Wintermute DeFi Governance Digest: March 2025 | Week 1
3 MARCH 2025 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include CoW DAO establishing a 4-entity legal structure for the DAO, Sky reducing their Smart Burn activity from 1M USDS daily to 400K USDS daily, and Aave using DAO funds to pay off ~$400k in bad debt before their new Umbrella system is activated; along with votes from Pyth to establish a community council, Aave deploying V3 on megaETH, and OP performing maintenance upgrades to ensure L1 Pectra readiness.
Proposals
CoW DAO (COW)
Proposal: CIP-Draft: Incorporation of a legal structure for CoW DAO
Author: Mooderator, Core Team
Summary: This proposal requests to create a 4-entity legal structure for the CoW DAO – 1 Cayman Islands Foundation and 3 British Virgin Islands Companies. The structure is designed to isolate and mitigate tax, regulatory, business, and liability risks.
Key Points:
- CoW DAO’s current unincorporated model exposes core contributors and large token holders to significant tax, regulatory, and operational risks.
- Furthermore, being unincorporated limits CoW DAO’s ability to engage with institutional service providers and manage specialised operational functions efficiently.
- This proposal requests to establish 4 new legal entities:
CoW Foundation – a Cayman Company Foundation that is shareholder-less and member-less. It’ll act as CoW DAO’s legal interface.
CoW Core Limited – A BVI Company Limited by Guarantee with CoW Foundation as the director. It’ll maintain and develop core infrastructure, specifically around Solver operations.
CoW Hosting Limited – A BVI Company Limited by Guarantee with CoW Foundation as the sole member and guarantor. It’ll manage the hosting and maintenance of the UI, user support, and token list.
CoW Business Limited – A BVI Company Limited by Guarantee with CoW Foundation as the sole shareholder. It’ll handle business relations, protocol-related payments, COW token buybacks, CEX listings, and market making agreements.
- Importantly, CoW DAO retains the power to give directions to each entity as well as its wind-down, any amendment, and the removal of the director for each entity and the supervisor of the Foundation.
- The new legal structure is expected to cost $50k for the initial setup, $130k for 2025’s running costs, and $180k for the following yearly running costs.
Our Take: This is a great maturation step for the DAO which provides greater security for all stakeholders while also unlocking better efficiency for operations.
Proposals
Sky (SKY)
Proposal: Smart Burn Engine Parameter Update – March 6 Spell
Author: JanSky
Summary: This proposal reduces the Smart Burn Activity rate from ~1M USDS daily to ~400k USDS daily.
Key Points:
- Following a suspected governance attack ~2 weeks ago, various parameters were changed within the Sky ecosystem, including a proposal to accelerate the buyback and burning of SKY.
- Specifically, the surplus buffer was reduced from 120M to 70M DAI/USDS and 100% of the surplus was directed to buying back SKY.
- This effectively forced aggressive buybacks of SKY making the token more expensive with an expected burn rate of 30M USDS per month.
- This current proposal increases the “hop” rate to 2160 seconds from 876, which slows down the rate of buybacks
- The previous accelerated Smart Burn activity was deemed to have little impact in deterring potential governance attacks.
Our Take: The proposed changes are certainly less aggressive, however, still represent a meaningful amount of SKY burn.
Proposals
Aave (AAVE)
Proposal: [ARFC] BGD. Aave ClinicSteward
Author: BGDLabs
Summary: This proposal requests to use $400k of Aave DAO funds to pay off Aave’s bad debt before activating Aave’s ‘Umbrella’ upgrade.
Key Points:
- Since the initial Aave V3 activation three years ago, due to the nature of liquidations, the system has accrued a minimal bad debt of approximately $400’000.
- While the amount is minimal in comparison to the size of Aave’s lending and borrowing activity, the bad debt needs to be cleared before Aave’s “Umbrella” system is activated (the Umbrella system automatically covers bad debt).
- This proposal requests to use funds from the Aave Collector to clean out the system’s bad debt and thus, start Umbrella with clean accounting.
- This will be done via a new ClinicStreward smart contract that will batch liquidate bad positions and batch repay their debt using funds from the Aave Collector.
Our Take: We support the clearing of Aave’s bad debt in preparation for Umbrella.
Votes
Pyth (PYTH)
Proposal: CO-PIP-7: Creation of the Community Council
Status: Live.
Created: Feb 26, 2025.
Ends: Mar 5, 2025.
Leading Consensus: Yes – 14.16M PYTH (99.5% of total votes).
Summary: This vote establishes the Pyth Community Council, a 7-member body responsible for overseeing community initiatives, fostering engagement, and amplifying the collective voice of the Pyth community.
Aave (AAVE)
Proposal: [TEMP CHECK] Deploy Aave v3 on megaETH
Status: Live.
Created: Feb 27, 2025.
Ends: Mar 3, 2025.
Leading Consensus: YAE – 398.5k AAVE (100% of total votes).
Summary: This proposal requests to deploy Aave V3 on megaETH – an EVM-compatible blockchain that aims to bring Web2-level real-time performance to the crypto world for the first time. MegaETH plans to offer several distinguishing features, including high transaction throughput, abundant compute capacity, and millisecond-level response times even under heavy load.
Optimism (OP)
Proposal:Maintenance Upgrade: L1 Pectra Readiness
Status: Live.
Created: Feb 27, 2025.
Ends: Mar 5, 2025.
Leading Consensus: For (Optimistic governance vote)
Summary: This proposal includes changes to node software, the optimism protocol, and the L1 Fault Proofs smart contract system(s) to ensure that OP Stack chains continue to operate as normal after the Ethereum Pectra hardfork.