WaterNeuron SNS-DAO Launch

[WaterNeuron]

WaterNeuron SNS-DAO: Let Liquid Staking begin.

100% of the ICP raised during the SNS will be staked in an 8-year neuron

Hey everyone, two weeks ago we introduced WaterNeuron. Thanks to all the feedback we’ve got, we improved the original design’s governance and go-to-market.

• Governance: All the NNS proposals will be mirrored into the WaterNeuron DAO. WTN stakers will be able to vote on the SNS proposal. One hour before the end of the NNS proposal whatever the outcome of the votes on the SNS proposal is, will be voted on the NNS.
• Go-to-market strategy: The DAO will progress through three distinct eras: Kiwi, Papaya, and WaterMelon. An SNS will mark each era. This SNS represents the first era, the Kiwi one.
  Changes to the airdrop have also been made. Users will incur tokens based on the table here. The tokens will be airdropped once the three eras are completed.

SNS Launch Key Parameters

• WTN Tokens for Sale: 28,600,000 WTN
• WTN Tokens for Contributors: 22,400,000 WTN
• WTN Tokens for Aidrop: 4,480,000 WTN
• Minimum ICP to Raise: 200,000 ICP
• Maximum ICP to Raise: 350,000 ICP (Without CF)
• Min per Contributor: 10 ICP
• Max per Contributor: 200,000 ICP
• Duration: 14 days

Protocol Launch Procedure

• May 17th - WaterNeuron introduction
• June 1st - SNS announcement
• June 12th - Audit report published + Code open-source
• June 15th - NNS proposal to launch the SNS
• June 18th - SNS participation starts
• July 1st - SNS participation ends
• As soon as the canister-control restriction is lifted: deployment of the protocol
• nICP is now live, everyone can enjoy liquid staking.

Some useful links

• Twitter
• Telegram
• Documentation
• Spreadsheet
• Taggr
• SNS Init yaml

All the ICP raised in the SNS-Swap will be sent to an 8-year neuron controlled by the protocol.

[Phasma]

Hmm, that’s interesting, but I think it’s a bit early.

[WaterNeuron]

Why would you say that?

[EnzoPlayer0ne]

WaterNeuron (WTN) and nICP FAQ

Below is a summary of the WaterNeuron telegram channel. Some questions asked might help everyone in the forum.

Best message

Jack Johnson provided an excellent summary of WaterNeuron:

Basics

Some users did not understand the basics, so let’s go over them one more time:

• What is WaterNeuron (WTN)?
  WaterNeuron ($WTN) is the governance token for the WaterNeuron protocol. It allows holders to manage the DAO-controlled protocol, vote on NNS proposals, and receive a staking bonus.

• What is $nICP?
  $nICP represents liquid staked $ICP. It is designed to offer competitive yields to attract users to the protocol.

How does the yield work?

• 6-Month Neuron: All ICP deposited in the 6-month neuron.
• 8-Year Neuron: All ICP from the SNS (Service Nervous System).
• 90% of the maturity from the 6-month and 8-year neurons will go to nICP holders.

SNS

• Why is the SNS needed?
  The SNS is essential for early yield, incentivizing, and kickstarting a liquid staking wave. Without the SNS, the yield of $nICP would be just the yield of a 6-month neuron minus 10%.
• What are the benefits of participating in the SNS?
  • Governance: SNS participants receive WTN, which gives them voting power and control over the protocol.
  • NNS Voting: with locked $WTN, you can vote on mirrored NNS proposals and thus vote on the NNS.
  • Yield: 10% of the 6-month giga neuron yield goes to $WTN holders
• What is the inflation rate, and why?
  • The protocol aims to incentivize locking $WTN into neurons with a 5% inflation rate in the first year, dropping to 0.25% in subsequent years.
• *What is the difference between buying in on the SNS and using WaterNeuron to swap to nICP?
  • SNS Participation: you get $WTN
  • Using the dApp: You get $nICP

Airdrop

Many users were interested in the airdrop

• How does the airdrop work?
  • If you mint 5 nICP, you get 40 WTN if you’re in the first 80k nICP minted. This carries on per the table below!

• Can I farm the airdrop by depositing $ICP and reselling it on DEX?
  Yes, you can. However When you sell nICP, you do so at the exchange rate set by the DEX (Decentralized Exchange), not the protocol.

• When will the tokens be airdropped?
  The airdrop will be claimable once the protocol’s TVL (Total Value Locked) reaches 5% of the ICP supply.

• How do I know how much tokens am I eligible to?
  You do not need to farm points, or anything. Rather the amount of $WTN is shown on the Dapp:
  

  

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For more detailed information, you can refer to the docs over at docs.waterneuron.fi spreadsheet with various parameters.

[WaterNeuron]

Thanks Enzo for summarizing everything here!

[0rions]

@bjoernek parameters look good?

[bjoernek]

I just had a quick look and found some inconsistencies

• minimum_direct_participation_icp: The forum posts (and the comments in the init file) mention a min target of 200k ICP, while the actual value in the init file is 250k ICP.
• maximum_direct_participation_icp: the max value the forum posts mentions 420k ICP (and also the comment in the init file) but the actual value in the init file is 350k ICP.
• minimum_participant_icp: The forum post states 1 ICP while the init file states 10 ICP.
• For the team allocation you mention 22M WTN in the comments of the init file, but the init file specifies 22.4M WTN

I halted my review at this point I recommend conducting a thorough review on your end and updating the community with the finalized suggested values.

[WaterNeuron]

Thanks for the feedback! We updated all the parameters accordingly.

Just FYI, we need to keep track of two .yaml because the one used for the SNS is not exactly the same as the file for GitHub - dfinity/sns-testing: Testing SNS in local testing environment.

minimum_icp in one, minimum_direct_participation_icp in the other
neurons_fund_participation is a bool in one, neurons_fund_investment_icp is a number.

I think this is because in sns-testing, they’re still using an old version of the SNS.

[skilesare]

See update from evening of June 9: WaterNeuron SNS-DAO Launch - #21 by skilesare

Update on June 14: WaterNeuron SNS-DAO Launch - #44 by skilesare

(As of morning June 9)

I’d recommend rejecting the Water Neuron proposal unless changes similar to the following are made to both the yaml and the stated goals/operation of the project:

1. The team allocation should be much less. Potentially 0. The proposed system is a ‘turn it on and leave it’ type utility. I have no issue with the team making a good bit of value here, and if Water Neuron ends up bringing significant value to the IC then Enzo and Leo(and any other team members) should earn the right to never have to work on anything they don’t want to. But the current 20% level is much higher than almost all SNSs before them and gives an unbounded stake of something that could become a significant portion of IC itself. This team allocation can be moved to the treasury where they will have significant access to fund almost any work for the DAO that they want to do and that has existing restrictions on it via the NNS(in withdraw limits).

2. If the team does take a team share, the vesting period should be staggered over 5 years, not 1. One year is over in the blink of an eye and if they want an unbounded upside it should require significant dedication. I’m not a fan of the SNS setup for team stakes because there is no way to recover them if the person disappears from the project. It makes much more sense to actively manage any vestings from the DAO itself with the ability to recall for abandonment or other misaligned behavior.

The web team has extended lock up to over three years. I still think there is a better way to do this with snss, but they are using the tools they have

3. The DAO should be capped at a maximum number of nICP. I’m not sure we want to encourage the unbounded collection of voting power by any one DAO. It seems like a bad practice. This number can be high so that the DAO has significant returns and budget. A number like 1% of ICP would give something like $24,000,000 in return to the WTN members from nICP holders at a 5% return on 6 month neurons at $10 ICP. If ICP goes to $100 the numbers start to get crazy. The treasury will have 10% of that return to spend on development and rewarding contributors(up to 30% of that if the team allocation is reduced).

4. The DAO needs to be much more explicit about the long-term value that it will provide to the general IC community. This is a ton of power to give a DAO. Enzo and Leo have a ton to give the DAO as long-time contributors to the IC. I’d really like to see a specific plan of how they’ll contribute to replica safety and how they will expand that vision with the returns the DAO receives.

The team has already built some replica verification tools and has indicated that they plan to build more. As significant constrictors to the IC I think it is rational to extend them the benefit of the doubt on this and look forward to seeing more plan. I would still love to see concrete plans for what the returns on the treasury WTN will be used for or if it will be be committed to stay in the treasury for a certain amount of time

5. Remove the Neuron Fund request unless the team allocation is moved to a very low number. The Neuron Fund is just handing a bunch of value to the founders in this current set up with only a 1 year vesting and code that will run on its own once deployed. I know of two other groups looking at launching the same concept with a near-zero team allocation and it doesn’t make sense for the NF to give away that much value for this particular algorithmic concept.

6. We still need to really understand what effect liquid staking(riskless staking) is going to have on the IC. I’ve created a thread("Dark Matter" or "Do you know where your ICP Bag's value is going?") for that issue(along with transferable neurons and bribes). If someone comes along and offers WTN a significant return for buying it’s votes, does a faceless, anon DAO have the moral willpower to turn that down? I’m not sure we know the answer to that and if we are going to experiment, we should probably have some caps on things.

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Water Neuron could be an amazing utility for the IC if it is set up correctly. I want Enzo and Leo to be crazy-successful AND for it to benefit from the IC. I do not think it would be difficult to come into alignment with these things and launch a seriously interesting experiment on the IC.

If the WTN team disagrees with any of these I’ll be happy to be convinced otherwise and I think a public debate about them would actually be really constructive for teams that come after them.

Edit: fixed name.
Edit 2: added link to update post.
Edit 3: strike through on 2,4

[0rions]

Thank you for sharing your thoughts on my previous comments. I’d like to address your points systematically and factually:

1. Team Allocation

Comparing team allocation percentages with other projects:

• ICPSwap: 26% Team allocation / 26% Swap
• OpenChat: 23% Team allocation / 25.1% Swap
• HotOrNot: 25.75% Team Allocation / 33% Swap
• Neutrinite: 20% Team Allocation / 30% Swap
• Sonic: 20.5% Team Allocation / 21% Swap

WaterNeuron: 19.3% Team Allocation / 24.7% Swap
With the large amount of ICP deposited in those swap teams control a much larger portion of ICP. Contrary to what you pointed out, WaterNeuron’s team allocation of 19.3% is slightly lower compared to other projects. This aligns with industry norms and is on the conservative side. This fact could support the argument that the allocation is reasonable and perhaps even modest.

2. Locking Period

While a 5-year vesting period may seem extensive, some industry examples show a range of vesting periods. If DFINITY seeds vest over 4 years, a 3-year vesting period for WaterNeuron could be a reasonable compromise. Lengthier vesting periods often aim to ensure long-term commitment and alignment with the project’s success.

3. Rewards Distribution

Regarding the reward distribution and the calculations, the example given:

“At 1% of the supply, with 1 swap there will be 47,863 ICP distributed every year.”

If there is any misunderstanding in calculations, the provided spreadsheet should clarify it. Ensuring clarity in reward mechanisms is crucial for stakeholder confidence.

4. Identifying Key Stakeholders

The mention of “Max” seems to be a misunderstanding. If it was meant to reference someone not relevant, correcting such details is important for accuracy.

5. Inclusion in Neuron Fund

Decisions regarding the Neuron Fund should indeed follow the set rules, and discussions about fund contributions need to adhere to these guidelines:

DFINITY’s voting on upcoming SNS launch proposals [DFINITY's voting on upcoming SNS launch proposals].

Understanding the contribution limits and the rationale behind previous funding decisions can provide context for current proposals. Comparing WaterNeuron’s hard cap of 70k ICP with other funded projects shows a relatively conservative approach.

6. Understanding Liquid Staking

Liquid staking is a complex yet crucial concept. Continuous learning and understanding these mechanisms will enhance discussions and decisions. If further clarification is needed, there are numerous resources available for detailed study.

Conclusion

While the feedback was direct, it’s important to ensure the conversation remains constructive and fact-based. Addressing potential misunderstandings and providing clear, logical responses can help in maintaining a healthy discourse around the project’s development and its potential impact.

Your engagement and critique, even if perceived as critical, can drive improvements and clarity. Ensuring accuracy and mutual understanding should be the goal of such discussions. If there are further specific points or clarifications needed, a detailed and objective analysis would be beneficial for all stakeholders involved.

[Henry_Suso]

"Dark Matter" or "Do you know where your ICP Bag's value is going?"

The issue at hand (from my view) with the upcoming WN sns is there is no “liquid” in liquid staking. Two ICRC tokens will be introduced without listings on ecosystem defi system and there’s no plan for team to allocate ICP for pairs of WTN or nICP. This is imo a fatal mistake. Arrangements should be in place for these canisters (wtn and nICP) to be “ready to rumble” for users whom wish to partake in this sort if staking arrangement. Why should a user commit 1000 Icp to a neuron via an sns to re…

[senior.joinu]

Hey @0rions,
Hope you’re doing great!

I agree with @skilesare’s recommendation to reject the proposal, unless more long-term clearly-communicated value is introduced or unless the team’s share is cut significantly.

What is the roadmap of this project? In any vesting scenario (1 year, 4 years, 15 years - whatever) what will the team do during these years? What happens after that?

---

Also, off-topic, but… did you just use ChatGPT to generate this reply? The structure, the language used and the “urge for summarization” made me think this way. If yes, why?

[skilesare]

@0rions

Comparing team allocation percentages with other projects:

• ICPSwap: 26% Team allocation / 26% Swap
• OpenChat: 23% Team allocation / 25.1% Swap
• HotOrNot: 25.75% Team Allocation / 33% Swap
• Neutrinite: 20% Team Allocation / 30% Swap
• Sonic: 20.5% Team Allocation / 21% Swap

Thanks for the data. My understanding came from some discussions after there was significant blow back from the early SNS allocation and I had understood that the allocations had come dow to around 15 as a standard. Looks like some of the more recent ones have started climbing back up.

The point remains that it is a large allocation for a perpetual motion machine(even an incredibly valuable one). Many of those have significant commitments for future developments. Some(the dexes) I’d argue are in the same boat as this where they are ultimately “turn on and let run” utilities. I’m just one small vote so the general community may feel differently, and like I said, I’m happy for folks to get externally rich for delivering value, but uncapped on something that could attract a massive amount(and even replace the nns dash as the primary place to stake) seems to create a long term imbalance in the future universes where you are successful.

@0rions

While a 5-year vesting period may seem extensive, some industry examples show a range of vesting periods. If DFINITY seeds vest over 4 years, a 3-year vesting period for WaterNeuron could be a reasonable compromise. Lengthier vesting periods often aim to ensure long-term commitment and alignment with the project’s success.

Seems reasonable. Just speaking from my own experiences where I’ve been in the negative end of five year vestings, and even still I can see the benefit of long term holdbacks for incentive alignment. I still think the treasury and dao should handle these, perhaps with some kind of smart contract that protects both dao and founders.

@0rions

The mention of “Max” seems to be a misunderstanding. If it was meant to reference someone not relevant, correcting such details is important for accuracy

This was a strange typo since I had Enzo mentioned later. Fixed and sorry about that.

@0rions

Decisions regarding the Neuron Fund should indeed follow the set rules, and discussions about fund contributions need to adhere to these guidelines:

Those are the base rules. The NNS still gets to make a judgement call. Because of the base mechanism that you guys are employing thru seems like gifting 20% of the fund input to founders. If you guys can convince the NNS that that gift is worth it, go for it. I think it’s high. Maybe every contribution has been higher.( I wouldn’t give the neuron find great scores for quality investments at this point).

Regarding the misunderstanding in payouts, I may have miscommunicated or misunderstood . I’ll try to work off your sheet and demonstrate what I mean and revert. The moral of the story was that even with 1% of the IC total supply ending up in nICP you guys do super well and that considering a cap could make the whole thing a bit more aligned. Maybe it’s 2 or 3z at some point it becomes the WTN network if unbounded and I think that is a situation to plan for and avoid.

Let me try to get to a computer tonight and work on the payouts for that. Basically the view would be here:here is what the team will make per ICP staked an nICP going from 0 to 51% of ICP supply.

[Henry_Suso]

I don’t think they wanted help

[skilesare]

I’m not sure what is going on with Taler, but if anyone is going to build some of these DeFi experiments it is likely these guys who’ve been building the IC for a number of years. I think we need to voice concerns and then let them answer. Every question I’ve asked has at least had a well thought out answer(even if I ultimately disagree…and we’ll have plenty of disagreements in a decentralized error…that is good, expected, and how we innovate).

[wpb]

@skilesare

I think we need to voice concerns and then let them answer. Every question I’ve asked has at least had a well thought out answer(even if I ultimately disagree…and we’ll have plenty of disagreements in a decentralized error…that is good, expected, and how we innovate).

I agree. I had a similar experience as you when I first responded to the WaterNeuron announcement on the forum, joined the WaterNeuron community on Telegram, and participated in their first 4 hours Twitter live session. They certainly have the skills to pull off this project and have given deep consideration to all concerns that I raised. They were even willing to listen to the community on several design decision for WaterNeuron (e.g. following the SNS vote instead of automatic no votes on all NNS proposals). Their ability to review a technical proposal under pressure of an audience was impressive and I appreciate their intention of development of tools that can help automate some of the technical code reviews for the community. I don’t think they are going to use the NNS neurons as a way to simply drain voting rewards from the NNS…instead I think they will likely make beneficial contributions to NNS governance on technical topics. However, those contributions are not as concrete as I’d prefer to see at this point. Hence, your point number 4 resonates with me. I’d like to see more explicit definition of the long-term value that WaterNeuron can provide to the ICP ecosystem, especially since WaterNeuron has the potential to harness a ton of voting power if they are successful, which I think is a realistic probability.

@skilesare

4. The DAO needs to be much more explicit about the long-term value that it will provide to the general IC community. This is a ton of power to give a DAO. Enzo and Leo have a ton to give the DAO as long-time contributors to the IC. I’d really like to see a specific plan of how they’ll contribute to replica safety and how they will expand that vision with the returns the DAO receives.

[dx111]

I also think that the team allocation should be less, focusing on the long-term value of this project. This project will be as successful as stETH. It is very difficult to directly participate in eth pos, but through stETH, participation becomes very easy. WaterNeuron should attract more people to participate in sns and produce more benefits for icp defi.

[skilesare]

A couple of notes while I have a second. Had some great back and forth with Leo from the WTN team.

There is a tough dichotomy in this SNS stuff where you have a project that is trying to launch a platform that they have poured a good bit of time, energy, and money into. Every one puts their best foot forward and wants to appear like an invincible force with guaranteed success. But often you are just trying to will something into the world. Then you make one of these proposals and everyone starts judging your project as if you are possibly one of the most morally corrupt people in the world and/or about to achieve success beyond your wildest imagination. Such is the place you put yourself in with one of these things and there is a lot unfair about it and yet it is the “job” of the NNS to vet the thing appropriately and consider all the edge cases. That is a really tough equation and it puts the people we most want to incentivize (devs) on the opposite side of the table as the vetting group(the community.) As a participant on both sides of the table, this dynamic really sucks. I’m not quite sure what to do about it, but async communication and winner take all twitter slap fights don’t help the situation. I often feel I have to constantly apologize for just saying words. How do we get everyone on the same side of the table? Hopefully SNS soft launch and migratory pathways that are on the roadmap will help.

In case it isn’t clear, I’m rooting for this to be a successful project and think that with a couple tweeks it can be very well positioned to give us some interesting info on how this coin governance thing is going to pan out. My arguments are from an assumption that WTN will be wildly successful to the extent that they become the dominant staking platform on the IC and most of my concerns stem from that extreme.

To be fair to WTN, we are a long way from that and the NNS will enable them to make adjustments along the way if a major issue arises.

Leo has convinced me that it may not be paramount to solve all the issues now and that the upside from building a strong governance DAO is a critical need now.

If the protocol needs to be capped later, it can be. On the other hand, if a cap exists than it can be removed later. My current thought is that the second is a safer approach and not much of a cost to the project at this time.

If the amount of possible VP the water neuron can control were say capped at 2% in the smart contract and it would take an NNS vote to change it, I think a healthy team allocation and NF involvement is much more justifiable.(we already have a motion proposal to reevaluate everything if canister control gets to more than 10% of vp, so this leaves room for a few other experiments and creates a nice sand box for observation.) I need to run the numbers, but I’m pretty sure that at 2% VP the founders, the dao and most everyone will be pretty damn happy about how things turned out.

Another advantage of this is that if WTN is able to get to 2% we will have a ton more data about how it is being used and what the effects on decentralization are and to get a lens on the existential problems that may exist with risk-less staking.

I’m not sure what or if the team will do anything along those lines, but it was a good conversation and the team really knows its stuff and product.

In summary, a cap would help alleviate my concerns 1,3 and 5 and give us time and space to explore 6.

With issue 3 they’ve suggested maybe 3 years which is better than 1.

That leave 2 which is the value question and the team certainly has the chops to handle that and will have a three year incentive alignment set up. More detail on how that will work and what the exact contribution would be welcome and also if the returns from the treasury WTN will be used for those purposes(Could the DAO fund code audits of other projects or replica validation software or canister penetration testing frameworks, etc)

I really appreciate the time taken to talk to me about it.

[0rions]

Hey @skilesare, thanks for updating everyone on our discussions.

Increasing the vesting schedule makes sense, that’s why it’s now configured for up to 3 years to make sure we’re aligned.

Now regarding the cap, this protocol has an implied cap. As the protocol grows the yield you get will tend to be slightly below what the NNS offers.

You can find the spreadsheet here and play with it by yourself: nICP - Google Sheets

Regarding future work, we already have a replica build tool verifier ready to be deployed. This is the first time such a tool has been built by community members. We also have a lot of ideas to develop and test, but first, we need to make this work.

Do not anticipate trouble, or worry about what may never happen.
Keep in the sunlight.

Thanks for your interest afat!

[skilesare]

@0rions

Now regarding the cap, this protocol has an implied cap. As the protocol grows the yield you get will tend to be slightly below what the NNS offers.

I’d be 100% on board with an algorithmic cap that tapered out the returns. That would be a natural way for the platform to self reg via the market.

The issue with this chart is that the bottom is 7.42 and the current rate for a 6m is 7.5.

There are a large number of universes where .08 percent + instant liquidity if a free option and no rational actor would choose traditional staking. If we find our selves in one of those, nICP could grow unbounded.

There are also a large number of universes where retail piles into Mother and 7.42 and 7.5 are irrelevant.

Cannot go to 0? Or at a tipping point could it accelerate to 0? This would cause a natural mint/burn cycle even in those universes where the free option is worth it at a 5% discount. And it takes the decisions out of human hands which could be good for keeping the meddlesome token architects out of future discussions.