Wintermute DeFi Governance Digest: May 2024 | Week 1
6 MAY 2024 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include Uniswap initiating a Delegate Reward Program and launching V3 on Redstone, Aave funding its future development as outlined by Aave Labs; along with votes from Arbitrum to double down on STIP success, Orca selling $4.5M in SOL from their treasury, and GMX deciding what to do with their Multiplier Points program.
Proposals
Uniswap (UNI)
Proposal: [Temp Check] Uniswap Delegate Reward
Author: Doo_StableLab
Summary: This proposal requests to introduce a compensation package of up to 6k USD/month in UNI to eligible Uniswap delegates.
Key Points:
- The recent work of the Uniswap Delegate Reward Working Group found there to be a general consensus from stakeholders of support for financially rewarding Uniswap Delegates.
- This proposal formalizes these findings into a framework that aims to compensate Uniswap Delegates to improve participation quality and dedication.
- The Uniswap Delegate Reward program will provide up to a maximum of $6k/month with a total budget that can support up to 21 eligible candidates.
- Eligible candidates will have a week to apply and if there are more than 21 candidates, an off-chain vote will be initiated to decide the top 21 applicants.
- Candidates are eligible if they have an 80% onchain and offchain voting participation rate for the last 3 months as a delegate and Voting Power greater than 100k UNI OR (co)authored a proposal that passed the Snapshot stage.
- Successful delegates will receive:
–> $3k USD/month in UNI for maintaining an 80% onchain and offchain voting participation rate for the past 3 months.
–> $3k USD/month in UNI for writing their voting rationale on their delegate profile.
- It’s expected that this program will last for 6 months.
Our Take: This is a great learning opportunity for the DAO and we look forward to seeing if there is a considerable improvement in the participation, quality, and effort displayed by delegates.
Aave (AAVE)
Proposal: [TEMP CHECK] Aave 2030
Author: AaveLabs
Summary: AaveLabs is requesting 15M GHO and 25k stkAAVE in exchange for a 3-year technical contribution commitment focused on building out the next iteration and long-term vision of Aave.
Key Points:
- Aave has consistently been a dominant leader in the DeFi money market sector boasting $10.7b USD in Total Value Locked.
- However, the DeFi market has significantly changed with the addition of new collateral types such as LSTs and the rise in popularity of non-EVM chains.
- For Aave to remain dominant, it must continue adapting to current and future market environments.
- This proposal provides an overview of Aave Labs’ goals and recommendations for the future of the Aave protocol including Aave Protocol V4, Cross-Chain Liquidity Layer (CCLL), GHO & RWAs, Aave Network, and an updated Aave Protocol Visual Identity.
- Aave Labs expects to deliver these products over the next 3 years in exchange for a grant of 15M GHO and 25k stkAAVE.
- One of the largest upgrades will be Aave Protocol V4 which is expected to launch in the first year of their technical contributions.
- Aave Protocol V4 will be built with completely new architecture featuring an efficient and modular design. Some features that V4 will include are:
–> A unified liquidity layer: This will allow for the onboarding and offboarding of new borrowing modules with differing risk settings, interest rates, and incentives, without fragmenting liquidity.
–> Fuzzy-controlled Interest Rates: Adjustments of interest rates will be automatically controlled based on dynamic market conditions.
–> Liquidity Premiums: Per-collateral asset borrowing cost premiums based on the riskiness of an asset.
–> Vaults & Smart Accounts: Smart accounts will allow for multiple isolated positions making handling positions (such as eMode) easier, while Vaults allow users to borrow assets without supplying collateral to the unified liquidity layer.
–> Dynamic Risk Configuration: Granular risk management capabilities that can force new users to different risk parameters from those who already have an open borrowing position due to changing market conditions.
–> Automated Assets Offboarding: Automatic adjustments to LTV for assets that need to be offboarded.
–> Automated Treasury Management: reverse auction mechanisms that allow every token earned by the protocol to be sold to any preconfigured asset once a threshold has been met.
–> Actions: Users can set up actions that automatically increase their collateral or repay debt if governance lowers the risk limit of borrowing a certain asset.
–> Liquidation Engine V4: A softer and more flexible liquidation engine that is better for borrowers and safer for the protocol.
–> Excess Debt Protection: The protocol is now aware of excess/bad debt and a threshold can be set that if triggered, the asset will lose its borrowing power, containing the spread of bad debt.
–> Emergency Redemption Mechanism: In situations of prolonged GHO depegging collaterals of positions with the lowest health factor are gradually redeemed to GHO and their debt is repaid.
- CCLL will allow for chain-agnostic borrowing, allowing borrowers to source liquidity from any supported Aave deployment.
- Later on, there will be a large emphasis on building out the adoption of RWA-based productions around GHO.
- Lastly, the Aave Network will serve as the primary hub for Aave and GHO while remaining multichain and network agnostic. Some key features could include using GHO for network fees, Aave V4 integrated at the network level, AAVE as the main staking asset for decentralized validators/sequencers, and Account Abstraction.
Our Take: We are super supportive of Aave Labs’ vision for the future development of Aave. The proposed initiatives allow for the easy adaptation of the protocol to current and future market regimes.
Uniswap (UNI)
Proposal: Deploy Uniswap v3 on Redstone
Author: Virtualelena
Summary: This proposal requests to deploy a canonical version of Uniswap V3 on Redstone – an L2 designed for onchain games.
Key Points:
- Redstone is a new L2 designed specifically for applications built with MUD and autonomous worlds and is built on the Plasma Mode of the OP Stack.
- Plasma Mode allows for the use of an off-chain data availability provider, while MUD and autonomous worlds allow for key onchain frameworks to enable onchain games.
- The Redstone Mainnet went live on May 2nd and currently has 563 ETH in TVL.
- Evidently, as the on-chain game economy grows on Redstone, users will need to exchange their in-game assets requiring the need for a DEX.
- This proposal requests to deploy a canonical version of Uniswap V3 on Redstone.
Our Take: A deployment of Uniswap V3 on Redstone could provide valuable insight into how it’s used amongst onchain game economies. Although, it’s important to note that Redstone is still in its infancy.
Votes
Arbitrum (ARB)
Proposal: Double-Down on STIP Successes (STIP-Bridge)
Status: Finished.
Created: Apr 17, 2024.
Ends: May 5, 2024.
Leading Consensus: For – 108.05M ARB (81% of total votes).
Summary: This proposal requests an additional 37.6M ARB to double down on the Arbitrum STIP. Eligible protocols are able to apply for further funding based on their original grant size to continue incentivizing their users and the Arbitrum ecosystem.
Orca (ORCA)
Proposal: Governance Council Proposal – Treasury Composition
Status: Live.
Created: May 3, 2024.
Ends: May 10, 2024.
Leading Consensus: Yes – 5 Votes ( 100% of total votes).
Summary: Due to the rise in the price of SOL, this proposal requests to sell 50% of the DAO’s SOL ~$4.65M USD to USDC in order to rebalance the Treasury.
GMX (GMX)
Proposal: MPs update
Status: Live.
Created: May 4, 2024.
Ends: May 8, 2024.
Leading Consensus: End MP Reward, 1 esGMX per 25 MP – 1.5M GMX (48.9% of total votes).
Summary: This vote requests to determine what to do with the current Multiplier Points program which entitles GMX stakers to increased protocol fees and governance power. The options include ending the MP program, converting MP to esGMX, or adjusting the MP APR.