Wintermute DeFi Governance Digest: May 2024 | Week 4

27 MAY 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include Stargate Finance establishing their LayerZero airdrop RFP, Redacted Protocol rebranding to Dinero Protocol, CoW DAO partnering with Balancer DAO to launch Balancer / CoWAMM pools; along with votes from Uniswap to fund the DeFi Education Fund with 1M UNI and Synthetix Launching FRIEND perps.

Proposals

Stargate Finance (STG)

Proposal: Stargate Foundation RFP Proposal

Author: Stargate Foundation

Summary: The Stargate Foundation has proposed a distribution strategy for LayerZero’s upcoming token launch, which allocates a portion of the airdrop to protocols built on top of LayerZero technology.

Key Points:

• The Stargate Foundation has put forward a proposal for LayerZero’s RFP process, outlining a distribution strategy for their upcoming token launch.


• The LayerZero allocation to Stargate community members will be focused on rewarding bridgers, LP providers, and STG stakers.

• The Stargate Foundation is proposing to allocate:

–> 60% to bridgers of which 42% goes to users who have bridged based on volume and 18% reserved for partner protocols built on top of Stargate (e.g., LiFi, WOOFi, etc.).

–> 20% to veSTG holders based on the token amount and the duration a user’s tokens have been locked.

–> 10% to liquidity providers based on the duration and volume of a depositor.

–> 10% to developers recommended by LayerZero

• Bridging volume snapshot will be taken from 17th March 2022 to 1st May 2024.


• Only users with > 20 veSTG will be considered for the veSTG allocation.


• Furthermore, users who staked their STG before the 17th of March 2023 will get a 1.3x Multiplier on their score.


• Importantly, users who bridged via Stargate will likely also receive a separate LayerZero allocation given the use of the underlying LayerZero technology in Stargate.

Our Take: This seems like a sensible distribution strategy that effectively targets all major stakeholders in the Stargate community.

Redacted Protocol (BRTFLY)

Proposal: Metamorphosis to Dinero Protocol

Author: Redacted Development Team

Summary: This proposal requests to rebrand the Redacted Protocol to Dinero Protocol and facilitate the migration of BTRFLY to DINERO on behalf of the redacted DAO.

Key Points:

• Since its inception in Dec 2021, the Redacted Protocol has evolved from metagovernance products to focusing on developing full-stack infrastructure for layer 1 and layer 2 protocols through Dinero Protocol.


• This proposal requests to formally rebrand from Redacted Protocol to Dinero protocol, replacing BTRFLY with DINERO as the governance token for the DAO.

• Previous products like pxCVX and Hidden Hand will continue to operate and be developed under the DAO, but under its own brand.


• Users will be able to migrate BTRFLY to DINERO at a rate of 1:2000, rlBRTFLY will be replaced with DINERO staking, while the current tokenomics (e.g., emissions schedule) will remain unchanged.


• Staked DINERO will have 3 votes, whereas unstaked DINERO will have 1 vote.


• Staking DINERO will have a warm-up and cool-down period to prevent governance attacks.


• Treasury and product revenue will be used to buy back DINERO and fund the rewards pool that is distributed to DINERO stakers.


• 3% of the total DINERO supply will be used to incentivize DINERO staking on a tapered basis for one year after the second year of rlBTRFLY incentives ends.

Our Take: Redacted’s brand migration to Dinero makes a lot of sense. Overall, it seems like they’ve focused on making their ecosystem simpler for users.

CoW DAO (COW)

Proposal: CIP-Draft: Balancer and CoW jointly creating CoWAMM pools

Author: AndreaC

Summary: This proposal requests to establish a strategic partnership with Balancer DAO to collaborate on the development of CoW AMM. An AMM that is MEV and LVR-resistant.

Key Points:

• The CoWAMM is the first MEV and LVR-resistant AMM design currently in production that uses CoW Protocol’s solver competition to ensure the AMM is always rebalanced to the correct price and never exploited by arbitrageurs.


• However, the current CoWAMM lacks several features that are standard in most AMMs – Portfolio monitoring, pooling of funds from multiple LPs into one AMM, etc.

• This proposal requests to partner with Balancer DAO to address these issues and use their AMM architecture.


• In practice, Balancer LP pools will exist as normal, however, the CoW Protocol settlement contract (i.e., its solvers) will have exclusive/privileged access to some balancer pools.


• With the launch of CoWAMMs, solvers now also compete to trade with the various CoWAMM pools. They do so by proposing an “in” and “out” amount for each pool, from which it is possible to compute the “surplus” generated by each proposed trade, that is, by how much the AMM “moves up the curve” if a trade is accepted.


• The solver that generates the highest surplus will win the right to trade with the AMM.


• As a result, LPs capture value from the parties attempting to arbitrage divergence in the pool price, which minimizes LVR.


• To establish the strategic partnership, each DAO will lock $500k of their token into a COW/BAL Balancer / CoWAMM Pool for two years.


• Any revenue generated from the pool will be equally shared between both DAOs and Balancer DAO will allocate ~$250k worth of BAL to strategic CoWAMM pools to incentivize liquidity provision.

Our Take: This is an interesting strategic partnership. If such pools manage to generate a significant amount of extra revenue for LPs, we should see a material uptick in Balancer’s TVL.

Votes

Synthetix (SNX)

Proposal: SIP-382: List FRIEND-PERP on Perps v3 on Base

Status: Finished.

Created: May 17, 2024.

Ends: May 24, 2024.

Leading Consensus: sYes – 6 Votes (100% of total votes).

Summary: This proposal requests to list FRIEND-PERP on Perps V3 on the Base network.

Uniswap (UNI)

Proposal: DeFi Education Fund

Status: Live.

Created: May 22, 2024.

Ends: May 29, 2024.

Leading Consensus: For – 34.8M UNI (97.39% of total votes).

Summary: This proposal requests to fund the DeFi Education Fund (DEF) with 1M UNI tokens. The DeFi Education Fund will use these funds to continue building out their team to super charge litigation efforts to reshape the legal landscape for DeFi and DAOs, double down on educational efforts, challenge regulatory onslaught targeting DeFi, and engage in state-level debates and jurisdictions outside of the United States.

Redacted Protocol (BTRFLY)

Proposal: RIP57: Metamorphosis to Dinero Protocol

Status: Live.

Created: May 25, 2024.

Ends: May 28, 2024.

Leading Consensus: Yes – 18k rlBTRFLY (100% of total votes).

Summary: This proposal requests to rebrand the Redacted Protocol to the Dinero Protocol including a token migration from BTRFLY to DINERO.