Proposals

Aave (AAVE)

Proposal One: [TEMP CHECK] Raising the Safety Module’s Slashing Percentage

Author: Xenophon Labs

Summary: This proposal requests to increase the slashing percentage for stkAAVE to 60% from 30% in the Aave Safety Module and reduce Aave emissions to stkAAVE from 550 to 470, lowering emissions by ~$2M/year.

Key Points:

• Aave pays between 39,000 and 56,000 AAVE (approximately $2.75M-$3.9M in USD terms) annually in the cost of capital to stakers in the Safety Module, for funds, it cannot slash.
• The Safety Module slashing rate determines the percentage of safety module deposits that governance can slash to help backstop a shortfall event.

• The current slashing rate is 30%, meaning a user who stakes in the Safety Module can have their principal slashed by 30% during a shortfall event.
• This proposal requests to increase the slashing rate to 60%, and if insurance coverage stays the same or improves, a subsequent proposal will be made to increase the slashing rate to 100%.

• Furthermore, this proposal requests to lower emissions by 80 AAVE/day, from 550 to 470, resulting in an annual savings of 29,200 AAVE (~$2M).
• Xenophon Labs has found the amount of emissions to be significantly higher than the insurance power of the Safety Module, making the module capital inefficient.
• Therefore, reducing Aave emissions and increasing the slashing rate to 60% is expected to increase the capital efficiency of the Safety Module.

Our Take: Xenophon Labs provides a reasonable model towards achieving greater capital efficiency for Aave. Currently, the Safety Module is one of the largest expenses for the protocol and we support the proposed changes.

Proposal Two: [ARFC] Cancel Llama Service Provider Stream

Author: Marc Zeller

Summary: This proposal requests to cancel Llama’s service provider income stream from the Aave DAO.

Key Points:

• Llama proposed their Aave service provider agreement in September 2022 which focused on Treasury Management, Analytics, and Growth, for the Aave DAO.
• Their compensation included a $1.5M base fee for 12 months plus a KPI-based bonus of $0–500k, with 70% of the total fee paid in USDC and 30% in Aave.
• Llama has 2-months left of their contract with the Aave DAO worth ~$240k in compensation.
• This proposal requests to cancel their payment stream early due to underperformance of expected duties.

Examples provided include:

• The prolonged handling of CRV bad debt, resulting in an additional $1M cost for the DAO.
• Charging third parties consulting services related to Aave, including asset listings, despite being paid by the Aave DAO.
• Failed to ensure there was sufficient aUSDC in the collector contract that is used to pay other service providers, resulting in no payments for several weeks.
• Therefore, it is believed that the DAO should end its relationship with Llama early and save the remaining $240k of Llama’s intended payment.
• Marc Zeller, on behalf of ACI, has offered to complete any outstanding work at no additional cost to the DAO.

Our Take: While there were some hiccups, we do think some of the initiatives driven by Llama were important for Aave’s growth (as they should’ve been under the approval of their service provider agreement). However, looking at the remainder of Llama’s work, we believe the expected benefit of these changes would be notably less than the remaining balance of their payment stream. This is further emphasized if ACI/TokenLogic is willing to finish the remaining work for no extra cost to the DAO.

Lido Finance (LDO)

Proposal: TMC-1: Pipeline to sell stETH at regular intervals for DAI

Author: Steakhouse Financial

Summary: Steakhouse (a Finance Workstream service provider for Lido) is requesting to convert stETH to DAI at regular intervals to ensure the DAO has a sufficient runway for contributor expenses.

Key Points:

• The estimated average monthly run-rate for Lido’s contributor expenses is around $1.5M-$2M/month.
• This proposal requests to set up an EasyTrack contract, triggerable by the TMC multisig, to sell specific amounts of stETH for DAI to secure 12 months of stablecoin working capital.

• The purchase will be triggered once the available balance of stablecoin working capital reaches a 2-month remaining runway.
• The current stablecoin working capital balance equates to a 7.29-month runway.
• The execution will be done through various venues such as Cowswap.

Our Take: Ensuring Lido contributors are paid is important for the health of the DAO. Steakhouse has proposed a solution that limits stablecoin exposure while ensuring the DAO has sufficient stablecoin working capital.

Votes

dYdX (DYDX)

Proposal: DIP 24 — Shifting from LP rewards toward market maker rebates

Status: Live.

Created: July 28, 2023.

Ends: August 1, 2023.

Leading Consensus: For — 77.3M DYDX (100% of total votes).

Summary: This proposal ratifies a 50% reduction in liquidity provider trading rewards and an increase in the Maker Rebate from 0.50bps to 0.85bps.

Uniswap (UNI)

Proposal One: Deploy Uniswap V3 on BASE

Status: Finished.

Created: July 21, 2023.

Ends: July 28, 2023.

Leading Consensus: For — 60.7M UNI (100% of total votes).

Summary: This proposal ratifies the deployment of Uniswap V3 on BASE. Given BASE is built on the OP Stack, users of Uniswap will be able to swap and provide liquidity at a fraction of the price it costs on Ethereum Mainnet.

Proposal Two: Deploy Uniswap V3 on Linea

Status: Live.

Created: July 26, 2023.

Ends: August 2, 2023.

Leading Consensus: For — 42.5M UNI (100% of total votes).

Summary: This proposal ratifies the deployment of Uniswap V3 on Linea. Linear is a Type 2 zkEVM developed by ConsenSys.

Compound Finance (COMP)

Proposal: [Gauntlet] 2023–07–24 Pause supply for Compound v2 Tail Assets

Status: Finished.

Created: July 24, 2023.

Ends: July 29, 2023.

Leading Consensus: For — 810k COMP (100% of total votes).

Summary: Gauntlet has proposed pausing the supply of AAVE, COMP, LINK, SUSHI, and UNI, on Compound V2. Gauntlet has noticed considerable deterioration in liquidity for these assets, therefore, resulting in outsized risk in comparison to the revenue they generate. By pausing supply, users will be unable to deposit these tokens as collateral.