Wintermute DeFi Governance Digest: June 2024

Wintermute DeFi Governance Digest: June 2024 | Week 3

17 JUNE 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Fantom establishing an airdrop campaign for the launch of Sonic, Balancer V3 vision and expected launch date, Aave deploying a V3 instance for Lido assets; along with a vote from Arbitrum to establish a 1.9M ARB incentive program for Kwenta users and their migration to Arbitrum.

Proposals

Fantom (FTM)

Proposal: Governance Vote 2: Airdrop & Unique Burn Mechanic

Author: Sam

Summary: This proposal requests to mint additional $S tokens (increasing the $FTM supply) for an airdrop campaign targeted at bootstrapping the upcoming Sonic network.

Key Points:

The Fantom Foundation recently announced their plans to launch a new, high-throughput chain named Sonic (ticker $S). Sonic will be a Layer-1 blockchain connecting to Ethereum via a bespoke Layer-2 bridge.

Holders of $FTM will be able to migrate their tokens 1:1 for $S at Genesis.

This proposal requests to mint additional tokens based on $FTM’s FDV to establish an airdrop campaign, targeted at bootstrapping the Sonic network.

Voters can either deny the proposal, approve 4% additional tokens, or 6% additional tokens.

The airdrop will reward historical Fantom Opera users based on various activities and stakeholder groups e.g., LPs, Validators, Delegators, LST holders, NFT holders & users, etc.

To bootstrap activity on the new Sonic chain, the airdrop will also reward developers, users, LPs, Validators, and Stakers.

The airdrop is expected to happen 6+ months after the launch of Sonic and it’ll feature a linear decay vesting schedule.

Users will be able to claim 25% of their total airdrop initially while the remaining 75% will be linearly vested over 270 days in the form of an fNFT.

At any point during the vesting period, a user can claim their remaining allocation, however, they will forfeit a portion of it depending on how many days remain in their vesting period. The forfeited tokens are then burnt.

By utilizing an NFT standard, users can freely sell the portion of their airdrop that is still vesting without affecting the supply of the token.

Our Take: Cold-starting a new blockchain without token incentives is extremely difficult. The outlined proposal seems well-thought-out with a decent claim mechanism.

Balancer (BAL)

Proposal: Balancer v3: My Thoughts for the Future of Balancer

Author: Fernando

Summary: This proposal outlines the vision of Balancer V3 which focuses on fungible liquidity, stablecoin and long-tail token liquidity, yield-bearing liquidity, hooks, LVR mitigation, and developer experience.

Key Points:

Balancer’s North Star remains the same as it aims to derive success from the protocols and products built on its platform.

Balancer V3 will remain a platform for AMM experimentation and innovation, allowing custom pools to iterate on existing or define entirely new swap invariants.

V3’s deployment will focus on:

–> Fungible Liquidity: This enables composability and ensures equality across all LPs in a pool.

–> Stablecoin & Long-tail Token Liquidity: New features that will optimize the handling of stablecoin and long-tail token liquidity, which is hard to do with Concentrated Liquidity variants.

–> Yield-Bearing Liquidity: New features to further optimize and simplify yield-bearing liquidity, allowing users to earn additional returns on their deposited assets.

–> Hooks: That introduces a new approach to managing a pool’s execution logic, enhancing operations, and allowing developers to customize specific pool behavior.

–> LVR Mitigation: This introduces new technical capabilities for developers to push all on-chain actions towards a fair and MEV-minimising manner.

–> Developer Experience: Balancer V3 will empower developers to rapidly create, integrate, and attract users and liquidity for new AMM logic.

Specifically, V3 will direct 100% of LP liquidity to on-chain yield markets while maintaining a small buffer of yield and non-yield assets to facilitate trading. This reduces complexity for users while also reducing on-chain operational costs associated with swapping.

While technical details remain rather sparse, the launch of Balancer V3 is expected in Q4 2024 after extensive security reviews and audits.

Our Take: Balancer’s upcoming launch of V3 is very exciting for the protocol and we look forward to seeing its release in Q4. Their proposed scope focuses on key DeFi advantages while being aware of current issues.

Aave (AAVE)

Proposal: [TEMP CHECK] Deploy a Lido Aave v3 Instance

Author: ACI

Summary: This proposal requests to support the launch of Lido Alliance by deploying an Aave V3 instance focused on the Lido ecosystem.

Key Points:

The Lido Alliance is a framework for the Lido DAO to offer support and endorsement for protocols with the same focus of safely decentralizing Ethereum validation.

At the very core of this is the underlying technology of Lido and stETH in which future changes of the protocol is directly aligned with the Lido Alliance.

Given Aave and Lido’s historical and mutually beneficial relationship, this proposal seeks to deploy an Aave V3 instance that purely focuses on the Lido ecosystem.

The Aave V3 instance will be designed and tuned to support stETH leverage loopers and will only include wstETH and wETH assets with E-mode enabled.

Lido will commit to an incentive program and ecosystem support for this instance to bootstrap liquidity and promote additional programs within the Lido Alliance.

The borrow cap of wETH will be set to 90% of supplied wETH with updates tightly controlled by the risk steward.

E-mode LTV & LT will be 50 bps above all Aave implementations, making it the most efficient loop venue in the industry.

wstETH RF will be lowered to 5% on all networks and there will be a Merit boost to attract wETH on both ETH, Lido Aave & ARB markets.

Our Take: This is an interesting proposal that makes sense. Aave is more of a general purpose borrow/lend market that shares risk across multiple markets, therefore, reducing how aggressive they can be with certain risk parameters.

Votes

Fantom (FTM)

Proposal: Airdrops for Early and New Adopters + Unique Linear Burn Mechanic

Status: Live.

Created: Jun 10, 2024.

Ends: Jul 17, 2024 or as soon as consensus reaches 55%.

Leading Consensus: Mint 6% of FDV for Airdrops (98.3% of total votes).

Summary: This proposal requests to mint additional FTM/S to establish an airdrop campaign for the upcoming launch of Sonic – a new Layer 1. The airdrop will be used to reward Fantom Opera users and new users of the Sonic chain to bootstrap activity.

Arbitrum (ARB)

Proposal: Kwenta x Perennial: Arbitrum Onboarding Incentives

Status: Live.

Created: Jun 8, 2024.

Ends: Jun 25, 2024.

Leading Consensus: For – 52.36M ARB (98% of total votes).

Summary: This proposal requests 1.9M ARB to focus on onboarding new users to Kwenta on Arbitrum (targeting users from Optimism and Base). The incentives will be used to cover migration costs, retaining users, bootstrapping liquidity, and rebating trading fees.