Understanding Neutron’s Launch Rules for Consumer Chains

Source: Jiang Haibo

Neutron, as the first consumer chain in the Cosmos ecosystem, will be able to use the security of the Cosmos Hub. Recently, Neutron will conduct airdrops, liquidity auctions, and lock-up airdrops.

On March 15th of this year, Cosmos Hub completed the Lambda upgrade and officially launched Replicated Security, also known as Interchain Security, which is the shared security model designed by Cosmos Hub.

Application chains that use replicated security are also known as consumer chains. They will no longer need to maintain the security of the blockchain themselves, but instead, the validators of Cosmos Hub will produce blocks. These validators will also receive additional native token rewards, increasing the value capture ability of ATOM.

Neutron is the first consumer chain launched using replicated security. It was approved by proposal #72 of the Cosmos Hub community last year and received 50,000 ATOM from the Cosmos Hub community pool to develop Neutron as the DeFi Hub in Cosmos. Well-known projects, including Lido, will also be deployed directly on Neutron. Today, Neutron’s mainnet has been launched, and airdrops have begun. Neutron is an unlicensed smart contract platform based on Tendermint and built using the Cosmos SDK. Since there is about 2 billion dollars worth of ATOM staked in the Cosmos Hub, Neutron will also be one of the safest cross-chain smart contract platforms through replicated security, and it will also allow DeFi applications to scale across dozens of blockchain networks.

For a detailed introduction to Neutron, please refer to the article on BlockingNews. The following will introduce the launch rules of Neutron. Before the launch event that begins on May 24th, Neutron has gone through a two-week warm-up period to ensure the stability and security of the Neutron blockchain.

Airdrop Rules: 7% airdrop, snapshot time is November 19, 2022

Time: Three months starting from May 24th

According to Neutron’s token economics, its native token is NTRN with a total supply of 1 billion. It can be used as gas fees in Neutron and has governance rights. Neutron has received continuous support from Cosmos Hub, so it has also allocated 7% of the total tokens to ATOM stakers, with the initial allocation as follows:

  • The founder is allocated 23% of the tokens, locked up for 1 year, and then linearly unlocked in 3 years.

  • Early supporters are allocated 21% of the tokens, locked up for 1 year, and then linearly unlocked in 3 years.

  • The community is allocated 12% of the tokens for airdrops and launch activities.

  • The Neutron DAO is allocated 54% of the tokens, which can only be transferred and used after governance voting.

Airdropped tokens account for 12% of the community’s distribution, with 7% allocated to airdrops. Specifically, 4% is allocated to accounts that staked more than 1 ATOM at block #12900000 (November 19, 2022), and 3% is allocated to accounts that participated in the Prop 72 vote. Eligible users can claim the tokens within the first three months of Neutron’s launch, which is on May 24. Any unclaimed tokens at expiration will be transferred to the Cosmos Hub pool. The airdropped tokens will be unlocked within three months after the end of Neutron’s launch event (approximately nine days after launch), and the airdrop accounts for 58.3% of the initial circulation.

The airdrop address first excludes addresses with less than 1 ATOM staked, which accounts for 38% of the Cosmos Hub staking addresses. The airdrop quantity is mainly distributed based on the weighted sum of staked quantity, which excludes the possibility of a Sybil attack but is also disadvantageous to small holders. If the stake of a single account is greater than 1 million ATOM, it will be calculated as 1 million ATOM. Users holding more than 1 million ATOM through multiple addresses must report it actively, otherwise they will be disqualified from receiving the airdrop when discovered.

Users who provided liquidity through Stride at the above block height are also eligible for the airdrop, but any US users, sanctioned country users, centralized exchanges, and custodians are excluded.

Liquidity Auction: 4% of tokens for auction

Time: May 24th to May 31st

The liquidity auction can help Neutron complete the price discovery process, and participants will be able to determine the price of NTRN tokens and begin to influence the Neutron governance system.

Neutron will evenly distribute 4% of the tokens from the community’s distribution in two virtual liquidity pools, ATOM and axlUSDC (USDC cross-chain to Neutron by Axelar). The Neutron Treasury will provide NTRN tokens, and users can participate with ATOM and axlUSDC. The LP tokens will be distributed uniformly according to the proportion of everyone’s participation funds, which means that the Neutron Treasury will automatically receive 50% of the LP tokens, and both ATOM and axlUSDC will be settled at the same price.

The liquidity auction is divided into two stages. The first stage is a free period of five days, during which participants can freely increase or decrease their participation funds. The second stage is a two-day closing period, during which no additional auction funds can be added, and only one withdrawal transaction can be initiated. On the first day, 50% of the funds can be withdrawn, and the amount that can be withdrawn will gradually decrease from 50% to 0 on the second day.

At the end of the auction, all participating funds will be deposited into Astroport’s liquidity pool in the form of LP tokens.

Even if you do not participate in the subsequent lock-in airdrop, the LP tokens obtained from the auction need to be linearly unlocked within three months after the start of the event. This part of the LP tokens can also receive other mining rewards from Neutron or Astroport.

Lock-in Airdrop: Lock-in for 4.5-12 months and distribute an additional 1% of the total tokens

Time: May 31-June 5

Users who participate in the liquidity auction can participate in the upcoming lock-in airdrop. This is a reward mechanism for liquidity auction participants. They can choose to lock their LP tokens for 4.5-12 months and obtain lock-in airdrop rewards. The reward tokens in this stage also come from the community distribution part, accounting for 1% of the total tokens.

Lock-in airdrop is a liquidity mining plan. Users who want to participate in lock-in airdrops can create locks by holding NTRN-ATOM or NTRN-USDC LP tokens. The same user can split LP tokens into multiple locks with different times.

The lock-in airdrop is also divided into two stages. The first is a 3-day free period, during which participants can create locks for the LP tokens obtained from their liquidity auction, or cancel them at any time. Then there is a 2-day end period. During this stage, locks cannot be created, but can be canceled. The maximum cancellation ratio is 50%, and the maximum cancellation ratio will decrease over time.

The lock-in airdrop mechanism of Neutron encourages longer lock-ins, and the time multiplier is super-linear. The longer the lock-in time, the larger the reward share. For example, the reward rate for locking for 4.5 months is 0.5, the reward rate for locking for 7.5 months is 1, and the reward rate for locking for 12 months is 8.

Unlike other activities, the rewards obtained from the lock-in airdrop can be extracted at any time.

Through Replicated Security, application chains in the Cosmos ecology will no longer need to maintain the security of the blockchain, and the Cosmos Hub can also increase its value capture ability for ATOM. Now the first application chain Neutron has started to launch and distribute airdrops. Projects including Lido will be directly deployed on Neutron, and the Cosmos ecology may receive more attention.

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