Wintermute DeFi Governance Digest: March 2024 | Week 2
13 MAR 2024 | RESEARCH | AUTHORED BY CALLEN
Proposals
MakerDAO (MKR)
Proposal: Accelerated Proposal: Rate System, GSM Delay, PSM-USDC-A ttl Changes
Author: Rema
Summary: This proposal requests temporary protocol parameter changes through enactment of MIP104, article 3.3, in order to prepare the Maker Protocol for a potential excessive Dai demand shock caused by further market volatility
Key Points:
- The crypto markets have experienced a major increase in borrow rates across the board due to the demand for leverage.
- MakerDAO employs a fixed-rate DAI borrowing rate which does not automatically adjust to market rates, resulting in the protocol offering one of the cheapest rates to borrow a stablecoin (DAI).
- This has led to a massive demand shock for DAI as users flock to borrow DAI cheaply and then sell it to buy other crypto assets, causing PSM reserves to drop to $320M.
- Such phenomena have led the DAI supply to decrease from 5B to 4.38B in less than a week.
- To combat this, MakerDAO’s Stability Advisory Council has put forward an expedited proposal to increase MakerDAO’s vault DAI borrow rates (SF) and most notably, increase the DSR to 15%.
Our Take: This is directionally the right move for MakerDAO and we have seen similar efforts by Aave regarding GHO due to the nature of fixed-rate borrowing for stablecoins.
Lido Finance (LDO)
Proposal: LIP-21: Simple On-chain Delegation
Author: Zuzu_eeka
Summary: This proposal requests implementing a Simple On-Chain Delegation Module to Lido’s governance smart contract architecture.
Key Points:
- Currently, the Lido DAO utilises the Aragon framework for on-chain governance with no implementation that allows token holders to delegate their voting rights.
- As a result, many on-chain votes have failed to reach quorum because token holders cannot access their LDO and vote in time before proposal deadlines.
- This has led to a 40M difference in total LDO voted on Snapshots (which supports delegation) vs. on-chain votes in Q4 2023, highlighting the importance of voting power delegation.
- This proposal introduces a Simple On-chain Delegation Module to Lido’s governance architecture allowing the delegation of on-chain LDO governance powers.
- Importantly, token holders retain the authority to override their delegate’s decision on any vote.
Our Take: On-chain delegation was a much-needed function for the Lido DAO for a very long time. We look forward to its implementation!
Euler Finance (EUL)
Proposal: RFC: RFC: Contract for Services with Euler Labs
Author: Euler_mab
Summary: This proposal requests to grant Euler Labs 1.6M EUL ($10.72M USD) for an additional 1-year service provider contract to continue developing various Euler products.
Key Points:
- Preceding the creation of the DAO, Euler Labs entered into an agreement with the Euler Foundation to contribute to the development of a suite of software products (i.e., Euler protocol and its constituents).
- This contract commenced on 1 May 2022 and lasted for 2 years, allowing Euler Labs to invoice the Euler Foundation for $5.7M USDC per year.
- The suite of products to be developed by Euler Labs includes:
–> Euler protocol v2
–> Euler Vault Connector (EVC)
–> Euler Governance Platform
–> Euler Swap
–> Euler Synthetics
–> FeeFlow
–> RewardStreams
- Euler Labs intends to continue developing these products under the newly proposed contract which requests 1.6M EUL ($10.72M) from the DAO treasury to continue incentivising team members and contributors to the Euler ecosystem.
- This brings Euler Labs’ total EUL allocation from 20.5% to 26.4% of EUL’s total supply.
- The contract will be for one year with Euler Protocol expected to relaunch in Q2 2024.
Our Take: The additional EUL request puts Euler Lab’s total EUL compensation in line with other major protocols/DAOs. The request seems fair given the proposed deliverables and use of funds of which a large portion is targeted towards security and audits.
Votes
MakerDAO (MKR)
Status: Finished.
Created: Mar 8, 2024.
Ends: Mar 8, 2024.
Leading Consensus: For – 111.7k MKR.
Summary: This on-chain vote ratifies an expedited proposal to drastically increase MakerDAO’s vault Stability Fees (Borrow rates for DAI) and DSR to 15% in response to current interest rate volatility and demand shocks for DAI.
SafeDAO (SAFE)
Proposal: [SEP #21] SAFE Token Utility
Status: Live.
Created: Mar 7, 2024.
Ends: Mar 19, 2024.
Leading Consensus: Accept – 25M SAFE (99.88% of total votes).
Summary: This proposal outlines various strategies to enhance the utility of SAFE. The proposal defines SAFE’s governance scope and the Safe Activity Program which acts to incentivize Safe users to actively participate and contribute to the Safe Ecosystem.
Jupiter Exchange (JUP)
Proposal: Round #1 of LFG Voting!
Status: Finished.
Created: Mar 8, 2024.
Ends: Mar 11, 2024.
Leading Consensus: Zeus Network & SharkyFi
Summary: This on-chain vote selected Zeus Network and SharkyFi as the first 2 projects selected by the DAO to launch on Jupiter’s Launchpad.