Wintermute DeFi Governance Digest: April 2024 | Week 4

23 APR 2024 | RESEARCH | AUTHORED BY IGOR

This week’s proposals include Aave introducing a safety module update, Arbitrum proposing permissionless validation, Celo migrating to the OP Stack rollup; along with votes from Lyra to migrate LYRA to LDX, and activation of deflationary parameters for INJ on Injective.

Proposals

Aave (AAVE)

Proposal: Introducing “FastPass” – A Safety Module Update

Author: MarcZeller

Summary: This proposal introduces the bypassing of the cooldown period for Safety Module stakers in exchange for a fee.

Key Points:

• The Aave Safety Module is a component designed to secure Aave in case of a shortfall event, such as an exploit or bad debt accrual.


• Users lock eligible assets with a 20d cooldown period to earn incentives (16% APR for GHO).


• The presence of a cooldown allows Aave to get rid of freeriding when stakers could unstake just after a shortfall event.

• However, in the current market conditions, the cooldown period creates additional opportunity costs for some users who’ll be ready to increase the protocol revenue to exit faster.


• To mitigate the risks of nullifying the coverage, the daily churn rate will be limited, as well as Risk Stewards could disable FastPass during a shortfall event.


• The GHO reserve was chosen for the pilot launch and a 1% fee will be set.

Our Take: This update can increase the amount of funds in the Safety Module, but having it activated for GHO is even more important. Currently, 44% of 48M GHO is inside the Safety Module and can’t be used in other protocols without waiting.

Arbitrum (ARB)

Proposal: ​​AIP: BOLD – permissionless validation for Arbitrum

Author: The Arbitrum Foundation

Summary: BOLD is a new dispute protocol for permissionless fraud proofs on Arbitrum chains including Orbit ones. The current paradigm with a validator set will be changed to the approach when anyone with a required bond size can post assertions or challenges.

Key Points:

• Arbitrum Nitro has already implemented fraud proofs but because of the risk of delay attacks, they were available only to allowlisted addresses.


• BOLD will enforce a fixed upper time limit on the dispute resolution to mitigate delay attacks.


• However, in a completely permissionless setup, grifters may start spamming challenges and delaying bridge withdrawals.


• To fix this issue, all active validators should provide bonds (for example, 1.5k WETH). Parties without this amount of capital could use pool contracts to become validators.


• It’s important to mention that there is no financial incentive to run a BOLD validator, but the DAO could change it in the future.

Our Take: With this initiative, Arbitrum will become much closer to a Stage 2 rollup. We’re looking forward to the implementation of BOLD and launching it on the mainnet after rigorous testing.

Celo (CELO)

Proposal: cLabs Proposes Migrating Celo to an Ethereum L2 leveraging the OP Stack

Author: mariano

Summary: After thoughtful consideration, The Celo team chose the OP Stack for their migration to L2.

Key Points:

• Celo was launched as an L1 with a set of unique features for accessibility to the broader community.


• Back in 2020, the only way to have cheap fees was through the launch of an independent chain, because rollups were in the R&D stage. Today, it’s possible to launch an L2 with non-expensive DA and better security guarantees.

• Celo considered OP Stack, Polygon CDK, zkSync Hyperchain, and Arbitrum Orbit as possible options.


• Although Celo decided to leverage OP Stack and potentially become a part of the Superchain.

Our Take: Celo is another example of the rollupification and moving from an independent security model to L2. We see how utilizing Ethereum for settlement will help Celo expand the user base with safer bridging.

Votes

Lyra (LYRA)

Proposal: [LRFC] Migrate $LYRA to $LDX

Status: Finished.

Created: Apr 16, 2024.

Ends: Apr 19, 2024.

Leading Consensus: For – 54.M stkLYRA (99.9% of total votes).

Summary: This proposal approves the migration of LYRA to LDX because, since the launch of the rollup, Lyra has become more than an options protocol. The snapshot will be taken on May 8, and TGE with 1:1 claims based on the snapshot will be in Q3. No new tokens will be issued, but tokenomics will be updated and an upcoming proposal will include more utility for LDX, incl. staking.

Injective (INJ)

Proposal: INJ 3.0: The Ultimate Injective Tokenomics Upgrade

Status: Live.

Created: Apr 19, 2024.

Ends: Apr 23, 2024.

Leading Consensus: YES – 38.9M INJ (92.8% of total votes).

Summary: This proposal updates INJ’s inflation parameters to make it more deflationary. The idea is to decrease inflation bounds every quarter over two years to [4%, 7%] from [5%, 10%]. On top of this update, the inflation rate change aka the responsiveness rate will be increased five times to quickly reduce inflation if more than necessary INJ will be bonded.