks.
I love it.
I love it.
I would not be the first one.
So if you don't want to be exposed,
if you want to be delta neutral, which is you don't have exposure
to the price and to the market prices, What you can do is you can use the interior
as a collateral asset,
and then you can short on perpetuals, right?
Because you're one X long and one X short,
you're no longer exposed to the price,
but what you're doing is two things.
First, you're collecting the sticking rewards,
and two, you're collecting the funding rights.
Now, if you want to get the-
And the droplets. And the droplets, yes, you're funding the staking rewards and two, you're collecting the funding grants. Now, if you want to get the data in and the droplets, yes, you're funding the drop as
well. So, there's like interesting positions you can cook in here. So yeah, those would
be my...
Adam Cook.
Adam Cook.
I just love this Mars feature that you can use basically any token as collateral.
It's huge.
It's just, yeah, I mean, compared to...
So do you want some alpha? Right now, the funding rates on the NTRN is 110% per year.
So if you like, it's a small market, it's being bridge trapped. It's not like, you know, you couldn't scale this a lot.
That's what you're doing right now. Yeah, exactly.
Yeah, that's a real alpha. That's real alpha. Yeah. I think the beauty of crypto is that everyone
creates this kind of markets. And if you're early to this markets, then you are the most
not financial advice. Neither of us is. Yeah, I wanted to say that this feature of cross collateral on Mars is just amazing.
I recently did a trade where when I used the D-atom as collateral, and then my health rate was
not very good, and I just slapped some additional DT in the same account. And you don't even have to
bother about swapping your tokens into usedc to
use as collateral you can still hold whatever you want to hold. Yeah it's amazing. I pretty much
all of my guilt bank derivatives are on Mars right now like all of them. Yeah it makes sense. Like my entire
portfolio is in this fucking app. Yeah it's nice for like multiple reasons right because like yeah
you have these delta neutral strategies that
you can run where you're like basically, you use this as an alternative to stablecoin lending
or something, or stablecoin yield. It's basically, it's effectively the same thing because they're
not taking on price risk, right? You're farming the stake rewards, you're farming the droplets,
you're farming the funding rate. So you're actually getting different forms of yield than just like the
stablecoin lending rate that you're getting. Obviously, there's like smart contract risk
in any of these things you're taking on. But then the other nice thing is like your collateral
is earning yield, right? Like, you know, so like, while you're doing any of these things
on Mars, it could be this
strategy could be something else, like your collateral is just, you're just always earning
the rewards, right? You know, and you can use different yield-bearing assets, collateral,
it's just so nice. Yeah. Like even like a USDC lending position or something like, yeah.
something like, yeah.
Yeah, that's pretty cool.
If we had Dino in here.
One of the, oh yeah.
One of the things that I've noticed recently is like,
actually the borrowing rate on Neutron,
so historically the borrowing rate was very low
because there were a few things that you could do
with NTRN on Neutron, paradoxical that it was the case.
And recently we've seen the yields like the
lending yields go from like zero to five or something to to like 4% right now. So it's
still a small market and stuff like great like these things are just like casually growing.
But like it's interesting to see that like some people are now like borrowing Neutron
like taking positions with it.
It was pretty cool.
Yeah. Do you think that enter in is gonna benefit
from the fact that lending markets haven't before staking?
Same as ETH?
That's a good question.
So like for folks who listen to us right now, the Mitya's question is about
the fact that if you look at Ethereum's history, DeFi started existing before staking was a
thing. And so when people were looking to earn yield on Ethereum, like on the token on ETH, the baseline, right, the least risky option
risk, sorry, like a yield was lending on Aave and similar lending and borrowing marketplaces,
right?
So that created kind of like this habit of like, hey, there's a bunch of ETH on Aave
and people are lending and borrowing it there, right? And so when staking began,
you had this massive portion of ETH that was available to be borrowed
and you could earn a little bit more
than you would pay to borrow it by staking.
And so like rational actors,
all right, I'll just like borrow a bunch of ETH,
stake it, use it as collateral,
repeat, right, like leverage staking,
like the thing that we've been talking about. And so we haven't seen that happen with a lot of other networks in the industry. And one of the
assumptions for why that's not the case is because they all get proof of stake before they get
moneyness and before they get a DeFi ecosystem. And so that habit of lending and stuff doesn't
occur. And there's also very little supply that's lent.
For example, right now, if you're holding TIA,
you have the choice between, hey, I can earn,
let's say 3% on the lending marketplace
and take some more contract risk and whatever,
or I can just like stake it,
take on very minimal slashing risk and get 8%.
I'm just gonna to stake, right?
And so you don't get that pool of supply
kind of like bootstrapped, right?
And the case of Neutron is going to be interesting
because we didn't have like staking.
And so, you know, there is some supply of like interior
and being launched right now.
And like the yields are actually going up.
So it's interesting to see.
There's going to be like probably a week or two
before the Dow actually bootstrap a bunch of supply.
And so like in that period, we're going to be able a week or two before the Dow actually bootstrapped a bunch of supply.
And so in that period, we're going to be able to see, and for example, are a lot of people
actually doing that trade and is it really increasing the lending and borrowing rates?
If we see this, it probably makes sense for the Dow to come in and stuff.
But if we see that just a lot of NTRN is now being lent by users, then it might be fine
to just actually let the market do it.
Right. Like it could just increase gradually together where like supply
and demand matches each other.
And in that case, that would actually be really, really bullish
because it means like on both sides of the market, there are people benefiting
from these opportunities, right?
Like on the one hand, you have people who are more risk tolerant
that want higher rewards that
are like borrowing and taking on leverage.
It's still relatively safe, right?
But they're taking slightly more risk.
And on the very conservative side, you have people who are like, oh, I'm going to earn
by lending assets.
And that's really cool, actually.
That will be really cool to see.
Yeah.
I think there is a significant kind of what's called linear defect.
Because the lending use case existed for a longer period of time, people kind of perceive
it as less risky compared to staking.
So if staking appeared later than lending and vice versa.
I don't know that it will play out for Neutron to be fair.
Like, you know, there's only one way to see it's like,
you know, and then we see.
I mean, I'm curious about BTC as well.
There's a huge lending market for BTC.
Voldemort, Voldemort, Voldemort.
0.5%.
Yeah, it's going to be interesting. Just an observation.
Just say, with BGC it will be interesting.
No, that makes sense.
So what's the best way for me to...
Yeah, go ahead.
Who's going to ask, like, what's the best way for me to maximize my droplets on a TRN?
Oh, what's the best way to maximize your droplets on a TRN?
Um, I think the underrated way to maximize droplets for drop assets in
general is leverage looping.
In fact, because when you because when you create this leverage,
you also leverage your droplets.
And most of the times, actually,
borrowing rates are pretty reasonable.
So yeah, you get very high APR,
but also you can get a lot of droplets.
But then you have to be careful with the borrowing rates
because they fluctuate.
So if you do this right now,
let's say for TIA, it's not going to be very profitable, but for Atom, that's going to be huge. So we'll see how it plays out for currently. I'm in that farm right now. I'm basically
and I'm making like 70% APR or something. Yeah, the APR is crazy.
I recommend it.
If you're exposed to that asset, slap into a Mars leverage
taking.
Yeah.
So I think leverage taking is really underrated.
Depends on what exactly we do with using assets for props trading.
That might be actually a pretty interesting option as well.
And long correlated pairs on the decks
are always kind of high in terms of the droplets
that you can earn.
But they kind of come with the impermanent loss risk.
So yeah.
I'll go with supervolts.
Supervolts. Okay, that's a good one. We've never done droplets for volts before. And by the way, just as a side note. They're not volts. They are integrated market makers. Big difference, kiddo.
Sorry. Sorry about that. Yeah, we need to decide.
And yeah, that would be huge.
That might be better than just providing the credit to Dex in some regard.
So my hunch is that...
Okay, here's the opportunity.
Okay.
So Supervolts, as we've discussed multiple times before on this platform. What was really cool about them is that because they exist on the same order, like on the
same venue as like other strategies like Astro board and margin and such, then and because
they're trading based on centralized exchange prices, like the most liquid venues prices
basically, they're able to internalize six-dex arbitrage.
And so what's interesting about this is that, for example,
because the DAO itself is going to migrate a lot of de-entirine
USDC, like a lot of entirine USDC liquidity to de-entirine USDC,
that means that there's going to be a lot of PCL liquidity.
But PCL has this cork that, to protect you
from a permanent loss, it doesn't
rebalance all the time. It's
kind of waiting for fees to accumulate and then it rebalances when it's trying to minimize an
permanent loss. And so what's nice about the vaults and PCL being on the same order book is that
PCL creates a lot of opportunities for the vaults to basically arbitrage the PCL liquidity. It's
great for the PCL because now you have way more volume, basically.
You're getting volume at every block as long as your liquidity is mispriced.
And that helps you so like rebalance accrue fees and whatever.
It's also great for the super vaults because now they're able to take profitable trades
almost on every block, right?
By helping the PCL rebalance. And so what could be interesting is for users,
it might generate vaults that are more profitable, actually,
because there is these arbitrage going on and stuff.
And so it might allow people to take on more profitable
positions.
The downside of the super vaults is
that they're probably not going to have unlimited capacity initially, right? Like there might be cuts. And so, you know, it
might be like a bit of rush and stuff, like if you want to get in and stuff. So like adjusting
the droplets for what that in mind might be interesting.
Yeah, you have to be early.
You got to be early. You got to be early, it. That's how it works. I'd say you
You earn your daily bread as a DJ
Yeah, I was just gonna say I think we're coming up to to to the hour here
But this has been great. This has been great. The nice thing about these streams is people can listen back.
If they jumped in at any point throughout the conversation, you can go back on the tweet
and just click on the link and you'll be able to listen back to the full conversation that
we had talking about the Mercury upgrade, DNTN, all sorts of related topics to that,
including different strategies that might be interesting
on the network.
Yeah, are there any last thoughts that you guys had that you wanted to end with?
Otherwise we can point people towards a couple resources for them to check out and then we
can close her off.
Thanks Dante.
I can read Elsa.
Fuck yes, we're doing off. Thanks, Dante.
Yes, we're doing that. Yes, that's part of the culture.
That's part of the culture.
So there's going to be a change to DropList program, in fact,
and it's going to be changed to the referral part of the program.
So right now, as you know, the protocol is invite only,
so you need to get a link to get into the protocol.
And that's kind of what you get
when you're using someone's links.
But from a couple of weeks from now, this is gonna change.
And when you share your referral link,
so we're gonna switch off invite only.
So we kind of go into production mode with the protocol.
But when you use someone else's link,
you're going to get a high temporary booster in terms
of how many droplets you're earning every day.
And when you share your link, you're actually giving,
let's say, the people that are going to use the link something
very, very valuable because they're going to get this kind of temporary high booster.
And as it was always the case, when you invite people to the protocol, you get 25% of their
droplets and 12.5% of droplets of any people who they invited to the protocol.
That's not a fancy scheme, by the way.
It's just very good design on the system.
So, yeah, use this opportunity when we launch DNT RN. This is going to be in place already, I think.
So you can invite Monute to the protocol. They're going to earn a lot of droplets. You're going to earn a lot of droplets.
Everyone gets droplets. Yeah, so I think that's going to be fun.
And yeah, I think it's time for us to grow up.
We're not invite-only mode anymore,
or at least we won't be in a couple of weeks from now.
Very nice.
Yes.
That is growing.
That's cool.
That's cool that you're also still be able to earn boosters
by referring people.
But you guys are moving away from invite only.
That's a good, I think, happy medium between the two.
All right, cool.
So if people want to check out, if they
want to learn more about DNTN, Drop did a post on this
yesterday, actually. So if you go to drop more about DNTN, Drop did a post on this yesterday, actually.
So if you go to drop.money on Twitter, you can check the post out there. In there, there's a blog post on it that you can read through that has all the details on it. The Mercury upgrade,
like I already mentioned earlier, you can read all about that in the pinned tweet on
neutron underscore org, Twitter's there. And then yeah, watch out in the coming weeks, there's going to be
more announcements from from both Neutron and Drop leading into and following the the Mercury upgrade
on April 9th. All right. Thanks, everybody for joining those that dropped into the chat and that
were listening in. And obviously, thank you to Mitch and Spade as well
for dropping in, dropping the alpha
and talking about what you guys are working on.
We'll see you guys in the next one.
Always a pleasure.
I just realized that we can see all of the chats
in the stream yard.
I've been looking at the,
like I had both like Twitter and the stream opened. It was not
great. I do not recommend it.
Boomer moment.
Yeah, I did the same because you can only comment if you have your Twitter open.
Anyway.
Yeah, that was an unlock. I didn't realize you could comment on the stream with your
personal account like you guys were doing.
See, here's the boomer now.
We're learning as we go.
When you do it, it's a boomer.
When I do it, we're learning as we go.
I see.
That makes sense. Cheers.
