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What is Neuron Fund and Why Does it Matter?

by Neuron FundSeptember 3rd, 2021

Too Long; Didn't Read

Neuron Fund is an investment management company working in crypto financial markets and dedicated to delivering attractive risk-adjusted performance. NEUR token, option pools in DeFi.

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What is Neuron Fund?

DeFi (Decentralized Finance) opens opportunities for awesome returns on crypto investments. There are many parts of DeFi, including lending platforms, liquidity protocols, stock synthetics, automated market makers, and more. Yield aggregators are another option in the Decentralized Financial space.

Unfortunately, such opportunities are distributed over different chains and projects, their reliability is sometimes questionable, and diving into the ecosystem of novel chains takes time users rarely have. So many individuals prefer HODLing and keeping all the assets in their wallets.

Neuron Fund is an investment management company working in crypto-financial markets and dedicated to delivering attractive risk-adjusted performance.

Opportunities offered by Neuron Fund

Neuron Fund currently consists of two (three if counting vote-locking) investing tools with more on the way.

Pools essentially automating the investing process, including LP position provisioning:

Liquidity providing pools for reliable assets and DEX projects
Option pools generating exceptional yield for ETH or WBTC
Vote-locking NEUR for veNEUR: receiving a share of protocol revenue, boosted rewards, and voting rights.

Can't I do it all myself?

Sure, you can, but the pools help you automatically reinvest your rewards to increase your principal, save on gas and optimize for the highest yielding strategies. For the option pools, that's mostly not possible for the average Joe (or Jane) as it requires some market maker agreements secured. More on our option pools page.

NEUR token

NEUR is the primary token issued by Neuron Fund. It is used to transfer return in Neuron Liquidity Pools as part of liquidity pools’ interest is accrued via the NEUR token, bug bounty program, development contribution.

Supply and emission

NEUR has its total supply hard-capped at 2,000,000 tokens. NEUR is minted at genesis and — following exponentially decreasing schedule — after it. Here’s the NEUR emission chart taking vesting schedules into account:

Allocations’ time-lock

Almost all NEUR supply is time-locked to convince the community in Neuron Fund team's long-term commitment:

Neuron pools

Liquidity pools

Liquidity pools automatically invest the assets in an array of yield-producing products or services through interacting with their protocols, automatically compounding the gains.

Perpetual Option Pools

This pool type earns yield on its deposits by running a weekly automated options selling strategy which earns yield on a weekly basis through writing out of the money options and collecting premium. The pool reinvests the proceeds back into the strategy, effectively compounding the yields for depositors over time.

For a primer on what options are and how they can be used in trading, you can visit either TastyTrade's excellent crash course or CoinTelegraph's in-depth crypto option article.

Neuron Pools run two options strategies to generate yields:

Covered call - this pool writes out of the money covered calls;
Put selling - this pool writes out of the money collateralized puts.

Option pools are actively managed and function in collaboration with some of the biggest crypto market makers. Here’s a basic primer on how they work at business-level:

Trading explanation is below, or you can always address our option doc article for a deeper specific dive!

Instead of doing 3–4 transactions per week per user, the pool will do 3–4 transactions per week for thousands of users at once. This alleviates the majority of gas problems by "socializing" gas costs across all the pool depositors.

It makes the user experience of using Neuron Pools extremely straightforward and relatively cheap — deposit, wait for yields, and withdraw.

Boosted returns in Option Pools

Since ETH put selling pools is collateralized by USDC, every Friday the pool converts 100% of its USDC balance into yvUSDC by depositing USDC into the Yearn USDC yVault.

This helps depositors gain exposure to yield generated from Yearn on top of the options strategy.

Trading-wise explanation of Option pools

Let’s consider our covered call strategy as an example.

The covered call strategy is a unique option strategy where you earn yield for selling potential upside of an asset. For example, if you are willing to give up potential upside of ETH going above $25k by the end of the year, you can get paid 2% in yield for selling a $25k call option. This is over 10x the yield you can earn by supplying ETH on Compound.

In the unlikely case that ETH goes to $29k, you're up in USD yet giving up those potential $4k — still a favorable scenario for one because s/he only risks getting exercised when ETH goes up.

Payoff diagram for a covered call strategy.

Fees and distributions

Neuron Fund has no deposit, withdrawal and performance fees.
Liquidity pools do have a 2% management fee.

As for distributions, we've made a chart for you to better understand the flows of minted and buy-backed tokens in Neuron Fund:

30% of the pools' yields are used to buy more NEURs back from the market - to distribute those to veNEUR holders.

70% of pools' yields are used for daily compounding ➡ better returns (actually, it's a lot better in the long term):

Governance

veNEUR: a shallow dive

veNEUR is Neuron Fund's governance and revenue sharing token and is basically a vesting and yield system based on Curve’s veCRV mechanism. Users may vote-lock their NEURs for up to 4 years for the same amount of veNEUR (e.g. 100 NEUR locked for 4 years returns 100 veNEURs), or anything in between in order to:

Participate in voting (1 veNEUR = 1 vote)
Receive up to 2.5x boost in NEUR rewards
Receive a share of protocol's revenue, distributed in weekly NEURs

More on veNEUR, including all the formulas and calculations, in our in-depth Medium article.

The number of veNEURs and, subsequently, voting power decrease linearly over time. In the meantime, the user can also increase their veNEUR balance by locking up more NEUR, extending the lock end date, or both.

Off-chain voting

All other matters pertaining to the Neuron protocol, including the selection of protocol officers (e.g., multi-sig members), the budget of the core team, grants and Treasury matters, enhancements, and strategic decisions are taken by the Neuron Fund community under the direction of the founding and developer team.

In order to increase participation, gasless voting via Snapshot will be used, which is integrated via Web3 with users' veNEUR balances at a pre-set point-in-time (i.e., a snapshot).

Join us at our forums for discussing NIPs - Neuron Improvement Proposals, a way to drive where Neuron's steering and make it better!

On-chain governance

On-chain governance relates to the determination of Pool weights, which is done autonomously by aggregating votes on the GaugeDistributor contract and is performed automatically. Pool weights determine how much of the continuous NEUR rewards the stakers of each Pool get.

Risks and security

Audits

An audit of the full suite of Neuron Fund smart contracts by Techrate had started on July 23, 2021.

No critical or major issues were found in the aforementioned contracts. Minor issues have been fixed. The full report can be viewed here.

Timelocks & Multisig

All key admin functions on the MasterChef contract, which controls NEURs emission, are controlled by a 24-hour timelock contract.
All key admin functions relating to the Neuron Pools are controlled by a 12 hour timelock contract.

Each of the above timelock contracts must be executed through a community multisig wallet.

Bug bounty

Neuron Fund will be running a continuous bug bounty program with Immunefi (starting just a couple of days after we release)- we're paying up to $25,000 (upping the limits soon!) in NEURs or stablecoins to anyone who finds a vulnerability.

Pools

Liquidity pools do only suffer from impermanent loss risks; however, that’s mitigated by NEUR rewards and compounding. Option pools do have some inherent risks concerning option selling, but we manage those multimodally - more below.

There is also a slim chance that the price of NEUR goes to 0; however, that's hugely offset by our tokenomics' incentivization mechanisms and providing AMM liquidity at protocol's kick-off.

And, as always: only invest what you can afford to lose and do your own due diligence.