Wintermute DeFi Governance Digest: April 2024 | Week 2
08 APR 2024 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include Arbitrum activating Stylus, Aave discussing the offboarding of DAI, Paraswap using DAO funds to fully reimburse exploit victims; along with votes from Lido to activate revenue share, Uniswap deploying on Sei with an incentive package, and MakerDAO increasing USDe debt ceiling to 1b DAI via their Direct Deposit Module.
Proposals
Arbitrum (ARB)
Proposal: AIP: Activate Stylus and Enable Next-Gen WebAssembly Smart Contracts
Author: Arbitrum
Summary: This proposal requests to activate Arbitrum Stylus on Arbitrum One and Arbitrum Nova. Stylus is an upgrade that will allow developers to write smart contracts in new programming languages.
Key Points:
- Stylus is a new technology developed by the Arbitrum ecosystem allowing for additional smart contract development languages inside of the EVM.
- While ensuring full interoperability, Stylus will support some of the most popular programming languages like Rust, C, and C++ (i.e., any programming language that compiles in WebAssembly).
- It’ll also enable a more efficient execution environment, leading directly to gas savings for complex smart contracts.
- Computation is expected to be over 10x cheaper while memory is expected to be over 100x cheaper.
- Stylus is also safer by design due to native and cheap reentrancy detection available within WASM.
- The Stylus SDK is 100% open-source, meaning developers are free to fork, modify, and contribute to the core patterns that the SDK represents.
Our Take: This is a massive and very impressive upgrade for Arbitrum, making development on Arbitrum easier and more inviting to the 3.5M Rust and 10M C++ developers.
Aave (AAVE)
Proposal: [ARFC] Risk Parameters for DAI Update
Author: Marc Zeller
Summary: This proposal requests to set DAI’s LTV to 0% across all Aave deployments in response to MakerDAO’s accelerated move to increase sUSDe’s backing of DAI.
Key Points:
- MakerDAO recently announced their aggressive collateral expansion into sUSDe – a synthetic stablecoin by Ethena that captures yield on perpetual cash-and-carry trades.
- MakerDAO is targeting a maximum cap of 1 billion DAI to be deposited into sUSDe/USDe Morpho vaults through their Direct Deposit Module, however, the actual number will likely be around 600M DAI.
- The new collateral expansion will likely happen within a month resulting in ~12% of DAI to be backed by sUSDe/USDe.
- Many community members have raised concerns over this labeling the aggressive move to be risky and reckless.
- As a result, this proposal requests to set DAI’s Loan-to-Value (LTV) ratio to 0% in an effort to stop borrows against DAI collateral across all Aave deployments.
- Other community members have also signaled their support for the full offboarding of DAI.
Our Take: We understand the nature of this response, however, we think that a full offboarding and aggressive risk parameter changes are unjustified. DAI’s risk profile has changed, however, not to the equivalent extent that these parameter changes are suggesting.
Paraswap (PSP)
Proposal: PEP-07 – Grant Request From the ParaSwap Foundation Regarding March 20th Vulnerability
Author: Paraswap Foundation
Summary: The Paraswap Foundation is requesting a grant from the DAO to help refund users in full as a result of their March 20, 2024, vulnerability.
Key Points:
- On March 20, 2024, a vulnerability was disclosed on the Augustus V6 contract. Immediate action was taken to pause the API and revert all swaps to the V5 contract.
- White hat operations were conducted, securing over $3.4M in assets, followed by a return process of these secured funds for users who were affected and revoked their V6 contract permissions.
- There are ongoing discussions with the hacker in which they have agreed to partially return funds. However, the Foundation believes that it’s important to refund users in full for the long-term sustainability of the project.
- The current outstanding amount sits at 103 ETH.
- The Foundation requests to be granted ~150 WETH and 27.2k FTM from the DAO’s treasury to facilitate a claims process for affected users to fully reimburse them for their losses.
Our Take: This is a super important initiative for Paraswap and users should be made whole using the DAO’s Treasury.
Votes
Lido Finance (LDO)
Proposal: Activate Lido Protocol Governance with Revenue Share Staking
Status: Live.
Created: Apr 5, 2024.
Ends: Apr 8, 2024.
Leading Consensus: No – do not add revenue share – 2.7M LDO (56.4% of total votes).
Summary: This vote requests to redirect 20%-50% (adjustable by governance) of future Lido DAO revenue from the protocol treasury to LDO stakers through weekly LDO buybacks and distributions. All tokens will be vested for 3 months.
Uniswap (UNI)
Proposal: [Temp Check] Onboard Uniswap to Sei
Status: Live.
Created: Apr 4, 2024.
Ends: Apr 9, 2024.
Leading Consensus: Deploy & Incentivize $500k – 18M UNI (87.64% of total votes).
Summary: This proposal requests to launch Uniswap V3 on Sei with an additional request to launch a Uniswap Growth Package in UNI to incentivize blue-chip pools. The incentive package ranges from $0 to $1M in UNI.
MakerDAO (MKR)
Status: Finished.
Created: Apr 5, 2024.
Ends: Apr 7, 2024.
Leading Consensus: For – 98.5k MKR
Summary: This onchain vote increases the GSM Pause Delay to 30 hours from 16 hours, increases the maximum debt ceiling for Spark’s MetaMorpho Direct Deposit Module to 1b DAI, adds a kill switch to disable all borrowing across markets in the event of a depeg on key collateral asset, increases the borrow cap on ETH markets to 20k ETH, and increases the WBTC supply cap to 10k WBTC.