Summary
The objective of this proposal is to define the initial list of assets that will be listed on the Mars Neutron Outpost, as well as their respective risk parameters.
Specification
We propose to initially list the following assets:
- ATOM
- axlUSDC
- NTRN
Currently these are the only assets with any meaningful liquidity on Neutron. As liquidity conditions naturally evolve new proposals can be made to incorporate additional assets to the Red Bank.
The following are the proposed risk parameters and oracle implementations proposed for these assets:
All of the above assets should be borrowable and available to be used as collateral.
- Please notice that the proposed oracle implementation for axlUSDC uses the price of the underlying asset, rather than the bridged asset. This is important given that, if anything were to happen to the bridge (such as a loss of assets), Mars would effectively be unaware of it and would still be pricing the bridged asset as the underlying, opening the protocol to potential losses. This is a known but important risk. As such, we think the current implementation should be considered an interim one, as a more robust implementation that incorporates bridge proof of reserves is adopted.
** Given the nascency of NTRN as an asset, the market risk methodology provided by the Mars Risk Framework couldn’t be applied to the asset. Thus, the Maximum LTV and Liquidation LTV parameters are set in a conservative manner, taking the Max. LTV cap that the framework recommends for the lowest tier of assets.
Additionally for NTRN, which is the only asset not currently listed on the Red Bank, a further analysis of several risks associated with listing it is presented below.
NTRN Risks
In the following sections, we assess the technical, centralization and oracle risks associated with listing NTRN based on the Mars Risk Framework.
Technical Risk:
| Metric | Requirements | Axelar Network |
|---|---|---|
| Time Since Launch | - | Neutron launched on May 10th, 2023. |
| Custom Public Audit | Ideal | Neutron was audited by Oak Security and Informal Systems. The audits can be found here. |
| Recent Audit | Ideal | Both audits were performed within the past 12 months. |
| No Critical Vulnerabilities | Ideal | No critical vulnerabilities have been exploited. |
| Bug Bounty Program | Not met | Neutron doesn’t have an active bug bounty yet but is planning to launch one with ImmuneFi. |
Centralization Risk:
| Metric | Requirements | Axelar Network |
|---|---|---|
| Admin/Owner Decentralization | Ideal | NTRN token is the native token of the Neutron blockchain. State machine logics related to NTRN token can only be changed via a chain upgrade or a hardfork. Chain upgrades refer to pre-scheduled changes in the Neutron software, which are determined by Neutron DAO governance. Hardforks refer to unscheduled changes in the software directly carried out by validators, bypassing governance. It is typically used in case time-sensitive vulnerabilities are discovered. It may also happen if malicious validators control a large portion of the chain’s consensus voting power. |
| Other permissioned addresses | Ideal | There’s a Security subDAO managed by a multisig composed of members of the team and other reputable members from the Cosmos ecosystem. This multisig has limited capabilities and can only execute pause() methods on a series of specific contracts: Other subDAOs, the Reserve contract and the Distribution contract. |
Oracle Risk:
A 30 minute geometric mean TWAP taken from the Astroport NTRN/ATOM pool, coupled with the Pyth ATOM feed are proposed as the price source for NTRN.
Oracle manipulation attacks have been among the most common vulnerabilities used by attackers to exploit lending protocols. These attacks broadly consist of 2 steps: 1) Manipulating the price feed used by the protocol (either artificially increasing or decreasing the price of the asset); and 2) Exploiting that artificial price to borrow more assets than the collateral deposited in the protocol would have allowed under normal circumstances.
These attacks have been relatively common and can expose the protocol to systemic risk. Having said that, we believe they are mitigated by:
- There’s currently ~9.8M in liquidity in the NTRN/ATOM pool on Astroport, from where the price of NTRN will be retrieved. We believe this level of liquidity, coupled with the proposed LTV, offers a sufficient level of manipulation resistance for the feed. For instance, a 30 block (~3 minutes, conservative) upwards price manipulation attack, without any arbitrage (very conservative as it makes the attack cheaper) would require a minimum of ~480M USD worth of ATOM to perform profitably. Additionally, it would require that the attacker holds NTRN as collateral in excess of the proposed deposit cap.
- The deposit cap both reduces the size of a potential attack (both from upwards and downwards price manipulation attacks) and mitigates an attacker being able to amass a significant synthetic NTRN position by looping the asset multiple times.
For the above reasons, we believe the proposed oracle implementation for NTRN is robust.
Implementation
This is a signaling proposal, not an executable proposal.
The Mars smart contracts on the Neutron chain will be initially controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary parameter change.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Delphi Labs Ltd., a British Virgin Islands limited company. Delphi Labs engages in incubation, investment, research and development relevant to multiple ecosystems and protocols, including the Mars Protocol. Delphi Labs and certain of its service providers and equity holders own MARS tokens and have financial interests related to this proposal. Additionally, Delphi Labs is one of several entities associated with one another under the “Delphi Digital” brand. Delphi Digital’s associated entities and/or equityholders or service providers of such entities may hold MARS and may have financial interests related to this proposal. All such entities, service providers, equity holders and other related persons may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Osmosis/OSMO. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Delphi Labs may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Delphi Labs is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Delphi Labs shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.