Wintermute DeFi Governance Digest: August 2024 | Week 2
12 AUGUST 2024 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include EtherFi upping their ETHFI buybacks from 5% to 25% of protocol revenue, Compound Finance exploring a staked COMP implementation that will receive 30% of protocol revenue, MakerDAO cautiously stopping new WBTC collateral growth; along with votes from RocketPool to rework their tokenomics and Arbitrum implementing the first stage of their staked ARB proposal.
Proposals
EtherFi (ETHFI)
Proposal: Increase to Buyback and LP Seeding Allocation
Author: EtherFi Admin
Summary: This proposal requests to increase the monthly buyback of ETHFI tokens using protocol revenue from 5% to 25% and improve ETHFI liquidity through Arrakis Finance’s automatic rebalancing vaults.
Key Points:
- EtherFi recently passed a Proposal to begin purchasing ETHFI with up to 50% of protocol revenue, starting with 5%. The purchased ETHFI is then used to build the DAO’s treasury and seed liquidity on Curve.
- This proposal requests to increase the amount of protocol revenue allocated to repurchasing ETHFI from 5% to 25%, creating stronger demand for the token and further accelerating the DAO’s treasury and onchain ETHFI liquidity.
- This proposal is also requesting to move ETHFI liquidity positions to Arrakis Finance which offers automated rebalancing and strategy adjustments, allowing liquidity to adjust to market conditions.
Our Take: It’s nice to see an increase in ETHFI buybacks. With EtherFi’s $5.257b TVL these buybacks should notably increase onchain liquidity and the DAO’s treasury.
Compound Finance (COMP)
Proposal: Potential Design of Staked COMP
Author: Bryan Colligan
Summary: This proposal introduces ideas around a staked COMP product enabling staked COMP holders to receive 30% of protocol revenue alongside other features and requirements.
Key Points:
- Following a verbal agreement with Compound Delegates and Humpy/GoldenBoyz regarding a resolution to the highly controversial GOLDComp proposal, the DAO is required to begin exploring a staked COMP solution that receives 30% of the protocol’s revenue.
- This proposal explores such a solution, providing a first step to a viable staking mechanism.
Methodology: Bryan’s methodology assumes a 30% distribution on all current accrued protocol reserves and no future additional fee revenue.
- Specifically, staked COMP will have the following features:
–> Receive 30% of protocol revenue
–> A 28-day staking and unstaking period
–> The ability to instantly unstake COMP with a 5% exit fee
–> Delegates can set a commission rate to earn a % of fees from their delegated COMP, however, need to maintain a minimum 80% voting participation rate
–> An auto-compounding wrapper of staked COMP that uses rewards to buy back and stake additional COMP tokens
–> Cross-chain deployments of staked COMP
- Based on previous protocol revenue and assuming 10% of the COMP supply is staked we could see staked COMP yields ranging from 40% to 60% annually.
Our Take: The proposed staked COMP implementation provides some interesting ideas some of which should work well. We should see a notable increase in COMP attention and governance participation.
MakerDAO (MKR)
Proposal: WBTC Changes and Risk Mitigation – 10 August 2024
Author: Monet Supply
Summary: Following BitGo’s announcement to transfer control of WBTC to a joint venture with BiT Global which results in custody changes, BA Labs proposes limiting WBTC growth and exposure within MakerDAO.
Key Points:
- On Friday 9th of August, BitGo announced that it will move its WBTC business to a multi-jurisdictional and multi-institutional custody solution in a joint venture with BiT Global.
- The change includes a partnership with Justin Sun and the Tron ecosystem, both of which will likely have significant influence and control over the joint venture managing WBTC.
- Monet Supply/BA Labs Team states that the situation is similar to Justin Sun’s takeover of TUSD which has since seen market deterioration in operational processes and transparency including the resignation of previous management and suspension of real-time proof of reserves.
- TUSD has also suffered notable depegs due to disruptions in its redemption service.
- Furthermore, BitGo’s recent failed acquisition by Galaxy Digital where Galaxy backed out for undisclosed reasons and now the unexpected decision to divest from the WBTC product may indicate BitGo is undergoing financial distress.
- While there are acknowledgments that this is all largely speculative, the BA Labs team is recommending erring on the side of caution given the major role WBTC plays within DeFi.
- Therefore, this proposal requests to set all Debt Ceilings for WBTC vaults to 0, disable WBTC borrowing and reduce WBTC LTV to 0% on SparkLend to stop further WBTC growth within MakerDAO and its ecosystem.
Our Take: BA Lab’s response is highly speculative and some could see it as an overreaction, however, we can understand the need to be extremely cautious and proactive given DAI’s influence in DeFi and the amount of WBTC collateral that backs it.
Votes
RocketPool (RPL)
Proposal: RPIP-49 Tokenomics Rework
Status: Live.
Created: Aug 8, 2024.
Ends: Aug 22, 2024.
Leading Consensus: For – 20k RPL (99.45% of total votes).
Summary: This vote ratifies a series of core proposals for RPIP-49 which focus on reworking Rocket Pools tokenomics and core smart contract architecture. Changes include smaller ETH bonds, Megapools to make adding validators and distributing rewards more gas efficient, adjustable revenue split for rETH, node operators, voters, and a surplus revenue mechanism.
Arbitrum (ARB)
Proposal: ARB Staking: Unlock ARB Utility and Align Governance
Status: Live.
Created: Aug 9, 2024.
Ends: Aug 16, 2024.
Leading Consensus: For – 12M ARB (99.75% of total votes).
Summary: This proposal requests to develop an ARB staking mechanism that distributes fees from the Arbitrum ecosystem to ARB stakers. The mechanism includes incentives for delegates and a Liquid Staking Token.