Wintermute DeFi Governance Digest: October 2024 | Week 3

14 OCTOBER 2024 | RESEARCH | AUTHORED BY CALLEN

This week’s proposals include World Liberty Finance requesting an Aave V3 instance, Ethena adding SOL as collateral for USDe, Compound allocating V2 reserves to their Aera vault, and ENS rewarding Blockful for their work in protecting the DAO from a governance attack; along with votes from Aave to list EIGEN, and Arbitrum voting on rewarding DAO contributors who played a meaningful role in LTIPP.

Proposals

Aave (AAVE)

Proposal: [TEMP CHECK] World Liberty Financial Aave v3 Instance on Ethereum Mainnet Proposal

Author: WorldLibertyFi

Summary: World Liberty Financial is requesting its own Aave V3 instance focused on providing stablecoin liquidity for ETH and WBTC which will be controlled by its WLFI governance token.

Key Points:

• World Liberty Financial is a DeFi protocol with links to Donald Trump as indicated by their Twitter.


• Their goal is to provide access to DeFi to a wider audience through their marketing reach, onboarding new users to the ecosystem.


• As such, they are requesting their own Aave V3 instance to provide stablecoin liquidity for ETH and WBTC holders.


• This instance will be governed by WLFI token holders who will determine future asset additions and risk parameters.


• In exchange, Aave will receive 20% of the protocol fees generated and 7% of the total supply of $WLFI.


• There will also be $WLFI liquidity mining incentives to bootstrap liquidity and protocol usage.

Our Take: This proposal has the potential to reach new users, exposing them to DeFi and more specifically Aave’s architecture. The revenue share and token grant agreement are notably large and could be a significant revenue driver for the DAO’s treasury.

Ethena (ENA)

Proposal: Onboard SOL as a USDe Backing Asset

Author: Ethena Labs Research

Summary: Ethena Labs is proposing to add SOL as a backing asset for USDe utilizing the same hedging mechanics currently in place for BTC and ETH perpetual futures.

Key Points:

• Ethena’s USDe stablecoin is currently backed by BTC, ETH, ETH LSTs, and liquid stables utilizing delta-neutral perpetual positions to generate a synthetic dollar position while earning yield.


• This proposal requests to add SOL as collateral in a similar fashion to the assets above given the asset’s growth and perpetual futures market.

• The addition of SOL should unlock $2-3 billion in additional open interest allowing the USDe supply to scale further.


• The initial SOL target collateral amount will be $100-$200M, representing 5-10% of SOL’s open interest.


• Liquid staked SOL like BNSOL (Binance Liquid Staked SOL) and bbSOL (Bybit Liquid Staked SOL) will also be considered as a potential backing asset for USDe.

Our Take: SOL is a great addition to USDe’s backing, improving diversification while allowing the USDe supply to expand comfortably.

Compound (COMP)

Proposal: Aera for Compound – Extension

Author: Aera

Summary: This proposal requests to extend Compound’s Aera vault to generate additional yield for the DAO by utilizing ~$30M of Compound V2 reserves.

Key Points:

• Aera has been utilised by Compound to gradually sell long-tail assets from the DAO treasury and to sell COMP to pay service providers.


• This proposal requests to extend Aera’s involvement in the DAO by transferring 2,000 ETH, 10.6M USDC, and 15M DAI from the DAO Treasury and V2 reserves to Compound’s Aera vault to then be supplied into V3 markets to earn ~$1M/yr in additional revenue for the DAO.

• The vault’s objective function will be updated from targeted volatility to yield generation.


• The vault will also receive an upgrade to a new and safer MilkmanRouter and see the addition of the Odos Router to improve execution efficiency.

Our Take: Given V2 is undergoing deprecation, it makes sense to transfer assets to V3.

ENS (ENS)

Proposal: Governance Security: Compensating blockful for preventing a potential attack on the ENS DAO

Author: Alextnetto.eth

Summary: The Blockful Team is requesting $100k USDC and 15k vested ENS tokens for compensation regarding their work in preventing an economic governance attack.

Key Points:

• In March 2024, Blockful uncovered a vulnerability that could have led to ~$150M in theft from the DAO treasury and protocol capture via an economic governance attack.


• This was due to the DAO treasury being larger than the amount of tokens delegated making it vulnerable. Furthermore, they identified a group of whales accumulating a large amount of ENS (~2M ENS) for the past 450.

• At the time the ENS DAO had only a 2-block delay between proposal creation time and the voting period, meaning there was practically no time to prepare extra votes against a malicious proposal.


• There was also no sufficient way to cancel a proposal.


• Blockful worked to flag this to ENS contributors aiding in devising firstly, a veto address with a bunch of ENS delegated to it and, secondly, the creation and auditing of a security council implementation that was successfully
  
• In return for the work, Blockful is requesting $100k in USDC and 15k ENS tokens to be vested over 2 years.

Our Take: Blockful’s request is reasonable and we applaud them for their proactive work in securing the ENS DAO.

Votes

Aave (AAVE)

Proposal: [TEMP CHECK] Onboard EIGEN to Aave V3 Ethereum

Status: Finished.

Created: Oct 10, 2024.

Ends: Oct 13, 2024.

Leading Consensus: Abstain – 586k AAVE (76.62% of total votes).

Summary: This proposal requests to add EIGEN to Aave V3 Ethereum Market. This would allow users to supply and borrow EIGEN, enhancing its utility within the DeFi ecosystem.

Arbitrum (ARB)

Proposal: LTIPP Retroactive Community Funding Selections

Status: Live.

Created: Oct 11, 2024.

Ends: Oct 18, 2024.

Leading Consensus: Do not fund – 23M ARB (96.36% of total votes).

Summary: This proposal requests to allocate up to 100,000 ARB from LTIPP towards DAO members who felt that they contributed meaningfully to the LTIPP program.