Wintermute DeFi Governance Digest: December 2024 | Week 1

4 DECEMBER 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Ethena proposing conditions for the ENA fee switch, Berachain requesting a Morpho Blue license, and GMX allocating 90% of protocol fees to buying back GMX; along with votes from Instadapp approving a $4M investment from Aave DAO and CoW DAO creating a delegation program.

Proposals

Ethena (ENA)

Proposal: ENA Fee Switch Parameters

Author: Ethena Labs Research

Summary: Following the general approval of the sENA “fee switch” proposal earlier this month, the Risk Committee has put forward Success and Risk metrics for the protocol to achieve before activating the Fee Switch.

Key Points:

• Wintermute recently proposed the activation of an ENA fee switch which was accepted by the Risk Committee.


• However, the proposal requested for the Risk Committee to prepare Risk and Success metrics that the protocol should achieve before activating the fee switch and directing protocol revenue to sENA.

• This proposal outlines the Success Metrics to achieve, specifically:

–> USDe circulating supply: > $6b

–> Cumulative protocol revenue: >$250m lifetime (current $166m)

–> CEX adoption: USDe integrated on 4 of the top 5 centralized exchanges by derivatives volumes

• And the Risk Metrics:

–> sUSDE APY spread vs benchmark rate: between 5.0 to 7.5% over the benchmark rate.

–> Reserve Fund sizing: Assessed monthly to determine if it’s adequately sized.

• If all 3 success metrics are hit, the Risk Committee will then assess the two risk metrics on an ongoing basis and determine whether or not to distribute a portion of revenue to sENA in some fashion.


• The exact split of protocol revenue directed to sENA is still undetermined and more details will follow soon.

Our Take: We welcome the Success and Risk metrics provided by the Risk Committee as they strike a good balance; pushing the DAO to increase growth while being aware of USDe’s competitiveness and security.

Morpho (MORPHO)

Proposal: Morpho Blue license

Author: Berachain Foundation

Summary: Berachain Foundation is requesting the Morpho DAO to grant Berachain a non-exclusive license of Morpho Blue.

Key Points:

• Berachain is an EVM-identical Layer 1 blockchain built on the ComeBFT, featuring a novel Proof-of-Liquidity (PoL) consensus mechanism.


• Berachain offers full compatibility with Ethereum tools and smart contracts while providing enhanced scalability and efficiency through its BeaconKit framework.

• The Berachain Foundation recognizes Morpho Blue’s emergence as a cutting-edge lending protocol and proposes launching Morpho Blue on Berachain and integrating it into their Proof-of-Liquidity environment.


• Thus, the Berachain Foundation is requesting a non-exclusive license of Morpho Blue in return for paying a license fee to the Morpho DAO in the form of USDC and BERA tokens, totaling low 7 figures.


• The license will allow Berachain to fork and operate Morpho Blue code as long as needed and includes some support from the Morpho team.

Our Take: Morpho Blue has seen great success and allowing for a friendly fork will allow its infrastructure and technology to penetrate across other ecosystems with little cost.

GMX (GMX)

Proposal: GMX: Increasing Buyback & Distribute Fee Coverage from 27% to 90%

Author: Gmsolq

Summary: This proposal requests to increase GMX’s Buyback & Distribute using protocol fees from 27% to 90%, with 63% of fees allocated to incentivizing liquidity providers.

Key Points:

• GMX recently transitioned from a Buyback ETH and distribute to a Buyback GMX and distribute.


• Which saw 27% to 30% of GMX V1 and GMX V2 protocol fees allocated to buying back GMX and distributing it to GMX stakers.

• The remaining 73% of fees generated from GMX V2 are allocated as follows:

–> 10% to the GMX Treasury

–> 63% to GM Pools (auto-compounded)

• Over the past 30 days, GMX’s buyback has resulted in:

–> Total GMX Bought Back: 103,764 GMX (5% of circulating supply)

–> Total Value: $3,341,200

• This proposal requests to divert the 63% of fees that go towards GM Pools to buying back GMX (through the Treasury) and distributing it to GM liquidity providers.


• This will result in a 3.33x increase in GMX buyback pressure which based on last month’s performance totals ~$8.5M GMX bought back monthly.

Our Take: While this might lead to increased demand pressure for GMX it also increases the reliance on exogenous LPs as protocol fees are diverted from protocol owned GM liquidity.

Votes

Instadapp (INST)

Proposal: Aave Alignment with $INST Sale

Status: Finished.

Created: Nov 29, 2024.

Ends: Dec 2, 2024.

Leading Consensus: For – 4.7M INST (100% of total votes).

Summary: This proposal approves allocating $4M worth of $INST ($350M FDV) from the Treasury to the Aave DAO in the form of a strategic investment. This initiative aims to strengthen the relationship with the Aave DAO. The purchased tokens will be used to incentivize GHO liquidity on Fluid and allow Aave to participate in Governance.

CoW DAO (COW)

Proposal: CIP-53: Delegation Program Initiation

Status: Live.

Created: Nov 28, 2024.

Ends: Dec 5, 2024.

Leading Consensus: For – 38M vCOW (100% of total votes).

Summary: This proposal introduces a CoW DAO Delegation program through Snapshot. While anyone can become a delegate, the GrantsDAO committee will be responsible for vetting “Recognised Delegates” who over time, could receive remuneration based on their success and contribution.