Wintermute DeFi Governance Digest: June 2024 | Week 2
10 JUNE 2024 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include Jito introducing a Validator Blacklist, Synthetix integration Pyth’s Express Relay, and Astar Network burning 5% of the ASTR supply; along with votes from Arbitrum to launch their 200M ARB Gaming fund and Aave launching a GHO Safety Module on Arbitrum.
Proposals
Jito (JTO)
Proposal: Authorization to Blacklist Validators for Mempool Participation and Other Malicious Behaviors
Author: Andrewt
Summary: This proposal requests to empower a working group to blacklist validators from the Jito Stake Pool who engage in adverse behavior that is harmful to the Solana ecosystem such as private mempool participation and vote lagging.
Key Points:
- An investigation done by Jito Labs found that ~10% of Jito Stake Pool validators are currently engaged in private mempool participation, among other adverse behaviors in the ecosystem.
- This proposal requests to create a working group of 4-10 community members and validators to blacklist validators from the Jito Stake Pool who are found to engage in harmful behavior such as private mempool participation, vote lagging, commission rugging, and any behavior deemed not in the best interest of the Jito network and broader Solana ecosystem.
- Such behavior reduces rewards to JitoSOL stakers and promotes centralization due to its undisclosed nature.
- By implementing a blacklist, network integrity will improve, while also rewarding positive-sum behavior that strengthens the trust in the JitoSOL ecosystem.
- Blacklisted validators will have the right to appeal to the working group for re-evaluation.
- There will be a three-strike system: first-time offenders will be blacklisted for 6-months, second-time offenders for nine months, and third-time offenders permanently blacklisted.
Our Take: We commend Jito’s efforts to promote a positive-sum network and protect the integrity of the JitoSOL network. This is a great first step and we look forward to seeing its results.
Synthetix (SNX)
Proposal: SIP-391: Liquidations on Synthetix using Pyth’s Express Relay
Author: Yaser
Summary: Douro Labs is proposing Synthetix adopt Pyth’s Express Relay to provide a better liquidation mechanism for liquidity providers on Synthetix.
Key Points:
- Pyth’s Express Relay allows DeFi protocols to independently auction off the rights to liquidations via its own order flow auction, reducing the value leak to arbitrageurs and block miners.
- This proposal requests for Synthetix to integrate Pyth’s Expres Relay on Base to convert margin positions that are eligible for liquidation to USDC through the protocol’s network of Searchers.
- For example, when a user’s position becomes eligible for liquidation, their margin is offered to Express Relay for conversion to USDC at the current Pyth price or at a discount.
- Searchers will then compete over the liquidation by bidding a premium denominated in USDC and the winning searcher with the highest premium amount pays the premium and USDC in exchange for a user’s margin.
- The premium + USDC that is paid by the Searcher is then redistributed to LPs resulting in better user experience as LPs no longer have to deal with multiple assets.
Our Take: Pyth’s Express Relay should have a notable impact on improving user experience for liquidity providers as they no longer have to convert yield earned in various assets.
Astar Network (ASTR)
Proposal: Astar Foundation burning proposal of 5% of Astar genesis allocation
Author: Maarten
Summary: This Astar Foundation is considering burning its parachain auction reserve (5% of Astar’s genesis allocation) as Polkadot’s upgrade phases out crowdloans.
Key Points:
- Polkadot will soon undergo a network upgrade – Agile Coretime, which will see the concept of Crowdloans phased out.
- At its genesis, the Astar network set aside a % of its ASTR tokens as a reserve to secure enough DOT for its Parachain Crowdloan.
- Given that Crowdloans are being phased out, this proposal requests to burn these reserves which would reduce the total supply of ASTR by 5%.
- This equates to 350M ASTR tokens which is roughly worth $30M USD.
- The burn is expected to reduce inflationary pressures and potentially increase the token’s market value while enhancing the attractiveness of staking rewards.
- Community discussion is expected to last for 3 weeks before an on-chain vote will be made to determine the outcome of the proposal.
Our Take: While burning tokens may make sense at face value, more often than not, protocols are better of repurposing these tokens or retaining them in the treasury for future expenses
Votes
Arbitrum (ARB)
Proposal: Catalyze Gaming Ecosystem Growth on Arbitrum
Status: Finished – Passed.
Created: May 22, 2024.
Ends: June 8, 2024.
Leading Consensus: For – 162.41M (76.3% of total votes).
Summary: This proposal requests the creation of the Arbitrum Gaming Catalyst Program (GCP) designed to increase awareness and adoption of Arbitrum/Orbit/Stylus by builders and players in the gaming community. GCP will have a budget of 200M ARB over three years to expand the gaming ecosystem on Arbitrum.
Aave (AAVE)
Proposal: [TEMP CHECK] Activate and Deploy GHO Safety Module on Arbitrum
Status: Finished – Passed.
Created: Jun 4, 2024.
Ends: Jun 7, 2024.
Leading Consensus: YAE – 653k AAVE (100% of total votes).
Summary: This proposal requests to launch a GHO Safety Module (GSM) on Arbitrum to provide an additional layer of protection to the protocol in case of shortfall events.