Wintermute DeFi Governance Digest: January 2024 | Week 4

24 JAN 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Uniswap establishing a growth plan for Uni v3 deployments, Silo Finance deprecating the XAI stablecoin, Compound Finance deploying V3 on Scroll, and Index Coop replacing BTC2x-FLI and ETH2x-FLI with an updated product; along with votes from Arbitrum to establish the LTIP pilot’s Council Committee and Advisors, Uniswap deploying V3 on Rootstock, and Aave launching stkGHO.

Proposals

Uniswap (UNI)

Proposal: Uniswap Revitalization and Growth

Author: Getty

Summary: Getty has kicked off a discussion surrounding a plan to improve Uniswap’s market share on new and existing chains. The plan involves allocating UNI incentives, a partner program, and frontends.

Key Points:

• Since Uniswap V3 launched, little has been done to drive the growth of Uniswap deployments outside of Polygon, Optimism, and Arbitrum.


• There are currently 13 Uniswap V3 deployments, many of which are deployed on newer chains with less activity than the likes of Arbitrum or Optimism, however, it’s expected that a lot of these chains will grow over time.

• Thus, in order to grow Uniswap’s market share the DAO can:

–> Support the latest emerging EVM chains and secure Uniswap as the dominant DEX early on.

–> Further invest in current deployments where Uniswap is not a dominant player e.g., BNB Chain, zkSync, Base, etc.

• This can be achieved through a Uniswap V3 onboarding package that provides:

–> $250k in UNI dedicated to kicking off liquidity incentivization on the chain for 3 months.

–> This will target an APY of 10% on ~$10M in liquidity.

–> Incentives will be focused on ETH-USDC, WBTC-USDC, USDC-USDT, and one local pool.

–> A partner protocol/app to execute the UNI rewards program live from day one.

–> A uniswap V3 frontend live from day one.

• Once governance decides on a standard package, when a new chain wants a deployment the package can be included as part of the governance proposal.

Our Take: This is a great initiative that should have a strong impact on growing Uniswap’s market share on newer chains.

Silo Finance (SILO)

Proposal: Proposal: A plan to deprecate XAI Stablecoin

Author: aiham.eth

Summary: This proposal lays out the deprecation plan of XAI – Silo’s native stablecoin, as a result of lackluster adoption, imbalanced LP pools, costs, and peg instability.

Key Points:

• The XAI stablecoin was created for the purpose of seeding liquidity in Silo’s lending markets and generating revenue from the DAO.


• XAI was a multi-collateral stablecoin without a stability module that relied heavily on deep DEX liquidity to maintain its peg.

• The assumption was that users who borrow XAI would LP it into a XAI-FRAXBP Curve pool where the yield would be greater than the cost to borrow. This would then allow the DAO to earn revenue and grow the pool’s incentives and liquidity.


• However, what ended up happening was XAI borrowers would sell their XAI for USDC causing heaving pool imbalances. The lack of liquidity also deterred large borrows and made XAI’s peg unstable.


• Therefore, this proposal requests to deprecate XAI and use its budget to grow the lending protocol via other initiatives.

Our Take: This is an unfortunate situation for Silo, however, it clearly highlights the troubles of successfully launching a stablecoin and the necessity for a peg stability module.

Compound Finance (COMP)

Proposal: Proposal: Deploy Compound III on Scroll

Author: Scroll

Summary: This proposal requests to deploy COMP III on Scroll with USDC as the borrowable asset and WETH and wstETH as collateral assets.

Key Points:

• Scroll is proposing to deploy Compound V3 on Scroll mainnet which is an EVM-equivalent ZK-Rollup built upon Ethereum.


• Since Scroll’s Mainnet launch on October 17th, 2023, they’ve accumulated $30M in TVL, 10M+ transactions, 2.5M unique wallet addresses.

• The Compound V3 deployment on Scroll will feature USDC as the only borrowable asset with WETH and wstETH as collateral assets (Gauntlet recommendations).


• This deployment will be treated as an MVP deployment to ensure the correct functionality of Compound before scaling up.

Our Take: This is a great opportunity for both Compound and Scroll to continue their growth efforts. Furthermore, it’ll allow Compound to begin testing their deployments on EVM-equivalent ZK-Rollups.

Index Finance (INDEX)

Proposal: Launch ETH2x & BTC2x, Deprecate FLIs

Author: anthonyb.eth

Summary: This proposal requests to replace ETH2x-FLI and BTC2x-FLI with ETH2x and BTC2x – new deployments of Index’s leveraged token product offering but built natively on Index Protocol.

Key Points:

• Index Coop’s FLI products are built on Compound V2 and offer automatic 2x leverage to users via a token interface. However, Compound V2 is currently undergoing deprecation.


• Furthermore, the FLI tokens are deployed on Set Protocol V2 which is not upgradeable, leaving Index Coop with no way to transition the products easily to a new protocol.

• Index Coop has developed their own set of smart contract infrastructure that enables leverage strategies on Aave V3. They will use this infrastructure to develop the new ETH2x and BTC2x products that will then replace ETH2x-FLI and BTC2x-FLI.
  
  
• The new products will also be more gas efficient, offer higher loan-to-value parameters and contain better risk automation.


• BTC2x and ETH2x will have an annualized streaming fee of 3.65% as well as a 0.10% issuance and redemption fee, of which all revenue will go to Index Coop.


• ETH2x-FLI and BTC2x-FLI will go through a deprecation process where each product will be deleveraged and converted into their new respective products.

Our Take: We look forward to watching Index Coop’s transition from its old leveraged products to its new leveraged products and underlying infrastructure.

Votes

Arbitrum (ARB)

Proposal: Pilot program Council Elections

Status: Ended.

Created: Jan 17, 2024.

Ends: Jan 24, 2024.

Leading Consensus: GFX Labs, 404 DAO, Wintermute, GMX, Karel Vuong

Summary: After the successful Snapshot vote of the Long-term Incentive Program Pilot, the DAO is now voting on the election of 5 Council members who will be responsible for filtering through grant applications, creating a scoring rubric, and ensuring no misuse of grant funds.

Arbitrum (ARB)

Proposal: Pilot Program Advisor Elections

Status: Ended.

Created: Jan 17, 2024.

Ends: Jan 24, 2024.

Leading Consensus: JoJo, SEEDLatam Gov, Castle Capital

Summary: After the successful Snapshot vote of the Long-term Incentive Program Pilot, the DAO is now voting on the election of 3 Application Advisors who will be responsible for helping design grant application templates and offering feedback to applications during the application process.

Uniswap (UNI)

Proposal: Deploy Uniswap V3 on Rootstock

Status: Live.

Created: Jan 22, 2024.

Ends: Jan 27, 2024.

Leading Consensus: For – 37M UNI (100% of total votes).

Summary: This proposal requests to deploy Uniswap V3 on Rootstock, the first Bitcoin Sidechain. The Rootstock team have earmarked $3M in bootstrapping liquidity across various pools.

Aave (AAVE)

Proposal: stkGHO Activation

Status: Ended.

Created: Jan 20, 2024.

Ends: Jan 24, 2024.

Leading Consensus: For – 661.87k AAVE (100% of total votes).

Summary: This on-chain vote ratifies the launch of stkGHO which will allow GHO to be staked into Aave’s Safety Module. stkGHO will receive 50 AAVE/day for the next 3 months.