Wintermute DeFi Governance Digest: January 2025 | Week 5
28 JANUARY 2025 | RESEARCH | AUTHORED BY IGOR
This week’s proposals include Compound moving to the CAPO model for LST/LRTs, Frax investing $5M to WLF, and ENS swapping 6k ETH to USD to replenish reserves; along with votes from Compound to create new organizational units, Aave to onboard LBTC from Lombard and Across to implement prefill to improve UX.
Proposals
Compound Finance (COMP)
Proposal: [WOOF!] Correlated-Assets Price Oracle (CAPO)
Author: dmitriywoofsoftware
Summary: This proposal provides an idea of improving strategies for LST/LRT tokens by deploying correlated-assets price oracles, similar to what Aave did last year.
Key Points:
- Oracles are essential for most lending protocols because, if designed poorly they can lead to liquidation cascades.
- Compound experimented a lot with various oracles, starting with a fully centralized feed and moving towards the Chainlink integration.
- This proposal requests to implement a CAPO that will limit the max exchange rate growth from the staking rate spike.
- After the implementation, this oracle will protect Compound from upward depegs.
Our Take: CAPO is a great solution to improve capital efficiency and decrease liquidation risks for correlated LST/LRT markets.
Frax (FRAX)
Author: Oldpaul
Summary: This proposal suggests investing $5M in World Liberty Financial and possibly deploying $5M more later to position Frax DAO as a partner.
Key Points:
- World Liberty Financial is an Aave fork launched by the Trump family with a live token sale of protocol token – WLF.
- Part of the sale proceeds were already used to buy assets such as WBTC, ETH, ENA, AAVE, TRX, and LINK.
- Some of the mentioned protocols also have partnerships with the Trump project.
- The rationale of this proposal is to improve visibility and distribution, influence WLF DAO and potentially realize the upside of this deal.
- However, the Frax community is not keen on this idea for multiple reasons, including WLF’s high valuation.
Our Take: Although a better affiliation with the “Made in USA” ecosystem could benefit Frax, the valuation is high enough to provide additional arguments as to why it is worth paying this premium.
ENS DAO (ENS)
Proposal: [Temp Check] Convert 6,000 ETH to USDC for DAO Operating Expenses
Author: karpatkey
Summary: This proposal requests the conversion of 6k ETH to USDC to fulfill project reserves, that were utilized after the last swap from Feb 2023.
Key Points:
- ENS is building its own chain, which needs funding, on top of its current infrastructure.
- The current monthly burn is $1.46M, and given that reserves are depleted, there is a need to execute at least the first 1k ETH TWAP.
- Karpatkey will manage the operation using CowSwap in two TWAPs, with the second one will be done over three months in 90 parts.
- Given the current ETH price, even though less ETH is planned to be sold, the USDC reserve should be larger than previously.
Our Take: Treasury management is an important part of the DAO lifecycle, especially when there is an immediate need to fund operations.
Votes
Compound (COMP)
Proposal: Growth Program Organizational Structure 2025
Status: Failed.
Created: Jan 20, 2025.
Ends: Jan 23, 2025.
Leading Consensus: Option 2: Maintain the Status Quo – 592.1k COMP (88.1% of total votes).
Summary: This vote proposed to create an organizational structure by making a bunch of subDAOs with unclear KPIs and a sharky bonus structure, so the community showed disagreement.
Aave (AAVE)
Proposal: Onboard LBTC & Enable LBTC/WBTC liquid E-Mode on Aave v3 Core Instance
Status: Finished.
Created: Jan 20, 2025.
Ends: Jan 24, 2025.
Leading Consensus: For – 739.6k (99.9% of total votes).
Summary: This vote onboarded LBTC (Lombard BTC) to Aave with activation of LBTC/WBTC liquid E-Mode with 80/800 borrow/supply cap.
Across (ACX)
Proposal: Upgrade Across to support Non-EVM and Prefills
Status: Live.
Created: Jan 21, 2025.
Ends: Jan 28, 2025.
Leading Consensus: For – 22.4M (100% of total votes).
Summary: Although, this proposal doesn’t cover details about non-EVM implementations, it’ll unlock prefills, where users can receive funds before depositing assets for bridging, which should improve UX.