Two Token Setup for Neutrino. Keep NSBT and Add the Recap Token

2 weeks ago, Waves Protocol published the “masterplan” to revive the Waves DeFi ecosystem and bring stability back to Neutrino. The response from the community was overall positive. Not everyone was happy, though. One group in the Neutrino community proposed a two-token setup to keep NSBT and add the new recap token. Our devs worked hard to model the various scenarios that could occur with a two-token design.

We’re pleased to announce that we are now working towards a two-token setup. The details of our investigations are published here to gain our community’s valuable feedback once again.

The proposal in short, is to:

• Only issue the recap token when BR <1
• Temporarily give recap token stakers all the benefits that gNSBT holders (NSBT stakers) have
• Automatically liquidate recap tokens when BR is >1

We will describe each point below. The following information is a draft plan ready for community review.

Recap token price and its purchase conditions

• recap token will be available for purchase (with slippage) from the contract when BR is < 1. The token price = BR e.g. Backing Rate = 0.5, RECAP token price = 0.50 USDN
• When BR >= 1, the RECAP token is not available for purchase.

Recap token stakers temporarily get gNSBT and all the related benefits until BR < 1

Recap tokens will have a few different uses:

• HODL it to profit when backing ratio goes >= 1
• Sell it on Waves.Exchange to the market at any point
• Stake it to get gNSBT and all the related benefits of staked NSBT (governance, swaps and profit from swap fees).

We mustn’t negatively impact the share of governance power and the amount of rewards received by the existing NSBT stakers. This is a key point where the previous plan differed from this plan:

• Old Plan: Allow users to swap NSBT to recap token at market value then deprecate NSBT.
• Problem: This would degrade the governance power and share of rewards held by existing NSBT stakers (gNSBT holders).
• New Plan: Give the option to buy recap token and stake it to get gNSBT to receive all the benefits of staking NSBT. But only temporarily, as long as BR is <1.
• Problem: This still creates pressure on the governance and rewards share, as recap token stakers gain a share of the gNSBT distribution.
• Solution: Use a variable exchange rate to protect the interests of the existing gNSBT holders.

We propose to use:

where P=60 at the launch (is subject to change) and is controlled by governance.

If we use this formula, users can issue an additional ~5 million gNSBT to give the incentive to buy recap token that allow to get gNSBT, receive the rewards, and fully recapitalize the system (see table below). This would inflate the total supply to ~7.7million gNSBT (2.7m NSBT total supply currently) but only, as long as BR is< 1

Recap token is liquidated automatically

• Old plan: Users hold recap tokens and gain all the benefits of NSBT eventually, even when BR >1.
• Problem: NSBT becomes irrelevant and there is no incentive to stake it.
• New Plan: Liquidate recap tokens and newly created gNSBT when the recap token has done its job, and BR is >1.

How does it solve the problem? It incentivizes people to buy recap tokens and makes NSBT stakers the only permanent beneficiaries of holding gNSBT.

• Recap stakers gain their benefits from being temporary gNSBT holders. They can vote, swap, and profit from swap fees.
• Recap holders/stakers automatically profit from BR returning to >1. The profit amount would depend on the value of BR when the recap token is purchased.

Recap auto liquidation algorithm

• Issuance of recap tokens stops when BR is >= 1. At some threshold point, for example, when BR=1.2, the proportional automatic liquidation starts, so that BR goes to 1.1. This way, about 10% of the reserves total will be used to pay for the recap tokens liquidation.
  The liquidation implies that 1 recap = 1 USDN.
• Every recap holder will have the same percentage of the recap tokens amount liquidated and get USDN in return.

Mechanics to protect voting

Problem:

If recap tokens are tradable on the exchange, it will be possible to quickly buy gNSBT to vote and immediately sell recaps. Undermining the commitment to the project long-term gNSBT holders have shown to the project.

Solution:

We need some kind of protective mechanism. For example, we can make it so that recap stakers don’t receive gNSBT immediately but some time after they stake the recap tokens.

We want your feedback!

We admit our mistake was positioning the “masterplan” as a certain outcome. It never was. It was a way of gaining community feedback on our direction, so we could understand unforeseen issues. This article too should be considered a draft plan for your review and feedback.

The beauty of the crypto space is that feedback can happen before product development, where other industries would pay millions to gain customer insight — all we have to do is release a blog!

We thank the community for their passion, intelligence, and dedication to the project and want you all to know that your feedback is heard, valued, and appreciated. Let’s build back better!

Neutrino website: https://neutrino.at

Twitter: https://twitter.com/neutrino_proto

Telegram : https://t.me/neutrino_group