Wintermute DeFi Governance Digest: August 2024 | Week 4
27 AUGUST 2024 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include Euler Finance establishing an XP points program, Swiss Stake AG requesting 21M CRV from the DAO for further development of Curve, and Arbitrum increasing the L2 Core Timelock delay to 8 days from 3; along with votes from UXD Protocol to wind down the protocol and distribute its $52M insurance fund, Mango DAO settling with the SEC, and MakerDAO moving into Phase 2 of its PSM migration.
Proposals
Euler Finance (EUL)
Proposal: Euler Experience Points (XP) Initiative
Author: Euler Foundation
Summary: With Euler’s relaunch nearing, this proposal requests to establish an XP program to keep track of and potentially reward key users.
Key Points:
- Euler is set to relaunch in the near future which will once again require bootstrapping efforts to kickstart the protocol’s usage.
- This proposal requests to establish an experience points (XP) program that tracks and reports the XP of key classes of protocol users.
- XP will be allocated over 4-month blocks of time called ‘seasons’ of which the design of how XP is allocated can change over these seasons.
- Season 1 will allocate XP to liquidity providers and vault creators.
- Liquidity providers will earn ‘lpXP’ where 1 lpXP accrues per $1 utilised liquidity per day for providers of ETH or USDC liquidity into verified governed or ungoverned vaults.
- Vault creators will earn ‘vcXP’ where 1 vcXP accrues per $1 value generated through vault fees for the Euler DAO.
- Importantly, there is no defined value associated with XP points but the DAO may opt to reward users with accrued XP in the future.
Our Take: The points meta is a staple within dApps & protocols looking to bootstrap certain activities. Season 1 focuses on bootstrapping liquidity and vault creators to create a usable borrow/lend venue.
Curve Finance (CRV)
Proposal: Funding proposal for Swiss Stake AG, the company building Curve
Author: Michwill
Summary: This proposal requests a one-year grant of 21 million CRV tokens to Swiss Stake AG for the continued development, promotion, and support of the Curve protocol and its ecosystem. The funds will be used for software development, audits, ecosystem growth, and educational initiatives, with any unused funds rolling over to the next year.
Key Points:
- Swiss Stake AG is the initial developer of the Curve software repositories which received an initial CRV allocation in August 2020 for continued development and research work.
- They are now seeking an additional 21M CRV (~$7M USD) grant from the community treasury which currently holds ~47.5M CRV, vested over 1 year, to continue further research and development of Curve software.
- Specifically, the grant will be used by Swiss Stake AG to:
–> Develop and promote Curve
–> Coordinate and engage third parties for Audits and Security Research
–> Develop and promote Software Development Kits (SDKs) and other software tools to interact with smart contracts for Curve
–> Build and support the growth of the Curve ecosystem
–> Create educational resources and organise events related to Curve
–> Create other resources, software, or other material to support the adoption of the Curve technology / Curve ecosystem
- Moreover, the grant conditions include:
–> Any CRV to be staked with liquid wrappers to generate additional yield
–> Enforce all software and IP developed to be released under open-source licenses
–> A portion of CRV received will be used to cover any payments required under income tax, capital tax, VAT and tax at source or withholding tax related to receiving the grant under Swiss Stake AG.
Our Take: The outlined grant request is in line with most major software contributors/developers of blue-chip DeFi protocols. However, there is a lack of clarity around deliverables as mentioned by the community.
Arbitrum (ARB)
Proposal: Extend Delay on L2Time Lock
Author: Arbitrum
Summary: This proposal suggests extending the delay for executing successful governance proposals on Arbitrum One from 3 to 8 days. The increased delay aims to enhance security by giving the Security Council more time to respond to malicious proposals and providing users with a longer exit window to withdraw their assets if they are concerned about proposed changes.
Key Points:
- Currently, Arbitrum’s governance process includes a Timelock of 3 days which adds a time buffer between the point at which a proposal has passed governance and when it can be executed onchain.
- This buffer allows users to react to proposed changes and gives time for the security council to assess if the proposal is malicious in nature and therefore, take necessary action to stop the proposal.
- This proposal requests to change the L2 Core Time Lock delay from 3 days to 8 days. The increased delay will allow users to withdraw their funds from the L2 before the change is enacted.
- Notably, the L2 Core Time Lock smart contract only affects upgrades to smart contracts and does not affect any transfer of funds from the DAO’s Treasury.
Our Take: While the delay might seem long within typical DAO structures, the 8-day delay makes a lot of sense from an L2 perspective as it allows users to request a withdrawal to Ethereum Mainnet (7 days) before any change can be enacted.
Votes
UXD Protocol (UXP)
Proposal: Proposal for UXD Winddown & Distribution of the Insurance Fund to Token Holders
Status: Live.
Created: Aug 19, 2024.
Ends: Aug 26, 2024.
Leading Consensus: Yes – 106.56M UXP (91.9% of total votes).
Summary: This vote ratifies the wind-down of the UXD Protocol, allowing for UXD redemptions to USDC and the distribution of the protocol’s $52.3M Insurance Fund to UXP token holders.
Mango DAO (MNGO)
Proposal: SEC Settlement Offer Proposal
Status: Finished.
Created: Aug 20, 2024.
Ends: Aug 23, 2024.
Leading Consensus: Yes – 387M MNGO (100% of total votes).
Summary: This vote ratifies a DAO settlement with the SEC following an investigation after the Mango Markets exploit in October of 2022. The SEC alleges the DAO and Mango Labs violated several Securities Acts and is demanding $223,288 in civil penalties, requests the DAO to cease all offers, sales, or resales of MNGO tokens on the protocol, and destroy or otherwise make unavailable all MNGO tokens in the DAO’s possession.
MakerDAO (MKR)
Proposal: LITE-PSM-USDC-A Phase 2 Setup
Status: Live.
Created: Aug 22, 2024.
Ends: Aug 24, 2024.
Leading Consensus: For – 110.1k MKR
Summary: This onchain vote is the second phase of MakerDAO’s PSM migration, moving all USDC reserved (but 200M) to the new PSM and increasing the old PSM’s trading fees to 0.01%.