[MRC-42] Neutron Outpost - Reserve Factor Rectification


Previously, on MRC-31, governance voted to set the initial reserve factor (RF) for all markets on Neutron at 20%. However, a mistake was made at implementation and the RF for those markets was set at 10%.

The objective of this proposal is to communicate the mistake and vote for a final RF for the current markets on Neutron.


As a reminder, the RF defines the percentage of all interest payments that accrue to the protocol. For instance, a 20% RF determines that 20% of all interest payments within a given market ultimately flow to the protocol (and the remaining 80% to depositors). The funds collected through the reserve factor, in turn, flow to 2 buckets:

  • Mars Hub: 50% of the RF funds flow to stakers on Mars Hub in the form of MARS.
  • Safety Fund: 50% of funds collected via the RF flow to the Safety Fund in the form of USDC.

Ultimately, the RF should be set in a sensible manner to achieve the right balance between protocol efficiency and revenue generation. If the RF is set too high, depositors won’t be compensated enough for the risk they’re taking and protocol growth will likely suffer. On the other hand, if the RF is set too low, the protocol wouldn’t be accruing the value it deserved for the services offered.

Given the nascency of the Neutron outpost, we believe that a lower RF is the right choice at the moment. Rather than optimizing for protocol revenue, we believe that incentivizing growth should be the priority. All else equal, a lower RF will incentivize deposits, which can in turn lead to better borrowing terms and, ultimately, more organic usage of the protocol.

In this sense, we propose to leave the RF at 10% for the current markets: NTRN, ATOM and axlUSDC.


If this proposal passes, no changes will be made since the RF is already at 10%. If this proposal doesn’t pass, the builders will utilize their multisig to change the RF back to 20%, as voted on MRC-31.


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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.