Wintermute DeFi Governance Digest: August 2024 | Week 3

19 AUGUST 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include dYdX launching a new 6-month $20M incentive program for the launch of dYdX Unlimited, Frax Core Team requesting a 13M FRAX budget for the next year of operations and development of the Frax ecosystem, and Optimism upgrading their Fraud Proof Architecture after audit findings; along with votes from Jito allocating 1M JTO to a bug bounty program, Arbitrum launching a 250M ARB treasury diversification program, and Uniswap enabling new fee tiers on Base.

Proposals

dYdX (DYDX)

Proposal: [DRC] Launch Incentive Program Re-launch Proposal

Author: Chaos Labs

Summary: Chaos Labs is requesting an additional $20M in DYDX rewards to rerun a new 6-month incentive program with the launch of dYdX Unlimited.

Key Points:

• Chaos Labs previously designed and ran a 6-month Launch Incentives Program to help bootstrap dYdX V4, following a relatively successful program, the community also approved an extension for an additional $10M in DYDX rewards.


• The extension is now coming to an end on August 28, however, dYdX recently announced dYdX Unlimited which allows:

–> Permissionless market listings

–> MegaVault liquidity

–> Affiliates program

–> Permissioned keys

• Thus, Chaos Labs is requesting to rerun a new 6-month $20M incentive program to retain and attract users to ensure a successful launch of dYdX Unlimited.


• In the 9-months of Chaos Labs’ current incentive program, dYdX V4 has seen:

–> Over $206bn in trading volume across 116 markets

–> Over $34M in net fees while distributing $25M in incentives

–> Over 14,000 active traders and 30 different market makers

–> A weekly trader retention rate of 50% to 80%

Our Take: Chaos Labs’ prior incentive program has successfully retained traders and market makers in a competitive market. A new incentive program aligned with bootstrapping dYdX Unlimited is important to continue attracting new users.

Frax Finance (FRAX)

Proposal: Frax Finance Annual Budget Request (2024 – 2025)

Author: Amirnader, Frax Core Team

Summary: The Frax Core Team are requesting 13M FRAX for the next year of development. The budget is focused on 6 key areas: Development and Operations, Security, Grants, Reserve Emergency Fund, Legal & Compliance, and Fraxtal Growth.

Key Points:

• The Frax Core Team is requesting a 13M FRAX budget for the next year of growing and developing the Frax Ecosystem.


• Frax is entering a new era with the launch of Fraxtal which will be the main focus of growth and development under this budget.


• Notably, the 13M FRAX is a maximum cap on expenditure and the Frax Core Team only spent ~7M FRAX out of their 9M FRAX budget for the prior year.


• The proposed budget breakdown:

Our Take: The proposed budget seems reasonable, clear, and in line with other large DeFi protocols.

Optimism (OP)

Proposal: Upgrade Proposal #10: Granite Network Upgrade

Author: Mofi

Summary: This proposal is an upgrade in response to security vulnerabilities identified during a series of third-party security audits regarding Optimism’s Fault Proof architecture.

Key Points:

• During a series of third-party audits conducted by Spearbit, Cantina, and Code4rena; 2 high, 3 medium, and 7 low severity issues were identified involving Optimism’s Fraud Proofs architecture.


• While none of the vulnerabilities have been exploited and users’ assets are not and were never at risk, this proposal requests to upgrade a series of smart contracts related to Optimism’s Fraud Proof architecture and invoke a hard fork to address certain issues found from the audit.


• If this vote passes, the Granite upgrade will be scheduled for execution on September 10th at 16:00:01 UTC starting with a pre-state update, followed by the Hardfork, and lastly, updating L1 smart contracts to the new versions that contain the audit fixes.

Our Take: This is great work by the Optimism team, auditors, and contributors, bringing Optimism closer to a highly secure Stage 1 L2.

Votes

Jito (JTO)

Proposal: JIP-5: Bug Bounty Program

Status: Live.

Created: Aug 15, 2024.

Ends: Aug 20, 2024.

Leading Consensus: Yes – 10.64M JTO (100% of total votes).

Summary: This proposal requests to send 1M JTO to a Jito Foundation-controlled address for payouts related to a bug bounty program.

Uniswap (UNI)

Proposal: [Temp Check] Activate 2, 3, 4 bps fee tiers on Uniswap v3 on Base

Status: Finished.

Created: Aug 15, 2024.

Ends: Aug 18, 2024.

Leading Consensus: Yes, activate additional tiers – 19M UNI (88.21% of total votes).

Summary: Uniswap V3’s volume market share on Base has seen a noticeable decrease as a result of Aerodrome introducing lower fee tiers on major pools. As a result, Uniswap is considering activating 2, 3, and 4 bps fee tiers to begin experimenting and potentially win back market share.

Arbitrum (ARB)

Proposal: Strategic Treasury Management on Arbitrum

Status: Live.

Created: Aug 16, 2024.

Ends: Aug 23, 2024.

Leading Consensus: For – 30M ARB (55.85% of total votes).

Summary: This vote aims to establish the Arbitrum Strategic Treasury Management Group tasked with allocating and diversifying 250M ARB from the DAO’s treasury to ensure long-term sustainability & ecosystem growth.