Initia Chain Upgrade Proposal #1: Taking Off the Training Wheels

Initia Governance L1 Chain Upgrade
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1. Background

In a few days, Initia’s mainnet will have been live for approximately one month. During the early stages, parameters have been conservatively set to maximize initial security bootstrapping. As Initia approaches higher levels of stability, greater sustainability and decentralization will become the core focus of early upgrades, including the changes rolled out in this proposal. This patch will include adding whitelist functionality to the emergency proposal framework, introducing the ability to change optimistic bridge withdrawal times and finalization periods, adjustments of Enshrined Liquidity parameters to equilibrium rates, and IBC hooks improvements.

2. Release Binary & Upgrade Resources

3. Proposed Changes

Emergency Proposal Submitter Whitelisting

The Initia L1 allows users to submit 3 different types of proposals; normal proposal with 7 days voting period, expedited proposal with 1 day tally time, and emergency proposals.

The emergency proposal type is designed for a rapid response to security patches, chain upgrades, and other time-sensitive changes. The emergency_tally_interval, which determines the minimum period for a submitted emergency proposal to pass, was previously set at 5 minutes. However, this potentially allows malicious actors with sufficient resources to propose harmful changes using an emergency proposal, sway governance votes, and pass the proposal before it can be detected and stopped. To address this, Proposal 24 temporarily increased the tally interval for emergency proposals from 5 minutes to 1 day. While this adjustment reduces the risk, it also means there is currently no functional difference between an emergency proposal and an expedited proposal.

Thus, this upgrade introduces a feature that allows only whitelisted addresses to submit emergency proposals. This list will be modifiable only through governance. An initial list of whitelisted addresses will be proposed, along with a reduction of the proposal tally time back to 5 minutes (or a similarly shorter duration), in a separate proposal if this upgrade passes.

OP Withdrawal Period

This upgrade introduces functionality for the Initia L1 governance to adjust asset withdrawal times and the rollup finalization period for all live Interwoven Rollups. This change will standardize withdrawal times, creating a more consistent user experience across rollups, and it will allow for adjustments to the parameters after the rollup is live. If approved, an initial standard finalization period will be proposed in a subsequent proposal.

Adjusting Staking Rewards

This upgrade proposal will be submitted alongside a parameter change proposal to adjust the staking reward rate.

As of now, the staking module holds approximately 246,462,616 INIT (real time balances can be viewed here). The long-term goal is to maintain a 30% APR with a total value locked of $30 million in the USDC-INIT pool. Currently, during the bootstrapping phase, the pool is close to the target TVL but offers staking rewards nearly four times higher than the equilibrium rate due to accidental genesis parameters being set. Additionally, excessively high staking APR has created competition with Initia’s L2 applications by over-incentivizing passive capital retention. Reducing staking rewards is expected to encourage a shift from passive staking to direct active capital participation across the interwoven rollups. This proposal recommends adjusting the annual equilibrium staking reward amount to 12,500,000 INIT.

Parameter Current Parameter Value New Parameter Value
release_rate 0.05 0.0125

Miscellaneous

  • Add hashed address check to IBC Hooks receiver validation (PR #399)

Governance Votes

  • YES – You support updating Initia with the changes proposed in this release.
  • NO – You oppose implementing the proposed update to Initia.
  • NO WITH VETO – This vote signals strong objection. It is used when the proposal is considered:
    1. Spam or irrelevant to Initia,
    2. Harmful to minority stakeholders, or
    3. In violation of Initia’s governance principles or encourages such violations.
      If more than one-third of total votes are cast as “No with Veto,” the proposal will be rejected and any deposits will be forfeited (burned).
  • ABSTAIN – You choose not to take a stance on the proposal but want your vote counted toward the quorum.
2 Likes
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Firmly disagree on cutting the INIT-USDC enshriend liquidity APR to 1/4 in a signle strike. Do understand the reasoning behind it but this is just too radical.

Would rather implement a 25% decrease for every 4~5 epochs and observe the TVL and reaction of the L2s and decide from there. What happens when the interest rate become suddenly unattractive and everybody withdraws from it and slippage gets high like crazy?

Then we raises the APR again?

We need to to this in different stages and observe the effects. Changing the parameters to be 1/4 or x4 every proposal seems nonsense

1 Like
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Why approaching every matter in one strike? Have some timespan where the protocol adjust stuffs throughout the epochs. This is too hasty.

This kind of radical changes are actions that is taken with overconfidence in thinking that the future is predictable with simple numbers. We may get the desired effect, but we may not also. To higher the probability + monitor the effect in stages + also give users time to react over time this should be done through a timespan of epochs not in such way.

All protocols that approach governance seriously adjust APRs, debt limits, LLTV or anything in stages to approach the target number because it is safer and more accurate. They do not change everything in 1/4 or x4 in one strike.

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Voted for No with Veto.

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one single proposal for four dif changes, one of them with $ impact is not appropriate; at least the adjusting rewards should do separately … what are the new times of the OP withdrawal period? that’s not mentioned

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No!!! I want the original proposal :grin:

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Cross-posting my thoughts to the forum.

Firstly, I agree that it’s necessary to revert the emission rate from 0.05 to 0.0125 as originally planned and communicated (ref: zon’s tweet confirms that 0.05 was set as the parameter accidentally and docs confirm that too).

But the change should’ve been well-communicated to the community at the least a week prior and the onchain proposal should ONLY be submitted after the proposal has had at least a day to collect feedback on the forum.

If the emission rate was reduced gradually across the next 2-4 VIP stages, it would be much better received by the community as it gives LPs enough time to analyse and decide their strategy WHILE it also gives the Initia team enough time to observe how changing the emissions affects user behavior.

Upgrade Release Rate
Upgrade 1 0.0375
Upgrade 2 0.025
Upgrade 3 0.0125

A little note on why less emissions is net-positive before I go:

  • Less yearly emissions, longer emission schedule. Long-term health of the economy is more important.
  • Less emissions to EL means less people are inclined to zap lock their esINIT. And they can now slowly vest their allocation to further use INIT in the Interwoven Economy.
  • Less emissions means less INIT on the market, better for the tokenomics of INIT and better for the LPs as well because the INIT-USDC LP is made up of 80% INIT.

Last thing to the community—please engage constructively in governance, it can make more of a difference than you’d think.

EDIT: It’s important to mention that this proposal shows the importance of a proper governance framework in place—proposal scope, procedure, etc. If the proper framework was in place, the staking emissions adjustment would & should not have been passed with the chain software upgrade. Putting the two together has led to the upgrade facing delays because of an action that isn’t even related to or blocked by the upgrade.

4 Likes
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Hi ! First off, thanks for the suggestion : )

But we, at Four Pillars, casted a vote with ‘No with Veto’. We’ve already posted about it via twitter(https://x.com/fourpillarsfp/status/1924868487014736099?s=46&t=Qyns4Kfmifo6n646v4GUQA), but here I share it again :folded_hands:

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Background

This proposal aims to adjust the 4x staking rewards originally provided to bootstrap the INIT-USDC pool to an annual rate of 25% APR, reducing the total emissions to 12.5 million INIT. In the long term, it targets maintaining $30 million in TVL with an APR around 30%.

We acknowledge that this proposal aligns with the broader direction of VIP tokenomics. It seeks to establish demand-driven tokenomics for INIT through rollup adoption while curbing inflation, which we consider a legitimate objective.

Four Pillars’ Vote: “No with Veto”

Given that the proposal effectively results in a sudden 75% reduction in user staking rewards upon approval, we believe the @initia team should have approached this with greater caution.

The Initia ecosystem includes a wide range of stakeholders. Despite the 21-day unbonding period, this proposal did not provide sufficient time or communication for users to respond meaningfully to the changes.

In particular, given that many community members still lack a clear understanding of the governance framework, we believe it was premature to push forward a policy change of this magnitude.

Accordingly, we voted No With Veto, with the view that the proposal should first be rejected, then resubmitted after proper governance structures are in place and sufficient community discussion has taken place. This vote reflects our commitment to procedural integrity and inclusive decision-making.

Recommendations and Action Plan

We urge the Initia Foundation to first establish a governance framework that includes the following components:

:black_small_square: Clear definition of the proposal scope and applicable criteria (Governance Scope)
:black_small_square: Designation of official communication channels for effective community engagement
:black_small_square: Specification of key governance parameters, such as voting periods and quorum thresholds

Only after this governance framework is in place should a revised version of the proposal be reconsidered through a legitimate and inclusive process.

3 Likes
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Hi, Dogemos from Keplr here.

Keplr decided to vote YES on this proposal, despite knowing very well that it may be an unpopular decision to do so.

We’ve posted our rationale through our Keplr Validator reviews feature which you can find [here].(Proposal #39 | Initia | Keplr Dashboard)

Governance exists to realign code with social consensus. While the process lacked formal structure, that’s acceptable in early stages—what matters is clear communication, corrective intent, and a path toward stronger governance discipline over time.

Initia is a newly launched, nascent network.

At this stage, Keplr believes in empowering the direction and intention of the core team than get bogged down in metagovernance.

We’ve seen too many chains fail to move quickly on intention as they get distracted on process.

Happy to further discuss, but my take is that if Initia’s goal is to not repeat the mistakes of other Cosmos chains, rectifying the unintentional, excessive yield must be done as quickly as possible.

Protocol emission can feel like free money, but we all know there is no such thing as ‘free money’.

We should see the early high APRs as an additional reward for early Initia believers–and for Initia as a protocol to build economics that incentivizes value accrual to the token rather than high APRs.

1 Like
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Hi!

I am hereby voting “No” to the following proposal bc I disagree with how the proposal is designed, clubbing proposal framework updates with parameter-specific changes in numerical terms ($, bridge withdrawal time window) in one proposal.

EMISSIONS

Wrt to adjusting staking rewards, while I agree with rationale that overpaying for security with emissions isn’t a prudent option long-term, there are other factors to consider as well, predominantly the cold-start problem for deeper enshrined liquidity.

The upside of low impermanent loss due to enshrined liquidity being denominated in 80% INIT is that available USDC liquidity for the chain WILL NOT be significant in times of extended drawdowns as rebalancing occurs, effectively tying onchain UX wrt price action (worse price > more slippage).

30% APR wrt $30M TVL is an audacious goal, however - net onchain liquidity needs to have a well balanced INIT, INIT derivatives/USDC ratio, thus allowing emissions reduction in successive epochs to be more normalised (even if reduced aggressively).

As mentioned previously - I am hereby suggesting that Initia also enshrines an <Initia native LST>/USDC pool with 20% LST and 80% USDC ratio, split staking emissions bw both pools, aggressively reduce emissions every few epochs to stable nominal rate of around 8-10%, preferably even lower in 2-3 years.

The benefit of applying this strategy is :

  • Incentivizes more USDC contribution to the enshrined DEX, fixing the cold start problem.
  • Positive coefficient emissions for users akin to single-sided staking, neutrality to directional price exposure while LP’ing IF users deposit in both pools.
  • Seamless onchain UX, irrespective of market conditions.

Echoing sentiment of others - these proposals must adequately inform community in advance & public response to these parameter changes must be observed over couple VIP stages to see if they’re effective (or not).

As it stands - the governance framework is not mature enough to make these decisions (Standard risk control framework applies), so these changes must not be clubbed together in one umbrella & drafted separately.

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Hey @CoinerHermes — as far as I know, it’s only possible to add an INIT/X LP to Enshrined Liquidity as a non-INIT pair would not contribute to the chain’s security.

I’m hoping to see teams step up to build deeper liquidity for their assets without the entire weight falling on the Initia team and INIT’s inflation. For ex, Milkyway can incentivise a milkINIT/INIT LP with their token or Inertia can incentivise an sINIT/INIT LP with their INRT points.

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Having a NATIVE LST & stablecoin pool with the aforementioned ratios (i.e. more stablecoin dominant) ENSHRINED would definitely achieve the desired effect for securing the network, the cold start problem & UX - hope this is explored (if possible).

I’m not sure the current VIP process would allow LST teams to bribe liquidity positions, as Milkyway team has suggested when some community members brought it up with them (accelerated vesting of existing MILK tokens, fresh MILK incentives) & aren’t interested in incentivization endeavor.

Most importantly, I don’t think incentivizing idle LST’s with VIP emissions is a productive use of emissions anyway (which currently seems to be the case).

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I agree on the need for LST/INIT & STABLE/INIT Enshrined Liquidity pools @CoinerHermes but the incentives are for EL pools to be max dominated in INIT as it allows the esINIT position to be zap locked with minimal additional liquidity on the other side of the pair AND more governance power from the position as you get awarded gov power pro-rata to the INIT in your LP.

I’m not sure the current VIP process would allow LST teams to bribe liquidity positions

VIP directly doesn’t allow for this functionality but there are certainly creative ways to enable the same. For ex: LP milkINIT-INIT, bridge the LP & stake on Milkyway for accelerated vesting of MILK. There interest in the same is a different question altogether and it’s one I’d like L2 teams to transparently answer.

I don’t think incentivizing idle LST’s with VIP emissions is a productive use of emissions anyway

That’s just the case for Milkyway, no other rollup is incentivising idle LST through VIP.

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I get it, I totally do - but as always, there are no free lunches.

Zapped esINIT (& corresponding voting power) will still be exposed to some IL there when paired with USDC liquidity, however, minimal. A decline in INITIA price in future is likely will also create a negative spiral effect (esp when 21 day unbonding period is in effect) as any mercenary stablecoin liquidity exits, causing lagging user liquidity to be subjected to worse slippages + decline in fees, as the USDC side shrinks. Hence, the concern around long-term TVL stability objectives, since crypto is largely reflexive.

The benefit with LST/USDC and INIT/USDC pools being enshrined could also be multifold because it can in theory, allow arbitrageurs to deposit capital on Initia in size, as well as result in increased fees for the network.

Even if esINIT rewards are split, a user could always zap his esINIT into INIT/USDC as always to acquire more governance power, whereas be incentivised to purchase more LST & LP with 80% USDC to limit his directional exposure to price. Think INIT & LST enshrined liquidity positions (20, 80) & (80.20) ratios respectively would achieve a net effect similar to Stargate’s single side LP staking.

Again - any suggestions here are just a fun thought exercise (, the larger emphasis was on eventual effective staking emissions rate & taking a second look at current governance proposal which seemed rushed. Cheers!

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Hey.

Markus here from Coinage x DAIC

We’ve decided to vote Yes on this proposal.

While we agree that the way it was brought on-chain was not appropriate and should have allowed more time for community discussion, the team has acknowledged this and committed to establishing a better governance process moving forward.

That said, given that Initia only launched a month ago and this is the first proposal of its kind, we believe it’s forgivable. It’s also worth noting that the intention was always to release 12.5 INIT annually—the team simply made a mistake with the initial parameter setting, which they are now trying to correct.

For a more detailed explanation, we’ve shared a statement on X.

Link: https://x.com/coinage_x_daic/status/1925490188060364876

1 Like