Codename KEANU: The first-ever decentralized, on-chain network hard merge between Keep and NuCypher

More I am reading chats more I think a word “merge” is misleading, in traditional sense where a new merged unit of ownership replaces the old constituents. As somebody mentioned JV is a better analogy. Especially because KEANU is an optionality for NU owners. Keanu DAO can go ahead but there is not a majority enforcement to exchange unit of ownership as it would happen in a traditional merger. Please correct me if I am wrong, but Nucypher use case only expands with the KEANU? If this is correct than KEANU is a free call option for both “JV” networks. And each single “JV” network still has its own existence. You would still be earning inflationary and non inflationary fees (eth) if you do not opt-in. Correct?

Reading recent Justin Myles Holmes primer and it answers what I was wondering/asking above.

You would not receive fees paid to apps running on Keanu (e.g. tBTC), but for apps that still run directly on NuCypher you would.

KEANU is a great name, and NUKE is way too negative. As long as the ratio of market cap and circulating supply for NU is not impacted by this “hard merge” then I am all for it.

I can’t say I fully understand what’s going on here, but as long as there aren’t any negatives then I don’t see why it is a bad idea.

Am I missing something?

I’d encourage everyone here to join our community call tomorrow (Monday, March 15) at noon Eastern US time: https://twitter.com/NuCypher/status/1370428551057526785?s=20

I’m all in on the spoon.
Just lmk when to update ursula

I wrote a blog post outlining some of my thoughts on the matter. It was largely prompted by discussions on the NuCypher subreddit (/r/nucypher), but is generally applicable to the topic and may be useful here as well:

http://justinholmes.com/nucypher/some-thoughts-on-the-keep-deal.html

I have no reason to minimize the fact that engineers from both teams clearly think this is a big opportunity for them collaborate and (in effect) multiply their efforts and output, which is great. If this also fast tracks NU node operators towards earning fees on the network, then let’s do the merge.

Hopefully the next app that’s added isn’t such an involved process.

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By adding a KEaNU token which will have basically the same audience of the NU token, don’t we risk to deflate it? I mean, don’t we expect that the typical NU investor will divert some money from NU to KEaNU or even KEEP, in order to invest in the new “NUCypher powered”tokens?
Considering also the massive NU tokens release will take place on mid April, it’s hard for me to figure out the possible outcome in terms of price.

Thanks to everyone from both communities who has contributed their thoughts, feedback, and ideas so far!

It’s been exciting to see the community pick out the weak points in the original proposal and iterate on new amendments and improvements. Those efforts increase the likelihood that the final proposal ends up being maximally equitable and positioned for success, so please continue to do so. :slight_smile:

A community member shared the below improvement with me earlier, which addresses one of the controversial parts of the original proposal: the differential dilution experienced by non-staking NU holders relative to non-staking KEEP holders.

Proposed design:

  • Keanu DAO decides whether to create a new token, which would be emitted as inflation rewards and/or other incentivizes.

  • NuCypher DAO and Keep DAO escrow their future NU and KEEP emissions in Keanu (perhaps retaining some amount for a graceful winddown of emissions on each side).

  • For every new token that Keanu mints, a proportional percentage of NU and KEEP would be burned from escrow until the NU and KEEP escrowed supplies are exhausted.

  • Both NU and KEEP communities have the ability to “rage quit” and take back their remaining emissions from escrow at any time.

This approach means that non-staking NU and KEEP holders are diluted at the same rate (via emissions in the new token). An inflation subsidy for NU stakers is preserved through the new token.

Very interested to hear what everyone thinks about this potential improvement!

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Thank you for the proposal. But why would a NU staker agree with that if the original proposal suggests NU token rewards and Keanu rewards for a NU staker simultaneously. And as we have concluded a number of times, NU by its design is a work token. With the above proposal we would discourage staking and consequently encourage NU speculating. Another issue is if myself as a staker, do not want to opt in Keanu - I think original proposal allows optionality. What would happen then?

Slightly beyond the discussion about this specific proposal I can identify a continuous struggle of a (minor in my opinion) non staking part of the community. Yes, good proposals could come from unexpected sources and angles, but if the main discussion is always how to “protect” the part of community that doesn’t have an infrastructure capital at risk ( as SAFT investor in our case for many years), then we are really not progressing from the postulates the team and the supporters built since inception. Speculators should stake as it was intended by design and as a benefit also speculate on price.

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Thanks for the thoughtful response, @Boldrik10!

But why would a NU staker agree with that if the original proposal suggests NU token rewards and Keanu rewards for a NU staker simultaneously.

There is a concern among some passive holders that, in the original proposal, there is an overwhelming incentive to swap NU for KEEP to avoid dilution. If that line of thought is extended to its extreme conclusion, then the NU inflation subsidy received by Stakers would be significantly devalued.

The goal of this design is to maintain the value of the existing revenue stream by moving it to the new token, while retaining the ability for NU stakers to rage quit and take back their inflation pool if Keanu does not pan out.

With the above proposal we would discourage staking and consequently encourage NU speculating.

There would still be an incentive to stake, since emissions would continue in the new token. So passive holders are still diluted, but it’s equitably across NU and KEEP holders.

Another issue is if myself as a staker, do not want to opt in Keanu - I think original proposal allows optionality. What would happen then?

I think this is a valid concern. One possible solution might be found in Keep’s existing app authorization model. Keep stakers are able to opt-in to providing different services: threshold ecdsa, the random beacon, and tBTC. I think it would be possible to extend this to PRE. The DAO would then specify the amount of emissions that are directed to subsidizing each of these services.

if the main discussion is always how to “protect” the part of community that doesn’t have an infrastructure capital at risk

The goal of this design is not purely to “protect” a passive part of the community, but to ensure similar groups are treated equitably between networks. Not just for reasons of fairness, but also to prevent weird distortions between the two assets that may impair the success of the network in the long-run.

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Thank you maclane!

[quote=“maclane, post:34, topic:159”]
There is a concern among some passive holders that, in the original proposal, there is an overwhelming incentive to swap NU for KEEP to avoid dilution. If that line of thought is extended to its extreme conclusion, then the NU inflation subsidy received by Stakers would be significantly devalued.[/quote]

Yes, correctly - in extreme. But I think we would be trying to rectify the potential of an “extreme”by changing the main building block of a Nucypher. I think escrowing the issuances is realistically irreversible, no matter the potential mechanics build in. We would use a “Nuke” - escrow :wink: to kill a fly (devaluation)

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If we look at the convergence of KEEP/NU prices since the original proposal was shared, there’s some evidence that this trade is already happening. So I’m not sure the concern is entirely speculative.

I think escrowing the issuances is realistically irreversible, no matter the potential mechanics build in.

It’s worth exploring the potential scenarios where NU Stakers are worse off in Keanu but for some reason decline to rage quit. It’s not obvious to me why that would happen. Can you expand a bit on your concern there?

It should become clear relatively quickly whether tBTC v2 is gaining traction in the market, so if reversibility is a concern, perhaps the NuCypher DAO could tranche the escrows based on time or milestones.

If the merger takes place and ends up failing, what will happen to people’s KEaNU tokens? Will they be transferred into a NU/KEEP Token? Also, if the merger happens, what’s the point of keeping either NU or KEEP around?

If the merger takes place and ends up failing, what will happen to people’s KEaNU tokens? Will they be transferred into a NU/KEEP Token?

Since the new token’s utility would be to stake in KEaNU, I’d assume it would be worthless if the network fails. Perhaps NuCypher or Keep would want to grant the new token staking functionality in their own networks for community retention or other purposes. But most likely it would just trend to zero.

Also, if the merger happens, what’s the point of keeping either NU or KEEP around?

Both NU and KEEP would be stake-able in KEaNU, along with any potential new token.

Thanks. Sorry if I wasted your time with stupid questions. I’m sure you answered those during the conference, I’m just still trying to wrap my head around all this. I’m an air traffic controller, not very tech-y. @maclane

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No problem at all, thanks for being interested.

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Milestones could be a solution about escrow. Why I am saying irreversible- because I have learned through life that in any large decision there are unintended consequences we simply cannot model. We haven’t yet have the opportunity to experience what a Nucypher is because Nucypher just started to exist last October (though we believed in Nucypher much earlier on). It is a newborn baby but we are already treating her with aesthetic face surgery :)- sorry for inadequate symbolism. That’s why initial proposal, where both staking activities happen simultaneously- giving a call option to NU stakers, simply gives a peace of mind to me (will try to comment on price action later). DAO can change escrow later when we experience what Keanu is, but it would be very courageous to do it now. For me personally, I would be prepared to ride out existing arbitrage ( NU down, Keep up) for some time just to see how Keanu will fare.

I know my explanation about the newborn is not entirely analytical and apologies for that.

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Could you elaborate more please how would an inflation subsidy be preserved in case of a NU staker?