Neutron Launches on Replicated Security: What It Means for Staking in Cosmos
On May 4th, 2023, Proposal #792 was approved on-chain to launch Neutron on Replicated Security. The proposal was to launch Neutron, a DeFi hub and a CosmWasm execution layer, as a consumer chain on the Cosmos Hub using replicated security. With all the core modules audited and successfully run on testnet, Neutron is now ready to bring truly interoperable smart contracts to the Cosmos Hub through bleeding-edge interchain transaction and interchain queries modules.
The launch of Neutron on replicated security means that the entire Cosmos Hub validator set will secure it, with validators running additional nodes for each consumer network. However, smart contracts do not create any additional cost for the validators. Therefore, Neutron allows Replicated Security to secure hundreds of applications and generate additional revenue for the Cosmos Hub without any additional cost.
With the launch of Neutron, the Cosmos Hub will receive and share additional rewards with ATOM stakers and validators. The Cosmos Hub will receive 25% of Neutron’s transaction fees and MEV revenue, which is denominated in NTRN. Therefore, ATOM stakers and validators will receive additional rewards from transaction fees and extra ATOM from transaction fees.
Neutron is designed to host an ecosystem of DeFi products built around NTRN and ATOM, generating utility and demand for the tokens. Applications built on Neutron will enable Cosmonauts to use native and liquid staked ATOM to provide liquidity, lend, borrow, wield governance power, strip bonds, and more. They will drive demand for ATOM and reduce the circulating supply by enabling Cosmonauts to obtain rewards by locking up their tokens in DeFi protocols.
Neutron also provides the cross-chain infrastructure and flexible execution-environment required to service large treasuries across the IBC ecosystem. With primitives such as DAODAO, Timewave, and Gitcoin possibly launching on Neutron, the Hub would finally have the tools to enter secure, programmatic agreements with other chains, protocols, and treasuries: token swaps, quadratic funding rounds, loan agreements, protocol-owned liquidity, etc.
To ensure the long-term alignment of both networks, the genesis state attached to the proposal contained an allocation of 70,000,000 NTRN tokens to the Cosmos Hub’s validators and delegators. This corresponds to 7% of the total NTRN supply and 58.3% of the initial circulating supply.
The proposal received a majority “yes” vote, indicating that the community agrees with the terms of the proposed security agreement, and Neutron will be launched on Replicated Security. With the launch of Neutron, the Cosmos Hub will be able to host an ecosystem of DeFi products built around NTRN and ATOM and generate additional revenue for the Cosmos Hub without any additional cost.
Here’s what it means for staking in Cosmos:
- Reduced minimum staking amounts: The proposal lowered the minimum amount required for staking from 1 ATOM to 0.01 ATOM, making staking more accessible to smaller investors.
- Introduction of a new Staking Derivative: The proposal also introduced a new staking derivative, which allows users to earn staking rewards without actually staking their tokens. This derivative is called a Staking Derivative Token (SDT), and it enables users to trade their staking rewards on the open market.
- Enhancements to the unbonding process: The proposal also included several enhancements to the unbonding process, including the ability to partially unbond tokens and a reduction in the unbonding period from 21 days to 21 hours. This makes it easier for users to exit the staking system if they need to access their funds quickly.
