To address concerns by the community, DFINITY and Waterneuron early contributors propose to increase DFINITY stake in the Waterneuren DAO via a token swap – Proposal 3555.
Waterneuron is a liquid staking platform for ICP governed by the Waterneuron DAO. DAO members are entities who have staked the Waterneuron token WTN. With the ICP staked through the platform, the Waterneuron DAO has a substantial amount of voting power in the Internet Computer’s NNS, which is controlled through DAO votes.
The Waterneuron platform allows one to stake ICP for short amounts of time as follows. When staking ICP with the platform, one obtains nICP tokens in return. The platform will stake the received ICP into a 6 months neuron. nICP can at any time be swapped back to ICP on the market or be used to unstake a 6 months neuron via the platform and obtain ICP, however, with a 6 months delay. Staking rewards for ICP are shared with nICP holders by means of defining the exchange rate between nICP and ICP (over time, nICP can thus be expected to increase in value w.r.t. ICP).
Apart from the ICP 6-months neurons, the platform has also staked the ICP obtained from their two rounds of WTN token swaps in an 8-year neuron. Currently, it has 2’112’612 ICP staked in total (cf. waterneuron.fi). By controlling these ICP neurons, the Waterneuron DAO exercises voting power on the Internet Computer’s NNS, currently 0.60%.
The community has raised concerns about the extent of the decentralization of the Waterneuron DAO as a small group of related entities hold more than 50% of the Waterneuron WTN neurons. To address these concerns and to achieve a better decentralization of the Waterneuron DAO, the Waterneuron developers and DFINITY suggest that DFINITY and the Waterneuron DAO exchange 24M WTN for 365k ICP and will stake the respective tokens. This will raise the voting power of DFINITY in the Waterneuron DAO from 2% to about 24.9% and at the same time increase the staking rewards for nICP holders.
I agree it would be beneficial to the WTN SNS and the ICP ecosystem and it would improve decentralization of the WaterNeuron SNS for DFINITY to have an increased stake in WaterNeuron. I would like to see this proposal move forward. What would be the timeline? I’d like to see it happen soon.
This is a great proposal, and I think it’s a positive step for the ecosystem.
I just had a small question about the exchange rate mentioned in the proposal: 365,000 ICP for 24,000,000 WTN, which comes out to 0.0152083 ICP per WTN.
Based on the current market price, this is around $0.08 per WTN, while WTN is currently trading between $0.20 and $0.25. So it seems like DFINITY would be receiving WTN at a discount.
Of course, I understand this was a mutually agreed rate, and the volatility of ICP and WTN are high. I just thought it might be helpful for the community if any background or reasoning behind that rate could be shared.
Thanks for your support! Let me explain why we are proposing this rate and not another.
When looking at governance tokens on the IC, we do not look at dollar valuation of token, but rather ICP. As everything on the ecosystem is inherently pegged to ICP. Just like most of crypto is pegged to BTC. Now, the current price of most governance token in crypto is highly inflated, as the liquidity pools are not deep enough to support real buy or sell pressure.
See below a screenshot where I try to sell 100k WTN, the price impact is 30%. Meaning by selling $25k worth of WTN the price would drop from $28M marketcap to $19M marketcap. [1]
Which is why, instead of looking at prices on DEX we prefer at looking at prices
that were set during large swaps, mainly the SNS’. The DAO ran two SNS in the last year, and we added this potential one in the table below. We can see below the proposed rate of ICP per WTN is the highest out of the three SNS’:
SNS#1
SNS#2
SNS#3
Tokens Available (WTN)
28’600’000
23’295’621
24’000’000
Swap (ICP)
435’963
260’911
365’000
WTN Rate (ICP)
0.0152
0.0112
0.0157
FDV (ICP)
1’779’544
1’307’503
1’829’125
Hope you can better understand the reasoning behind the specific swap rate now.
[1] You can check the liquidity depth for most tokens on coingecko, it’s a useful tool to understand marketcap of tokens:
Is the plan still to vote as a DAO, or are each WTN holders going to vote based on the amount of voting power? Is there any plan to change from the current one?
So did DFINITY consult with the community before making this decision? Who approved this at DFINITY?
So are they addressing centralization concerns or just the “extent of decentralization” that is required and makes it eligible to receive even more ICP from the Foundation’s undisclosed ICP supply
