Summary
This proposal aims to transition Neverland from growth-subsidized tokenomics to a sustainable model built on two invariants: Rewards distribution continues at the same schedule.
Rewards: Making DUST rewards liquid comes at a high price or time commitment, and liquidity is rebuilt around normalized trading of the token based on its inherent utility. Shrinking the mechanics that made DUST a farm-and-dump rewards token and the provision of liquidity is a high risk strategy.
Distribution: Both to grow the supply in holders’ hands and to continue spreading ownership into new ones. A supply that remains concentrated and inexpensive to acquire is a standing threat to the protocol’s decentralization.
Under the proposed framework the distribution continues at the current schedule. At claim time, the receiver chooses a commitment duration, and the share of rewards received scales with that commitment. A full commitment claims the full amount of available rewards while a short commitment claims a fraction and burns the rest permanently, onchain.
Nothing else about the protocol changes in this proposal. More proposals will follow addressing different aspects and inefficiencies of the protocol.
Expected outcome: In the short-term the consequence is disincentivization of farming behaviors of the lending system. In exchange, net liquid supply growth stops, farm-and-dump becomes disincentivized, and distribution continues widening ownership while release follows commitment.
Problem Statement
The imbalance. Neverland’s token economy has two flows today. On one side, users farm the lending markets to earn DUST and sell it. On the other, the model assumed users would buy and utilize DUST, capturing the value that the first group’s activity generates. The first flow arrived at scale. The second did not. Without sustained organic onchain activity, a growing userbase, and fresh attention on the protocol, there was no population from which DUST buyers could emerge. The result was continuous, unanswered selling pressure, absorbed epoch after epoch by a finite pool of liquidity until that liquidity was depleted.
The hurdle-rate asymmetry, or why 5% sells and 150% doesn’t buy. The clearest evidence of the imbalance is what each side of the DUST market demands before it acts. On the sell side, farmers consistently accept DUST incentives as low as roughly 5% APR on an asset. They can, because they carry no DUST exposure: rewards are claimed and sold, so even a small incentive is near-riskless incremental yield on top of a position they would hold anyway. Their hurdle rate is effectively zero, and their selling is therefore structural and price-insensitive; it arrives every epoch in any market.
On the buy side, the same market has not shown up to buy and utilize DUST even at headline yields of 150% APR or more. One side of the market acts on 5%; the other stays out at 150%. The chain’s low organic DeFi activity, the bear market, and the frequent exploitation of DeFi protocols has led to this result and risk intolerance. That gap is the imbalance expressed as a single number: selling arrived every epoch in any conditions, buying stayed discretionary, and the flow went one way. It consumed the order book, drained pool liquidity, and made each unlock a larger fraction of whatever depth remained.
“What went wrong” is that rewards manufactured price-insensitive sell flow every epoch, the organic buyers the model depended on never arrived after growth stalled in April under general bear market conditions and a rising number of exploits across the space, the machine only ran faster.
What this implies for the fix. A flow imbalance cannot be subsidized away: added yield recruits more farmers before it recruits holders. The correction available now is shutting off the structural sell flow at its source, which is what this proposal does. The reform changes what a buyer is buying: a token whose supply growth is based exclusively on holder commitment, whose claim penalties burn, and whose sell flow is no longer manufactured by design.
Every epoch that passes under current claim rules mints the next wave of liquid supply 30 days out. Forward rewards are the only supply we control, and every delay in implementing change compounds them weekly.
Low Level Details
The mechanism: commitment-based release
All DUST rewards from lending incentives claimed after enactment are subject to a commitment menu. The claimer chooses a commitment at claim time. What is not committed is burned immediately, permanently, onchain.
Example:
| Commitment chosen | Received | Burned at claim | veDUST weight |
|---|---|---|---|
| 12 months / Infinite | 100% | 0% | 1.00x |
| 9 months | 75% | 25% | 0.75x |
| 6 months | 50% | 50% | 0.50x |
| 3 months | 25% | 75% | 0.25x |
| 1 month | 8% | 92% | 0.08x |
Mechanics:
- Distribution is unchanged: Gross rewards continue at the current schedule. This proposal touches release, and only release.
- Early exit burns the remainder: Any active lock can be exited at any time; the unserved balance is burned in full. As per Open Question-2 below, offering a decaying-penalty alternative is up for discussion.
- Weight: veDUST positions carry revenue share and voting weight scaled by chosen duration, per the table. Long commitment earns proportionally more of both. Short commitment cannot cheaply rent governance power.
Implementation and rollout
- Affected systems: The incentives claim path burns the penalized fraction, mints a veDUST lock for the rest or adds them to an existing lock, veDUST weight accounting, and the frontend claim flow.
- Explicitly untouched: The rewards schedule and all existing veDUST locks.
- Rollout and contract readiness: The alterations on the claim flow should be minimal and a secure change, yet it will need development and proper review. The solution should be ready within two weeks if this proposal passes.
- Migration requirements: None for users.
Economic implications. READ THIS BEFORE VOTING!
- Borrow demand and revenue: A large share of current borrowing exists to farm DUST. With farm-and-dump closed, that borrowing unwinds, and revenue falls with it before real demand rebuilds. We are deliberately not publishing a floor forecast: any number precise enough to be useful would be precise enough to be wrong. Voters should assume materially lower revenue through the transition and treat anything better as upside. This proposal solves DUST inefficiency immediately while aiming for long-term sustainability, market appreciation and growth.
- veDUST holders: Positions have revenue-share weight while revenue compresses, so per-unit distributions decline during the transition.
Alternatives Considered
- Cutting or halting rewards instead. Rejected. Cutting distribution shrinks the process that spreads ownership and drives the protocol’s decentralization.
- Exit penalties only, without upfront burns (a single 12-month lock, breakable anytime with a decaying burned penalty). Strong design, and its core survives here: locks are breakable and breaking burns. Rejected as the sole mechanism because contingent burns depend on holder behavior under stress, while menu burns at claim time are certain, immediate, and independently verifiable.
- Demand-side subsidies (raising locker yields with DUST incentives or other potential ways to attract DUST buyers). Rejected. No APR clears a hurdle set by expected depreciation, and the headline yield rises mechanically as price falls, so the subsidy chases its own tail.
- Status quo. Rejected. The 30-day path releases effectively all rewards as liquid supply every month, and the imbalance compounds weekly.
Alternative Proposals for Discussion
Open Questions
- OP-1: veDUST weight multipliers for claims. Proposed as tabled or altered.
- OP-2: Early exit: keeping the mechanic the same with the penalty decaying from 75% to 0% across the term, change it, or remove it.
- OP-3: Whether the 1-month tier (8%) should exist at all, or whether the shortest commitment should increase in time to avoid excessive penalties by forcing time to serve.
- OP-4: Whether the holders are willing to explore other solutions that would allow farming behavior but limit it to some degree.
Closing Statement
Short-term, this hurts. Effective farming yields, looping returns, and this quarter’s borrow numbers all take the hit.
Long-term, rewards that keep flowing and keep decentralizing ownership, release that follows commitment, penalties that burn, and sell flow that is no longer manufactured by design. The protocol rebuilds, introduces new tech and new revenue flows to replace the strict/isolated borrowing demand revenue generation.
Before progressing to vote, weigh the one real tradeoff: this proposal heavily disincentivizes the farming behavior with DUST to promote a more sustainable token economy at the expense of the opportunity to use it as an incentive to generate revenue. If you believe cheap liquidity is compatible with the protocol’s survival, and another plan should be considered, share why in this post.
This proposal can evolve before reaching its voting phase.
The only way to reach sustainability is to build it. One epoch at a time.
The idea for the proposed solution was first introduced by the community member @shadow_hodl on Discord on February 20, 2026, in the #lost-boys-hideout channel, and has been supported by @jackfarrington. It has since been discussed within the community, alongside alternative solutions that can be properly discussed in this topic including proposed ideas by @nykon1293 and @argsarausrex. Also make sure to read [RFC-06] DUST/USDC Liquidity Incident Mitigation Plan by @0xTuongLam and the alternative path proposed by @danielf15 on the comments section, which is a proposal on DUST liquidity which is connected to the broader system design. The team promotes this as a viable and technically sound design that is open to changes during the RFC phase.