Wintermute DeFi Governance Digest March 2025

Wintermute DeFi Governance Digest: March 2025 | Week 2

10 MARCH 2025 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Aave launching updated Aavenomics (buybacks, Umbrella, anti-GHO, etc.) and a new savings rate module for GHO (sGHO), Silo launching xSILO on Sonic with emission gauges and revenue share, and Curve Finance discussing allocating DAO revenue to the treasury to cover expenses; along with votes from dYdX to establish a buyback program, Arbitrum voting on TMC’s Treasury Management recommendation, and Compound establishing a partnership with Morpho and Polygon.

Proposals

Aave (AAVE)

Proposal: [ARFC] Aavenomics implementation: Part one

Author: Marc Zeller

Summary: This proposal introduces an updated Aavenomics proposal, notably, new AAVE tokenomics, activation of Umbrella, a new Aave Finance Committee, completion of the LEND to AAVE migration contract, and an AAVE buy-and-distribute program.

Key Points:

This proposal is an update to the Aavenomics update that was approved by the DAO in August 2024.

Since then, Aave has remained the top money market protocol and in general the number one DeFi protocol; GHO crossed $200M in supply and the DAO has increased their “cash” reserves by 115% reaching $115M.

Due to Aave’s strong position both in the market and its available capital, this proposal introduces various changes to certain functions, rewards, and incentives across the Aave ecosystem and protocol.

Specifically, this proposal requests to:

Establish an Aave Finance Committee (AFC) tasked with managing Aave collector contract holdings (revenue) and using these funds to incentivise optimal Umbrella liquidity target ratios.

Activate Umbrella for wETH, USDC, USDT, and GHO, and provide incentives for Umbrella stakers using wETH, USDC, USDT, and AAVE, across Ethereum Mainnet, Avalanche, Sonic, Arbitrum, Gnosis, and Base.

Utilise the Aave Liquidity Committee to improve secondary liquidity for AAVE.

Close the LEND to AAVE migration contract by removing all AAVE and returning it to the treasury.

Provide up to $6M in anti-GHO for Aave Stakers which effectively gives them a discount on their GHO borrows.

Activate an AAVE buyback and distribute program, which is expected to buyback $1M/week of AAVE from the open market for the first 6 months.

Our Take: All these proposed updates foster a more cohesive and inviting environment for users and stakers within the Aave ecosystem.

Aave (AAVE)

Proposal: [TEMP CHECK] GHO Aave Savings Upgrade

Author: TokenLogic, ACI

Summary: This proposal introduces sGHO – a savings module for GHO with safe and low-risk yield.

Key Points:

TokenLogic and ACI are proposing to launch sGHO – a low risk savings product that rewards users for staking GHO by earning the Aave Savings Rate (ASR).

Whilst the growth of GHO has been strong with the stablecoin becoming the 20th largest stablecoin, further actions are needed to continue its growth.

sGHO is expected to further propel GHO’s growth, offering a simpler and lower risk product than stkGHO, which currently acts as a backstop for the protocol.

sGHO is an ERC-20 receipt token that accrues value over time; features & benefits include:

No rehypothecation – providing instant liquidity

Minimal smart contract risk

No deposit or withdrawal fees

While GHO inside the sGHO contract will not be deployed to earn yield, facilitators will be created to mint and deploy GHO to earn yield, helping preserve liquidity while increasing revenue.

sGHO will have a supply cap managed by GHO Stewards to ensure the Aave DAO can afford to pay the Aave Savings Rate.

The Aave Savings Rate (ASR) is defined as:

ASR = Amp x Index_Rate + Premium; Where,

Amp = Amplification Factor; adjusted to offset periods of low USDC utilisation.

Index_Rate = representation of market conditions; tracks USDC native yield from Aave’s Core instance on Ethereum.

Premium = nominal amount; allows for a discrete amount of extra relative yield to be applied.

The sGHO ASR will receive funding from GHO revenue sources such as:

GHO borrowed via Core instance

stataToken GSM Holdings (GHO PSM that earns yield with excess funds)

Facilitator liquidity deposits (GHO minting facility that earns yield)

Lastly, sGHO ASR will be launched as a competitive and attractive yield facility for users, likely exceeding yields from other competitors.

Our Take: sGHO offers a safe and simple avenue for users looking to earn yield on GHO. Much like Sky’s sUSDS, we expect sGHO to positively impact GHO’s supply.

Silo Finance (SILO)

Proposal: Introducing xSILO: Tokenomics Upgrade on Sonic

Author: Aiham.eth

Summary: This proposal introduces tokenomics upgrade to SILO (xSILO) which allows SILO holders to stake their tokens, direct emissions, and earn voting rewards.

Key Points:

This proposal introduces changes to SILO tokenomics on Sonic consisting of staking, gauges, SILO emissions, and xSILO rewards.

Specifically, users will be able to stake SILO to receive xSILO.

xSILO is a non-transferrable governance token which is granted voting rights within the Silo Gauge system, allowing xSILO holders to direct SILO emissions.

xSILO voters also receive voting rewards proportional to their gauge’s share of total protocol fees, ensuring emissions are spent on productive markets.

xSILO can be redeemed for SILO after a 6-month lock-up period or unstaked earlier with a redemption fee that starts at 50% and scales down linearly over 6 months.

Our Take: We look forward to seeing the effects on gauge votes and token lock ups for lending markets as borrows and lenders can effectively subsidise their costs/yield with SILO emissions.

Curve Finance (CRV)

Proposal: [Temp Check] Start Building a Curve DAO Treasury

Author: Benny

Summary: This proposal requests to start directing a portion of protocol fees towards the Curve DAO Treasury to support ongoing and future operational costs.

Key Points:

Curve’s current “treasury” consists of $16M USD in CRV tokens, where all the protocol revenue is currently being distributed to LPs, veCRV, and scrvUSD.

As a result, there is no mechanism to grow the treasury and cover funding costs that does not result in the sale of CRV.

Yearly operational costs currently sit around $5M for audits, development, and risk analysis.

The DAO has generated over $40M in revenue in 2024 and is on track to reach a similar amount in 2025. However, 70% of all the DAO’s revenue is directed to veCRV holders.

This proposal requests to begin growing the DAO’s treasury in non-CRV related tokens by allocating a portion of the DAO’s revenue to the treasury via two proposed strategies.

The first strategy requests to redirect 100% of Curve’s 3pool’s admin fees to the treasury, effectively shifting 100% of the pool’s fees from veCRV holds to the treasury. Curve’s 3pool generated $3.1M in fees in 2024.

The second strategy requests to take a 10% of all DAO revenue distributed to veCRV holders, which would be ~$4m/yr based on 2024 figures.

Our Take: This proposal highlights a reasonable concern about the DAO’s runway and the need to begin accumulating non-CRV assets. The two strategies seem reasonable with little effect on veCRV holders.

Votes

dYdX (DYDX)

Proposal: dYdX Treasury SubDAO DYDX Buyback Program (Stage 1)

Status: Live.

Created: Mar 7, 2025.

Ends: Mar 11, 2025.

Leading Consensus: Yes – 99.8M DYDX (93.56% of total votes).

Summary: This onchain vote ratifies stage 1 of the dYdX Buyback Program. Stage 1 involves redirecting 25% of net protocol revenue (taken from the Megavault) to buying back DYDX and staking it on the network to earn additional USDC revenue.

Arbitrum (ARB)

Proposal: TMC Recommendation

Status: Live.

Created: Mar 7, 2025.

Ends: Mar 14, 2025.

Leading Consensus: Deploy both strategies – 2.3M ARB (61.86% of total votes).

Summary: This vote requests to establish the direction of Arbitrum’s Treasury Management V1.2 initiative, specifically, for the Treasury Management Committee, which was tasked with converting ARB into yield-generating stablecoin activities and ARB-native yield strategies.

Compound Finance (COMP)

Proposal: Compound <> Morpho <> Polygon Collaboration

Status: Finished.

Created: Mar 5, 2025.

Ends: Mar 10, 2025.

Leading Consensus: For – 1.03M COMP (93% of total votes).

Summary: This proposal requests to establish a collaboration with Morpho and Polygon to launch Compound owned Morpho vaults on Polygon. The newly established vaults will be incentivized with $1.5M in POL and $1.5M in COMP.