Q&A on Codename Keanu: Creating Threshold
June 16, 2021
We sat down with Protocol Specialist Viktor Bunin to discuss the challenges and opportunities arising from the merger of Keep and NuCypher
Originally published June 16, 2021
Q: Hi Viktor. Tell us about Codename Keanu, the merger of the Keep and NuCypher protocols (resulting in the new network Threshold). What was the impetus for the project?
Keanu is incredibly exciting because it’s the very first decentralized protocol merger. This type of merger is extraordinarily complex, but the potential positive impact for the teams, communities, and users is high.
Keep and NuCypher are incredibly similar in many ways. They are both work token models built on Ethereum that are on the cutting edge of cryptographic tooling.
Keep started by building a random beacon and tBTC, while NuCypher began with proxy re-encryption. But given their similarities, they had to make a choice — either continue as they were and compete or join forces and work together.
Community is the killer feature. The people you have around you building together are what make the difference between projects succeeding or failing. This merger is an opportunity for the Keep and NuCypher teams and communities to combine forces and build the most decentralized and advanced cryptographic tooling network in the world — which we now hope Threshold, the network created by the Codename Keanu merge, has the potential to become.
Q: What are the benefits of merging the two protocols?
Keanu has four primary benefits:
Co-operation instead of competition. Crypto isn't about being the biggest fish in a small pond — it's about expanding the pond. Keep and NuCypher merging will enable them to pool their resources (tech, stakers, communities, etc.) to win a bigger market instead of splitting a smaller one.
Synergistic modularity. Keep and NuCypher are both modular. They can add support for new applications and uses, which stakers can opt into. Stakers on the new network will have a greater selection of modular components (proxy encryption, random beacon, etc.) from which they can earn fees.
Increased fee revenue. Work token models need to earn fees to be sustainable. Keanu will diminish the networks’ reliance on inflationary incentives and help make the combined network sustainable on fees alone much faster.
Greater decentralization. Both teams and communities are true believers in decentralization. By combining forces and sharing ownership in a single protocol, the new network will become one of the most decentralized in the industry.
In addition, most protocols have only a single dev team, but the new network, Threshold, will have two standalone teams with the ability to add more. This is where it gets truly interesting! Because Threshold will be modular, sustained by fees, and decentralized, it’s possible for new teams to develop. Through governance, teams can get funding, create their own modules, bootstrap stakers, not worry about exchange listings, and much more.
Q: Are there any potential risks?
There are two key risks to Keanu.
First, the teams and communities will need to transition from running two independent protocols to collaborating on just one. Although the teams and communities are highly ethos-aligned, there’s going to be a forming and storming period as everyone figures out how to work together.
The second risk is on the technology side. This merger is one of the most technologically complex undertakings in crypto (likely second only to the eth1 → eth2 transition).
The teams will need to gracefully transition stakers, token holders, and users from the old networks onto Threshold. The existing protocols have thousands of nodes and hundreds of millions of dollars in value, so you can imagine how important it is to get this right.
Q: What do you think the merger says about the development of the blockchain ecosystem overall? Do you think we'll see more protocols merging in the near term?
To be honest, I am surprised this is the first. I expected DeFi protocols to merge before Threshold, but now that we’ve started the process, I can see why it’s the first.
The complexities of two teams combining two protocols, communities, and tokens are huge. Mergers are a natural part of the traditional business world and, as pioneers like NuCypher and Keep blaze a trail, it will make it much easier for other crypto projects to follow suit. I see this as a natural maturation of the industry.
Q: Ben Longstaff and yourself put forward the rc0 T Token Proposal that was voted on by the Keep and NuCypher communities. What are the goals of your proposal? Can you describe the key points?
The rc0 proposal was built upon many community efforts and discussions. It attempted to take the best parts of the T1, T2, T3, T4, T5, and T6 proposals, and incorporate the token migration mechanism that has been analyzed by third-party experts from an accounting and legal perspective.
RC0 proposal overview
The proposal had four key components:
The NuCypher and Keep collaboration will be implemented as a network upgrade.
“No token left behind.” Whether staking, LPing, or simply holding, all holders will have an equal opportunity to participate on the same terms without being punished for upgrading “late.”
Inflation in NU and KEEP will be suspended by respective DAO votes and replaced by inflation in T.
Post-upgrade governance decisions related to the post-Keanu [Threshold] DAO treasury and functioning of the Threshold network are not part of the proposal.
The networks have different numbers of nodes, market capitalizations, token prices, liquid supplies, products, etc. Our proposal sought to cut through their differences and focus on giving all token holders proportional shares of the new network.
Lastly, we structured the merger as a network upgrade to make it totally opt-in and equally accessible to all. The process makes sense because it is very similar to how software is usually upgraded, like iPhone software upgrades.
Anyone with that software is welcome to stay on the old version, but if you do decide to upgrade, you’re not getting a new iPhone. Network participants are welcome to remain on NuCypher or Keep, but if they would like to upgrade to Threshold, they are always welcome to do so with no penalty or obligations.
If at any point they would like to downgrade to a previous version of the software, they are welcome to do that as well, by unwrapping their T tokens back into their original NU or KEEP tokens.
Q: Congratulations on the vote passing! What are the next steps for the merger?
Thank you. Both networks voted via Snapshots. NuCypher had 144 node operators vote, with 100% voting in favor of the merger. Keep had 26 node operators vote, where all but two voted in favor of the merger.
Proposal vote results
Now that the communities have approved the merger, the teams can begin implementing the new network and transition plan. There are still some factors to figure out, such as Threshold’s inflation schedule and the DAO governance process, but at this point these are implementation details.
Q: How do current token holders begin to participate and actively support the new network [Threshold]?
There are a few things folks should be doing. First off, continue engaging in the governance process and network designs. NuCypher and Keep token holder and community member perspectives are incredibly important.
Stakers on both networks should continue staking. As part of the transition, there will be a stake migration process by which node operators can join the Threshold network. Node operators are the lifeblood of these work token models and should feel secure that they will be treated as first-class citizens in this merger.
Exchanges, custodians, and any other service providers should reach out to the Keep and/or NuCypher teams. Because both networks are decentralized and the upgrade is totally optional, the NU and KEEP tokens will continue to exist in perpetuity. However, because the merger is structured as an upgrade with token wrapping, service providers can provide their users with a great experience by performing the wrapping on their behalf without requiring the users to take their assets off-platform.