Wintermute DeFi Governance Digest: May 2024 | Week 3

20 MAY 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Optimism upgrading their protocol to introduce Fault Proofs, Index Coop launching a presale for their new RWA index, Rune proposing two new stablecoins for MakerDAO; along with votes from MakerDAO to reduce the DSR rate to 8%, GMX listing GMX markets, and Aave voting on their GHO cross-chain launch strategy.

Proposals

Optimism (OP)

Proposal: Upgrade Proposal: Fault Proofs

Author: Ajsutton

Summary: This proposal requests to upgrade the OP protocol and introduce permissionless Fault Proofs, allowing users to withdraw assets from L2 to L1 without relying on the sequencer or any other centralised infrastructure.

Key Points:

• Introducing Fault Proofs to Optimism brings the protocol inline with Stage 1 status as defined here. Which ultimately forces the OP Chain to be governed by smart contracts with decentralised fault proof systems.


• The main purpose is to allow anyone to propose output roots and participate in a dispute system. This system gives users the ability to withdraw assets from L2 to L1 without relying on centralised infrastructure.

• If approved by governance, the upgrade will be deployed to OP Mainnet by the Security Council.


• To ensure a safe rollout of Fault Proofs, the existing Guardian role capabilities will be carried over to the new upgrade granting the Guardian the ability to disable the Fault Proof system in the event of an emergency.


• The upgrade includes a set of smart contracts that provide a solid basis for a future multi-proof system, allowing additional proof systems to be added later on.


• Importantly, users who have a pending withdrawal during the upgrade will be required to re-prove their withdrawals, effectively resetting their withdrawal waiting period.

Our Take: This was a long time coming for the OP community and we are excited to see the proposed implementation of their Fault Proof system.

Index Coop (INDEX)

Proposal: IIP-XYZ: Launch the Real World Asset Index (RWA) Presale

Author: Allan.g

Summary: This proposal requests to launch a Presale for an upcoming RWA Index consisting of MKR, ENA, ONDO, CFG, CANTO, and MPL.

Key Points:

• The goal of the RWA index is to allow investors to gain diversified exposure to the Real World Assets sector.


• The RWA Index will consist of the following assets with their respective weightings:

–> MKR – 49.4%

–> ENA – 21%

–> ONDO – 20.6%

–> CFG – 6.7%

–> CANTO – 1.2%

–> MPL – 1.1%

• The RWA Index will support flash minting at launch, enabling seamless issuance and redemption.


• Auction rebalancing will occur quarterly with updated weights provided by the FortunaFi team.


• There will be an annualised streaming fee of 1.95%, a redemption fee of 0.10%, and an Issuance Fee of 0.10%. Index Coop will cover the operational gas cost.


• The presale allows users to seed the Index by depositing wstETH that will be used for minting shares in exchange for earning PRT tokens.

• Product Revenue Tokens (PRTs) are fungible tokens that represent ownership in the cash flow of the underlying Index token.


• RWA PRT owners will receive 20% of the product’s cash flow in exchange for helping seed the Index.


• The presale deposit period will last from June 5 – June 19 with a target of 500 wstETH.

Our Take: This is a great new Index product with a PRT system that has proven to be successful with their recent hyETH presale.

MakerDAO (MKR)

Proposal: Reconciling the two opposing paths for Decentralized Stablecoins

Author: Rune

Summary: This proposal requests to introduce 2 new stablecoins PureDAI and NewStable (codename) into MakerDAO’s Endgame plans; PureDAI will be a fully decentralised stablecoin and NewStable will be a RWA-backed stablecoin.

Key Points:

• Since Dai’s inception, it’s been battling two paths – the path of pure decentralisation and the path of delivering utility and value to users at scale.


• Unfortunately, both paths are fundamentally hard to achieve due to the Stablecoin Trilemma which states that achieving a dollar peg, maintaining pure decentralisation, and scaling to large sizes simultaneously is not feasible.

• Rune has proposed two new stablecoins to solve this issue:

–> NewStable: This will prioritise utility and scale, providing a dollar-pegged stablecoin backed by real-world collateral and real-world entities.

–> PureDai: This will prioritise pure decentralisation by strictly relying on decentralised collateral.

• Holders of Dai will be able to upgrade to either stablecoin option with a 1:1 conversion to NewStable beginning shortly, and the conversion to PureDai a little later.


• NewStable will be the main successor to Dai focused on growth, yield and resilience. It will take over the RWA and TradFi integrations of Dai with the goal of deepening and improving such integrations.


• NewStable will remain attached to Maker and gain the tokenomics, growth focus, and governance features of the Endgame.


• Importantly, NewStable will eventually be upgraded to have a freeze function to ensure Maker remains regulatory compliant in relevant jurisdictions.


• Dai will remain as is with the ability to be redeemed to NewStable 1:1, after a 1 year transition period the DSR will begin to be phased out with yield only being available on NewStable.


• PureDai will have purely decentralised collateral like ETH and stETH, a free-floating peg, maximally decentralised oracles and no governance or budgets.

Our Take: This is a significant change to MakerDAO’s Endgame, but more importantly, it’ll reshape the DeFi landscape as the focus on growing and maintaining Dai as the largest decentralised stablecoin begins to taper off.

Votes

Maker DAO (MKR)

Proposal: Reduce the DSR Rate to 8%.

Status: Finished – Passed.

Created: May 16, 2024.

Ends: May 18, 2024.

Summary: This on-chain vote introduces a myriad of operational transactions and, most importantly, a reduction in the DSR rate from 10% to 8% and a subsequent 2% reduction in the Stability Fee of WBTC, WSTETH, and ETH vaults.

Leading Consensus: Yes – 108,366 MKR

GMX (GMX)

Proposal: GMX Token Pools in GMX V2

Status: Live.

Created: May 18, 2024.

Ends: May 23, 2024.

Summary: This vote requests to introduce GMX Token pools into GMX V2, allowing users to trade GMX with leverage.

Leading Consensus: Create GMX-USDC then GMX-GMX – 456k GMX (99.84% of total votes).

Aave (AAVE)

Proposal: [ARFC] GHO Cross-Chain Launch

Status: Finished – Passed.

Created: May 16, 2024.

Ends: May 19 2024.

Summary: This Snapshot vote requests to adopt Aave Labs’ cross-chain strategy launch for GHO. The architecture utilises Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to handle the cross-chain minting and burning of GHO. The first chain that GHO will be launched on is Arbitrum.

Leading Consensus: YAE – 677k AAVE (100% of total votes).