Wintermute DeFi Governance Digest: January 2023 | Week 5

1 FEB 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Frax Finance introducing a 10% protocol fee on Fraxlend, Index Coop buying out Scalara as part of their legacy FLI deprecation plan, the dYdX Foundation requesting $30M in funding, and Uniswap deploying V3 on Zora; along with a vote from Aave to list sFRAX on Aave V3 Ethereum.

Proposals

Frax Finance (FXS)

Proposal: Proposal for Implementing a 10% Protocol Fee on Fraxlend

Author: Amirnader

Summary:  This proposal requests to introduce a 10% protocol fee on Fraxlend – Frax Finance’s lending platform. This will align Fraxlend closer to industry standards/competitors.

Key Points:

• Since its inception, Fraxlend has operated without a protocol fee, focusing on growth and user acquisition.


• With TVL now at $300M, this proposal requests to add a 10% protocol fee bringing Fraxlend in line with other protocols like Aave.

• Currently, Frax earns revenue on Fraxlend through their AMO operations, which has earned the DAO 1.86M FRAX since inception.


• If the protocol fee were to be approved, Frax would begin earning revenue on all positions within Fraxlend and not just their AMOs.


• Furthermore, all revenue generated from this fee will contribute to the stability and growth of the FRAX stablecoin, which includes bringing FRAX to a 100% Collateralization Ratio.

Our Take: Fraxlend has seen some great growth and they’re in a good position to begin experimenting with a protocol fee.

Index Coop (INDEX)

Proposal: Buyout FLIs from Scalara

Author: Allan.g

Summary: This proposal requests to buyout Index Coop’s FLI products from Scalara – the methodologist who helped create them.

Key Points:

• Index Coop recently announced their deprecation of legacy FLI products that were built on Compound V2. These FLI products give users leverage to tokens such as BTC and ETH through a simple token interface.


• The FLI products were constructed in a collaboration between Index Coop and Scalara with a 60/40 revenue split, respectively.

• The legacy FLI products are being replaced with upgraded versions of which Index Coop was the sole developer and maintainer. This also means Index Coop will receive 100% of the revenue from these new products.


• However, as users of the legacy FLIs will be automatically converted to the new products, Index Coop is proposing to buyout Scalara for 120k USDC given they played a role in the success of the legacy products.

Our Take: We support Index Coop’s buyout of Scalara and look even more forward to seeing how Index Coop grows their new FLI products.

dYdX (DYDX)

Proposal: dYdX Foundation Fundraising Proposal

Author: dYdX Foundation

Summary: The dYdX Foundation is requesting $30M in DYDX to fund their operations for an additional 36-month term. Their new term will continue to focus on enhancing governance, dYdX Chain integrations, adoption, and marketing.

Key Points:

• The dYdX Foundation was established with the launch of dYdX V3 – the predecessor to the dYdX Chain, to support and grow the dYdX ecosystem.


• Their North Stars include Market Share, Active Traders, and Protocol Revenue for the dYdX ecosystem.


• Before this fundraising event, the dYdX Foundation was responsible for the introduction of ethDYDX, go-to-market, growth, and business development efforts in numerous jurisdictions, DAO frameworks such as the Guernsey purpose trust, user support, education and documentation, legal, marketing, IP protection, and the enablement of the dYdX Chain.


• The dYdX Foundation is now raising $30M in capital to continue fulfilling its statutory purpose for the next 36 months and will focus on:

–> Enhancing the dYdX Chain’s governance velocity, impact, and DAO enablement

–> Supporting technical and strategic integrations for the dYdX chain infrastructure and applications

–> Help scale the adoption of the dYdX Chain

–> Enhance global marketing and communications around the dYdX brand

• The dYdX Foundation currently consists of 12 members across divisions such as governance, strategy, business development, growth, marketing, and core operations.

Our Take: The dYdX Foundation continues to play an instrumental role in the adoption and advancement of dYdX and the dYdX Chain. dYdX remains in a dominant position as the leading DEX however, there is still so much more to achieve on the governance, community, and growth side and the dYdX Foundation is the perfect steward.

Uniswap (UNI)

Proposal: Deploy Uniswap v3 on Zora

Author: she256

Summary: This proposal requests to deploy Uniswap V3 on Zora – an ETH L2 built with the OP stack.

Key Points:

• Zora Network is an ETH L2 built with the OP Stack to bring media onchain and has grown to more than 90k weekly active users who drive 600k transactions every week.


• Zora is currently supported by industry-leading infrastructure partners such as Rainbow, Opensea, Zerion, Dune, LayerZero and many more; cultivating a bustling ecosystem of creators, collectors, and developers.

• Zora network brings a uniquely creative and NFT-native audience to the Uniswap Ecosystem. Many of the users on Zora are artists, collectors, and builders, who need a way to convert their Protocol Rewards to stablecoins and other assets.


• Currently, Zora hands out protocol rewards to those who contribute to their growing ecosystem.


• A deployment of Uniswap V3 on Zora will be instrumental to users being able to convert protocol rewards to various assets such as stablecoins.


• Uniswap would be the first DeFi protocol on the Zora network, giving it a first-mover advantage.

Our Take: This is a great opportunity for Uniswap to serve an active market with a unique audience that desires the ability to swap from ETH to other assets like stablecoins.

Votes

Index Coop (INDEX)

Proposal: IIP-181: Buyout FLIs from Scalara

Status: Ended.

Created: Jan 26, 2024.

Ends: Jan 29, 2024.

Leading Consensus: FOR – 1M INDEX (100% of total votes).

Summary: This vote ratifies the buyout of Scalara – a methodologist for Index Coop’s legacy FLI products. Scalara will receive 120k USDC for their efforts in growing and creating successful legacy products such as ETH2x-FLI and BTC2x-FLI.

Aave (AAVE)

Proposal: [ARFC] Add sFRAX on Ethereum V3

Status: Ended.

Created: Jan 27, 2024.

Ends: Jan 30, 2024.

Leading Consensus: YAE – 582k AAVE (99.99% of total votes).

Summary: This proposal requests to add sFRAX (staked FRAX) to Aave Ethereum V3. sFRAX is an ERC-4626 staking vault that distributes a portion of the Frax protocol yield. sFRAX APY attempts to roughly tack the interest on reserve balances (IORB) rate of the US Federal Reserve.