Over the past few weeks, the Keep and NuCypher communities have developed six token designs to integrate with a new network currently called KEANU to deploy tBTC v2 and continue work on threshold cryptography. If you’re unfamiliar with the merge guidelines, the short version is that the temporary name is KEANU. The merge combines the existing protocols’ products, staking networks, development efforts, and community. NuCypher and Keep will not disappear as staking networks, and participating in KEANU should be optional.
For more details on the network merge, I recommend checking out this previous article. Learn more about the token designs by reading below.
The two teams are initiating a new network but did not include a token proposal for the new network. They have been hands-off in this situation. In this article, I’ll give a short overview of the six token proposals around the forums and a brief of good information for delegators to know going into further negotiations with the new network.
All of the proposals are centered around allowing both NuCypher and Keep token holders to have a 50/50 stake in the network. Initially, this new network was originally set aside to be an opt-in process.
The two primary goals include (a) having a significant token supply to be live when it would first start trading and (b) rapid distribution owed to KEEP and NU holders.
The proposed token is inflationary and with 100M T1 tokens distributed in the first year in three phases.
- Phase one: an initial distribution – 50M allocated to KEEP and NU holders, via staking and Merkle roots.
- Phase two: a market launch, when tBTC v2 will be ready to launch – 20M sold via a tBTC raise to the DAO treasury.
- Phase three: where 30M rewards start being distributed in both tBTC and T1.
The proposal doesn’t have details for NuCypher, suggesting that NU token holders should participate. But the general idea is that users would have 45 days to stake their tokens in this staking contract before staking weight starts accruing. Those that begin staking their tokens within the first 45 days will receive an additional allocation of stake weight equivalent to half of the staking weight to accrue to staking contract stakers during the year.
This proposal’s design goals are centered around active rewards capital and support for a tBTC v2 launch.
The initial supply will be 2M tokens, and the distribution is designed to reward those who have been staking on Keanu since its initial launch. The proposal sets aside a few key distribution features:
- 75% to existing token holders (this percentage is split 50/50 between Keep and NuCypher token holders).
- 12.5% stakedrop for the first six months. Anyone who stakes TBTC V2 would qualify to receive stakedrop tokens. This is to incentivize people to start staking on the network quickly
- 7.5% to stakers based on time staked in the existing networks x amount staked. This is based on the amount and time staked on the networks to get tokens into the hands of active network users and create incentives to remain staked in existing networks.
The proposal also suggests that there will be a 2% annual issuance and sets aside funding for DAO governance and the community pool.
The main goal of this proposal is to merge the two previous proposals while providing a simple token design and bootstrap tBTC v2. The authors of this proposal made it clear that stakers can opt out and not receive the new token. Anyone can keep their founding token.
A few key distribution details include 500M tokens that will be minted at launch, with a plan to distribute tokens via stakedrop and through a token sale. The stake drop will last 18 months. During the first few months, NU and KEEP can be staked and receive T3. After 90 days, this mechanism will wind down, and the T token will be the only token that can be staked to receive T rewards.
- 45% (225 Million) dropped to current KEEP and NU holders.
- 5% (25 Million) dropped to past stakers in both networks.
- 15% of the tokens will be sold. This is to generate liquidity and incentivizing new investors.
- 50% of the total supply goes to bootstrapping tBTCv2 through the treasury. 20% of the amount allocated to the treasury will be locked for future projects, mergers, and bootstrapping. It will gradually unlock over the next five years.
T3 is a work token meant to be a work token and held for governance. All owners for KEEP and NU can claim their allocation. People can acquire T3 by exchanging tBTC. T3 will also be used for staking rewards, LP’s and the Coverage Pool. Eventually, the weight of Keep and NU in rewards will decrease, and the weight of active participation for T will increase.
The goal of proposal 4 is to combine aspects for the first three proposals into one, with special attention paid to converting stakedrops into a WorkLock 2.0 and preventing a “zombie” Keep or NuCypher, where activity on the other two networks would move to KEaNU and abandon the older networks.
The author wants to switch from stakedrops to a WorkLock 2.0 because WorkLock 2.0 carries name recognition and emphases how to escrow collateral and run a node to earn T4. Token holders would escrow their NU or Keep to run tBTC v2 node and earn T4. WorkLock 2.0 should allocate more T4 to stakers with longer lock durations.
Participants would receive T4, or the NU inflation subsidy that they would have received is escrowed on-chain. Those who chose not to participate will not receive T4 tokens, but node operators are still required to run tBTC v2, incentivizing node operators to join in WorkLock 2.0.
Should the proposal fail, those who have staked NU in WorkLock 2.0 will be able to get all of it returned to them.
T5 is a short proposal that provides an alternative to a token sale. It also aims to distribute most tokens to stakers through farming and achieve a larger token float at launch. Immediately after the tBTC v2 launch, a week-long concentrated farming period will start, during which 15% of all supply will be distributed to parties that provide liquidity for TBTC.
After that has concluded, farming rewards are unlocked, and 10% of the supply will be airdropped to current KEEP/NU holders. The rest of the tokens will be distributed as follows:
- 10% treasury
- 10% liquidity incentives
- 55% for KEEP/NU/T stakers. The staking power of NU/KEEP will keep decreasing while the power of T5 stakers will gradually increase.
This proposal aims to provide a simplistic approach to token design. The authors also write that, unlike the previous proposal, this does not include any details or suggestions on how the KEaNU’s governance DAO will work.
First, the proposal suggests an initial supply of 2B tokens, 45% available to existing NU token holders and 45% available to current KEEP token holders, with 10% allocated to the Keanu DAO.
This supply of tokens is fixed, just like Keep’s token supply. NuCypher’s distribution is on an issuance schedule, meaning that the NU number will continue to increase, theoretically past the amount of Keep and T6. Therefore, to keep an equal distribution.
- NU and KEEP tokens will continue to live on and be tradeable on centralized and decentralized exchanges.
There are several approaches to building a mechanism for token launching:
- WorkLock 2.0
- Over 90 days in July, any NU or KEEP holder can lock their tokens for four years for the right to receive T6 tokens at the price of $0.001
- When Keanu launches, people will receive T6, and all T6 will be locked for three months.
- After 90 days, NU and KEEP tokens will be exchangeable directly for T6. There will be a simple swap through an LP that will hold any T6 tokens that have been allocated to KEEP/NU holders.
- T6 CDP
- The lending protocol will be deployed that would enable NU or KEEP tokens to wrap all collater and borrow T6 tokens against that collateral.
- Anyone holding NU or KEEP can wrap that asset.
The inflationary design model is supposed to be similar to eth2. The rate of inflationary rewards decreases slowly as the staking rate increases. The exact curve is to be decided.
There are an infinite number of ways to approach launching a token on a new network, especially since this merge has never happened before in the Web 3 space (to my knowledge). By the way, in which the teams introduced this new network, there doesn’t have to be a new token for the network at all.
These are all community introduced proposals, encouraged and supported by the teams. That being said, there are two ways to approach token models for a situation like this.
Either establish parameters where NU and Keep can be staked and in return, receive T token with a secure and defined way for NU and Keep holders to receive their original token back in case the network is unsuccessful. Thus protecting original token holders from potential failure.
Or suspend inflation of NU and KEEP (therefore making them a fixed token) and lock NU and Keep tokens for a longer period of time. By suspending inflation, this will put both networks on an even playing field. For example, if NU kept its inflation rate, there will one day be more NU than KEEP, thus giving NU holders the ability to have a larger share of the new network.
In order to ensure a fair distribution of the new network’s token, both networks will need to suspend inflation before the network has launched to ensure a 1 KEEP = 1 NU split.
We can’t speculate on the price of the new token, and there are lots to consider about NU and KEEP, and the direction of KEANU.