Osmosis Updates from the Lab, ft. Regen (Carbon Credits) and Reverie (Osmosis Grants Program) — Mar. 16, 2022
Osmosis Updates from the Lab occurs every Wednesday at 1 PM EST (5 PM UTC) on the Osmosis Zone Twitter Space. Replays are available on the Osmosis YouTube channel or the podcast.
This week, with Sunny taking a much-deserved break, Josh Lee and Dev Ojha came by to chat with Dynamicmanic, Gregory Landua and Will Szal from Regen Network, and Derek Hsue from Reverie.
In Osmosis news, superfluid staking is now available in Pools 560–61, OSMO/UST and OSMO/LUNA. Dev reports that the testing framework for superfluid continues to be improved, which is producing new insights into the superfluid code. The team is also working to generalize the AMM module to prepare it for stableswap, the next big feature in the works. Finally, the IAVL improvements have greatly sped up chain queries and epoch times, while adding a few node stability problems that have largely been fixed, with just one remaining.
The front-end team has also been hard at work. Work continues on the front-end refactor, separating the front-end code from the chain logic in order to make it easier for external teams to develop on Osmosis. Preliminary front-end work on the LBP v2.0 as well as the upcoming Ethereum bridge UX is under way. And check out the new Keplr Dashboard, which aggregates balances and proposals, and provides an easy interface for claiming from different chains from the same menu, as well as single-transaction claim-and-stakes. Thank you, Delivan!
Regen: Nature Carbon Tonnes (NCT) on Osmosis
Regen Network has written three proposals about bringing carbon credits to Osmosis. The first of these, proposing that the Osmosis Community Pool to purchase “1 year of carbon credits at worst case projections,” is already on chain. It asks that 5100 NCT (nature carbon tonnes) be purchased and burnt at a cost of 6700 OSMO, covering the first year of Osmosis, June 2021–22.
NCTs were developed by Toucan Protocol (on Polygon) in conjunction with Regen and Moss.earth. Entities can retire carbon on Verra and tokenize it as an NFT on Toucan. The protocol then fractionalizes these NFTs into TCO2s, which can further be commodified (i.e. stripped of the sourcing information contained in the NFT) into BCTs (base carbon tonnes) or more restrictive NCTs.
NCTs have the twin benefits of following industry-accepted accounting methods and being robustly liquid. As Greg says, using NCTs is a baby-step, since Verra is ultimately one of the companies Regen wants to disrupt with its own climate indexes. Regen is developing a completely auditable chain of custody for carbon, to ensure that it is not poorly or fraudulently sourced, double-spent, or emitted.
In the meantime, we have NCTs, which can be generated either from avoided emissions (e.g. sparing old growth forests) or carbon removal (e.g. sequestered in new soil or forest reclamation). For an in-depth overview of the methodologies approved for NCTs, see this report by Regen’s Sarah Baxendell. There is considerable nested complexity in carbon credit-sourcing as well as non-obvious trade-offs. For example, poorly constructed incentives can depress food production and economic growth. At the same time, intelligent incentives can introduce new sectors of economic growth, improve air quality, food quality, and mental health.
Even to naively skeptical, it is clear that carbon offsets are big business and getting bigger. Industry experts expect the carbon offset market to skyrocket to around $50 trillion by 2050. Lenders are increasingly requiring companies to purchase offsets if they want to be eligible for loans, and companies will continue to rush to acquire regenerative assets.
Not only does it make direct economic sense to get into the carbon market, regenerative finance is also a great narrative. Environmental critiques of Proof of Work continue to drive people away from the industry, but Osmosis and Regen can show them that the interchain is not only sustainable, but climate- and earth-positive.
The second proposal is for Osmosis to buy 106K NCT with roughly 140K OSMO, to be paired with the 1m of the REGEN donated to Osmosis in a REGEN/NCT pool. This will not be incentivized, since the Osmosis-owned liquidity will be sufficient to facilitate trades. The pool trading fees are expected to buy back roughly 9100 NCT per year, allowing Osmosis to offset its carbon in perpetuity. Finally, the remaining 400K REGEN in the community pool will be used to incentivize NCT/OSMO — which LPers are expected to seed with NCT bought from the NCT/REGEN pool.
The final proposal is simply to include OSMO/NCT in the regular and matching incentive models. As the interchain DEX, Osmosis is well positioned to be the primary liquidity source for carbon moving forward. The interchain DEX is also becoming the regenerative, solarpunk exchange.
Reverie: Osmosis Grants Program
With Reverie having updated its proposed Osmosis Grants Program proposal, Derek Hsue came by again to talk about the program ahead of the vote.
This Osmosis Grants Program is key to the continuing modularization and decentralization of Osmosis. By passing the proposal, the Osmosis community will continue to show that it has learned the lesson of Sushiswap: spend freely on development. Sushi tried to become a super-app, but failed to modularize, largely because the community refused to pay the developers adequately. Sushi had incredible momentum and community support, but they failed to be aggressive in hiring a team to match their ambitions. Their small, underfunded team broke down in the face of creating an entire suite of applications. By the time people realized how bad things were, community sentiment had radically declined, the treasury had shrunk, and the product suite was underwhelming and unable to drive further adoption.
It is in keeping with Osmosis’ modular approach to complexity that we hire an elite external team to manage our grants. The Osmosis core development teams do not have the resources to build all of the apps and tooling we need to compete with centralized exchanges. We must attract outside developers so that core team can focus on big projects like superfluid, interfluid, stableswaps, and threshold encryption. We have momentum and a massive war-chest: the Grants Program will help us use it.
The initial budget for the program is up to 1.5m OSMO ($15m at $10 OSMO) from the 44m OSMO community pool. That is the maximum we would pay out — to grantees, not Reverie. Reverie proposes $100k for their extensive program set-up work, particularly on the legal front, and $70k per month, with the option to renew or not after 6 months. For those with sticker shock, it should first be said that we would be lucky to be able to spend the whole program budget because it would mean that we have found so many good developers and teams that want to build.
The Reverie team will do most of the legwork, managing the requests for proposals, handling outreach and onboarding, due diligence, and managing milestones. They will also serve as the first filter for potential grantees, deciding what gets forwarded to the multi-sig for approval. That multi-sig will make funding decisions on behalf of the DAO, and it will consist of 7 members: Sunny, Cosmostation, Figment, Brandon Curtis (CoreScientific), Eddie Hartman (Osmosis Foundation), Coldchain (Independent Validator), and Dan Elitzer (Nascent, Yam). If money is granted to a developer or team by the multi-sig, they will receive 25% of the approved funds up front, and 75% upon successful completion (as determined by the multi-sig). Projects that expect to launch their own token (and who will generally receive more substantial funding) will be expected to airdrop to the Osmosis community.
It is worth noting as well that Reverie is a top-notch team that has worked exclusively with blue-chip projects on Ethereum, running similar grants programs at Compound and dYdX. Both projects have given their programs glowing reviews, and have renewed them past their initial windows. It is no surprise that the Osmosis developers and validators are overwhelmingly in favor of this proposal.
We should mention one last upcoming vote: the much-requested proposal to lengthen the voting window from 3 days to 5 days. It will be good to have more time to discuss potentially controversial proposals, and fewer votes will fly under the radar when people are busy. It will however take longer to incentivize new pools and update incentives, since variable-length voting windows will not be available until voting is overhauled in the Cosmos SDK. We will therefore have to be expeditious in getting these proposals on-chain. Unless this turns out to require a chain upgrade, which would push it out a few weeks, I expect the bridge service provider vote to go on chain immediately after 5-day voting goes into effect.
That’s all for this week! Be sure to make your voice heard on Commonwealth about these proposals, even if that is just an upvote! Next week, Jake Kim from Alphaworks is stopping by the lab to talk about ION DAO — the code is ready!
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