Wintermute DeFi Governance Digest: March 2024 | Week 4

25 MAR 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Frax Finance outlining their new roadmap and turning on the protocol fee switch, GMX exploring single-asset BTC and ETH markets, LlamaRisk applying as a Risk Service Provider for the Aave DAO; along with votes from Arbitrum to launch the Gaming Catalyst Program with 200M ARB in funding and doubling down on the STIP program, Curve Finance launching a 20x sUSDe LlamaLend market, and the dYdX Community voting on allocating 20M DYDX to Stride.

Proposals

Frax Finance (FXS)

Proposal: Frax Singularity Roadmap Part 1

Author: Samkazemian

Summary: This proposal outlines Part 1 of Frax’s roadmap, unifying all aspects of Frax into a single vision. It will act as the guiding light of the Frax community.

Key Points:

• This roadmap highlights the achievements of Frax thus far, including the launch of all protocol products, Fraxtal, and reaching a 100% Collaterlization Ratio for FRAX after generating $45M in revenue.


• The vision for Frax is to become the only full-stack protocol with Fraxtal acting as the home of the Frax Nation and the Fraxtal Network State.

• The goal is for Fraxtal to reach $100B+ in TVL by the end of 2026. Going forward all Frax Assets including FRAX, sFRAX, frxETH (and new Frax Asses) will be issued on Fraxtal.


• Fraxtal will aim to have 23 L3s in the next 365 days with each L3 receiving direct support with access to developers, incentives, investments and more.


• All roads of Fraxtal and the roadmap will lead back to FXS making it the ultimate beneficiary of the Frax ecosystem.


• It’s proposed to turn on the protocol fee switch and begin directing 50% of the yield to veFXS holders while the other 50% will be directed to the FXS Liquidity Engine (FLE).


• The FLE will acquire FXS and other Frax assets to pair them in liquidity pools, significantly increasing the stability and liquidity of Frax assets.


• The last remaining changes of Part 1 include:

–> An FPIS Resolution: Reducing the conversion of FPIS to FXS by 67% implying 1 FPIS = 1.33 veFXS locked for 4 years.

–> sFRAX will now have a yield cap rate of 50% and a 5.4% IORB floor rate.

–> sfrxETH restaking capabilities which should lead to a higher native yield, EigenLayer points, and FXTL points.

• Part 2 of this roadmap will be posted at a future date after this proposal has been voted on in governance.

Our Take: This was a super interesting proposal by Sam outlining a pretty ambitious mission akin to MakerDAO’s Endgame. If executed correctly, we could see FXS follow a similar path to MKR.

GMX (GMX)

Proposal: Single Token Pools (GMX V2) – BTC and ETH

Author: coinflipcanda

Summary: This proposal requests to launch gmBTC2 & gmETH2 markets which are single-token markets that are backed by WBTC and ETH, respectively.

Key Points:

• The core contracts of GMX V2 can support trading markets for a wide variety of assets, market structures, risk parameters, and different collaterals.


• GMX V2’s first iteration of synthetic/partially backed pairs was the launch of gmBTC, gmETH, gmSOL, etc. which implemented dynamic funding fees to ensure the pools stay balanced.

• Since their launch, these markets have grown to over 300M USD in TVL with healthy Long/Short balances, highlighting their resilience and robustness.


• As a next step, this proposal requests to begin experimenting with single-token-backed markets to continue scaling up GMX.


• Single-token-backed markets will appeal to a much larger liquidity provider user base as users only need to deposit a single asset e.g., ETH instead of ETH-USD, ensuring they remain 100% exposed to ETH.


• Testing will begin with gmBTC2 and gmETH2 which will be backed by WBTC and ETH, respectively, on both Arbitrum and Avalanche.

Our Take: This is a great next step for GMX and we look forward to seeing how the new markets perform. This should unlock a substantial amount of new liquidity providers who want to put their single-asset exposure to use.

Aave (AAVE)

Proposal: [TEMP CHECK] Onboard LlamaRisk as Aave Risk Service Provider

Author: LlamaRisk

Summary: LlamaRisk is proposing to join Aave as a Risk Management Service Provider after Gauntlet announced their intention to leave.

Key Points:

• After Gauntlet announced their intention to depart from Aave, the Aave DAO has been looking to onboard a second Risk Service Provider.


• LlamaRisk is proposing to join alongside Chaos Labs for an initial 6-month engagement which may be extended pending DAO approval.


• LlamaRisk was established in 2021 as a service to Curve DAO and its LPs. They provide risk transparency analyses of assets listed on Curve, including Stablecoins, RWAs, LSTs, and LRTs.


• Their scope within Aave will consist of:

–> On-demand Risk Assessments: In-depth risk assessments for assets listed or considered to be listed on Aave with emphasis on GHO collateral types.

–> Collaborative Engagement with Chaos Labs: Combining expertise to provide Aave with comprehensive and nuanced risk analysis.

–> Active Involvement in DAO Governance

–> Legal Regulatory Advisory and Policy Work: Provide specialized legal research and regulatory guidance, equipping Aave with the necessary foresight to navigate regulatory uncertainty in DeFi.

• LlamaRisk is proposing a flexible retainer model for their engagement with a proposed budget of $250k for 6 months.

Our Take: This is a fair proposal on behalf of LlamaRisk and we think their experience and previous work fits nicely within the Aave DAO.

Votes

Curve Finance (CRV)

Proposal: Add gauge for sUSDe LlamaLend market (which allows 20x leverage-long of sUSDe)

Status: Live.

Created: Mar 21, 2024.

Ends: Mar 28, 2024.

Leading Consensus: No votes.

Summary: This proposal requests to add a gauge to Curve’s sUSDe LlamaLend market. The LlamaLend market will allow users to farm sUSDe with up to 20x leverage using crvUSD. sUSDe currently yields 60% APY.

Arbitrum (ARB)

Proposal: Double-Down on STIP Successes (STIP-Bridge)

Status: Live.

Created: Mar 23, 2024.

Ends: Mar 30, 2024.

Leading Consensus: For – 21M ARB (99.51% of total votes).

Summary: This proposal requests to introduce an STIP bridge to sustain and enhance Arbitrum’s market lead amongst other Layer 2s. Any protocol funded under STIP is eligible to apply for a bridge and any protocol that was funded with greater than 500k ARB can apply for up to 50% of their prior funding. In comparison, protocols that were funded with 500k ARB or less can apply for up to 100% of their prior funding (capped at 250k).

Arbitrum (ARB)

Proposal: Catalyze Arbitrum Gaming: HADOUKEN!

Status: Finished.

Created: Mar 16, 2023.

Ends: Mar 23, 2024.

Leading Consensus: Press Start (For) – 151M ARB (96.76% of total votes).

Summary: This proposal requests to allocate 200M ARB from the Treasury towards investing in the Gaming Catalyst Program (GCP). GCP is a model to rapidly accelerate Arbitrum’s support for game builders over the next two years.

dYdX (DYDX)

Proposal: dYdX Community Staking Proposal

Status: Finished.

Created: Mar 20, 2024.

Ends: Mar 24, 2024.

Leading Consensus: Yes – 86.6M DYDX (83% of total votes).

Summary: This onchain vote was a signaling proposal to gauge the community’s interest in staking 20M DYDX from the dYdX Community Treasury with Stride. This proposal intends to improve the economic security of the dYdX Chain while putting DAO funds to work.