Recap of the Inter Protocol Community Call: Why Does the DCF Recommend a Sunsetting?

On April 23rd, the Inter Protocol community gathered for a live call to discuss the Decentralized Cooperation Foundation's (DCF) recommendation to sunset the protocol. Speakers included DCF’s Ric Shreves and Bob Calabritto, Agoric CEO Dean Tribble, and Joe Clark from Inter Protocol’s Economic Committee (EC). This blog post provides a summary of the opinions and perspectives shared during the call.  

Objectives of the Community Call

The purpose of the live discussion was to inform the community about the recent proposal from the DCF regarding the strategic sunset of Inter Protocol. It aimed at sharing the initial thoughts and reasoning that led the DCF to the conclusion that recommending a sunsetting is the optimal course of action.

Why Is Sunsetting on the Table? The DCF’s Rationale

Ric Shreves, the President of the DCF, explained that the decision to recommend a sunsetting reflected market and financial realities for the players involved. A significant amount of time, effort, and money was invested in Inter Protocol, but it never achieved the level of community adoption that would justify the expense. It just simply wasn't pulling its weight. Across time, there was a continued erosion of TVL (total value locked), and even the onboarding of new collateral assets didn’t attract enough community attention.

The DCF, as a supporter of the Agoric ecosystem, had always viewed Inter Protocol as a public good. That’s part of DCF’s mission — to fund projects that are useful for the ecosystem. However, at a certain point in time, it became essential to ask whether the resources necessary to keep the protocol alive wouldn’t be better spent elsewhere. 

What is the cost of maintaining Inter Protocol's operational status?

Since the question of operational expenses arose on several occasions, Shreves clarified the cost of maintaining Inter Protocol and categorized it accordingly. He confirmed that:

On an annual basis, for the DCF alone, Inter Protocol is over a million dollars in overhead. This amount doesn’t take into account the time that Agoric spent on the project, which was not inconsiderable.

A bespoke Oracle network was set up for Inter Protocol, which represents the bulk of the expenses. It was built for a protocol that was intended to scale to a much larger size, with multiple node operators, providing a very high level of service.

Secondarily, there is the Economic Committee (EC), a group of individuals that, until recently, comprised six members, all of whom receive a salary. This entity incurs several associated running costs, including the corporate structure that shelters it.

Then comes the website maintenance, the various subscriptions to security and analysis services necessary for the EC to be able to make appropriate risk decisions. Finally, there is the cost of marketing and DCF time to shepherd governance, to build tools like CosGov, and generally steward the protocol.

Agoric’s View: IST Doesn’t Fit

Agoric’s Dean Tribble shared that IST hasn’t integrated well with Agoric’s Orchestration layer. Whenever the Agoric team had offered to put IST front and center in an Orchestration use case, IST turned out to be an obstacle. Builders favored either mainstream stablecoins like USDC/USDT, or their own native tokens. Dean clarified:

“One of my favorite Orchestration projects personally is keeping Akash accounts topped up. We tried to do that multiple times with IST, but it just wasn’t relevant to them, since they pay for Akash execution on their DePIN network in AKT token. If you could keep that topped up by automatically buying the token on the appropriate markets using your savings in another stablecoin pool, then that’s great. But if you’re trying to stick IST in the middle, then it becomes very complicated.”

Since IST didn’t bring meaningful value to Orchestration or boost the BLD token, the decision to focus on BLD as Agoric’s core utility and fee token became clear. The team is now focused on simplifying tokenomics so that BLD can effectively power Orchestration. 

From that point of view, then, IST having a life of its own seemed like a possibility, as long as ecosystem members were willing to support it. 

Were other avenues explored before recommending a sunsetting?

Yes. A concept called “The Inter Protocol Alliance” was put together by the DCF, and different collateral providers and key players within the Cosmos ecosystem were approached. They were not asked to take over the entire bill, but to contribute to it. With the expense spread among multiple stakeholders, the DCF would free up resources for other purposes. However, although everyone highly appreciated IST, not a single party committed to supporting it.

What will the forthcoming signaling vote mean for Inter Protocol?

Yes. A signaling proposal is currently open for review and comments, and will remain so until April 28th, when the signaling vote will begin. The outcome of the vote will determine the future of Inter Protocol. 

If the community votes ‘No’, meaning that they don’t want to sunset Inter Protocol, the DCF board may still cease funding. Their opinion that the outputs are not being worth the expense won’t be influenced by the outcome of the cote. That would require the community to support and maintain the protocol independently.

If people vote ‘Yes’, a 60-day wind-down period will begin. The wind-down process was designed by the DCF in consultation with Agoric around engineering demands, and with the EC around dealing with outstanding vaults.

What would the wind-down process look like?

The first 30 days, roughly from May 1st to May 30th, will focus on notifying Inter Protocol users about the wind-down, urging them to close their vaults and reclaim their collateral. Minting capabilities will be limited, and the Economic Committee will be recommended to reduce liquidation fees to zero. The goal is to ensure adequate time for notification and a structured, step-by-step process to shut down all vaults.

From Day 30 to Day 60, if there are remaining vaults, over-collateralization requirements will increase weekly, forcing liquidations. Ideally, everyone would close their vaults early, but the system is designed to ensure the most beneficial treatment even for those who take no action.

IST holders will be able to claim collateral at any time. If a vault gets liquidated, that would mean that an automatic conversion occurs to cover the debt. Any remaining collateral will continue to live in the vault, and users can retrieve their assets even after the shutdown.

What other risks exist?

The primary risks for vault holders are price risk and the risk that there may not be enough bidders for the collateral. The best way to mitigate this is to withdraw collateral and repay it from the vault. 

Generally, the system is over-collateralized to minimize risk. The Parity Stability Module (PSM) allows 1:1 conversion of one stable for another. If IST is needed to pay down debt, users can obtain it at any time by converting USDT or USDC.

Inter Protocol is in the community’s hands now

Despite challenges and setbacks, significant progress was made, informing IST and advancing it from its initial intent for the Agoric economy to its broader interchain goal. The DCF team took pride in stewarding the entity and, in the absence of Inter Protoco, will free up resources to focus on the next phase of Agoric. 

The community is encouraged to participate in the ongoing discussion and voting process.