Wintermute DeFi Governance Digest: October 2024 | Week 5
28 OCTOBER 2024 | RESEARCH | AUTHORED BY CALLEN
This week’s proposals include dYdX reducing their validator set, trading rewards, and token revenue share; Jito launching a TipRouter NCN program that routes 2.75% of MEV tips to the DAO’s treasury, Silo Finance enabling revenue share, and Sky considering recentering the Maker brand; along with votes from Compound Finance establishing an Immunefi bug bounty program and ENS rewarding Blockful for their work in preventing a $150M governance attack.
Proposals
dYdX (DYDX)
Proposal: Analysis and Proposals on dYdX Chain and DYDX Tokenomics
Author: Nethermind
Summary: Nethermind is proposing a series of changes targeted towards improving liquidity on the dYdX Chain, increasing the attractiveness of the DYDX token, and encouraging the staking and holding of the DYDX token.
Key Points:
- dYdX Trading recently announced dYdX Unlimited – a software release featuring significant improvements to the dYdX Chain including permissionless market listings, MegaVault, an Affiliate Program, and Permissioned Keys.
- However, despite the success of the dYdX Chain and its product achievements, the DYDX token has been facing high inflation (and subsequent poor price performance) due to trading rewards and token unlocks.
- Nethermind is proposing a series of changes to optimise the dYdX Chain and DYDX tokenomics for the protocol’s long-term viability and success.
- They expect to achieve this vision by:
–> Directing 50% of all protocol revenue to the MegaVault, improving liquidity across all markets
–> Directing 10% of all protocol revenue to the Treasury subDAO, to begin building non-DYDX treasury assets
–> Implementing a buy and stake program through the Treasury subDAO if annual protocol revenue is above $80M
–> Reducing the active validator set from 60 to 30 validators to improve validator profitability
–> Reduce the Trading rewards “C” constant from 0.90 to 0.5, effectively reducing the amount of –> –> Trading Rewards distributed per block to Traders
–> Cease support for the wethDYDX Smart Contract Bridge
- They expect these changes to:
–> Improve liquidity on the dYdX Chain markets
–> Increase the attractiveness of the DYDX token
–> Encourage holding and staking DYDX
Our Take: Nethermind’s proposal focuses on key aspects that should lead to better long-term growth for the dYdX Chain. But, the performance of MegaVault should be closely monitored, ensuring that funds are not wasted on poor performance.
Jito (JTO)
Proposal: JIP-8: Adopt TipRouter NCN (Protocol Development)
Author: Andrewt
Summary: This proposal requests to route 3% of all MEV tips collected from the Jito Tip
Distribution protocol to the DAO treasury and NCN network participants.
Key Points:
- The Jito Tip Distribution Protocol is a program responsible for collecting and distributing MEV to validators and stakers.
- However, the Jito Tip Distribution Protocol currently relies on a permissioned authority to update a merkle root which is responsible for determining SOL distributions to validators and stakers.
- This proposal requests to adopt the TipRouter NCN (Node Consensus Network) which leverages Jito (Re)staking to empower a set of node operators to come to a consensus on the correct merkle root for tip distribution.
- In return for participating in the TipRouter NCN, Node operators, vault managers, and restakers will earn 0.15% of all MEV tips while 2.85% will be routed to the DAO in the form of JitoSOL, introducing a total fee of 3%.
- There will be a $100M asset cap at launch for deposits into the TipRouter NCN.
- Based on the last month which saw $66M in MEV tips, the annualised run-rate for Solana MEV tips is around ~$800M.
- Based on these tips and and the deposit cap, NCN participants will earn ~1.13% in programmatic fees for the year. While the DAO is expected to earn ~$22.8M.
Our Take: This is a significant benefit for the DAO and it’s great to see the Jito team continue to advance their protocol while improving decentralization.
Silo Finance (SILO)
Proposal: A New Era for SiloDAO
Author: Aiham.eth
Summary: This proposal requests to activate revenue sharing with SILO holders along with details unveiling Silo v2 Alpha and a product roadmap for 2025.
Key Points:
- This proposal is requesting to immediately introduce a revenue sharing program that distributes 100% of the protocol’s revenue to $SILO holders for 4 months with a guaranteed distribution of $100k/month denominated in ETH.
- The revenue share program will be renewable and distribution will begin on November 4, 2024.
- To grow protocol revenue the DAO should also allocate 8M SILO tokens as incentives to users of the protocol across all deployments. It is expected to run for 4 months and be handled by the core team.
- To earn protocol revenue, users can stake SILO into a Pendle spSILO pool while additionally earning boosted yield from PENDLE rewards and swap fees.
- The spSILO pool creates a market on Pendle for traders to speculate on the protocol’s yield.
- Furthermore, this proposal is requesting for the DAO to approve Silo V2 Alpha which will be deployed as soon as possible pending a vote./li>
- V2 Alpha will have a new UI, immutable markets, hooks, and a partner and developer program.
Our Take: Silo’s Pendle market is an interesting addition to typical revenue share modules, we look forward to seeing if they can hit their 2025 goals.
Sky/MakerDAO (SKY/MKR)
Proposal: Success of the USDS Launch and the opportunity to recenter the Maker brand
Author: Rune
Summary: Despite a largely successful rebrand launch, Rune is proposing various options for the community to decide on the future of Sky/MakerDAO given various concerns.
Key Points:
- MakerDAO’s rebrand to Sky has been largely successful with USDS supply exceeding 1 billion in just two weeks, Sky’s front end hitting 400k visits in the first month, large USDS DeFi integrations, and DAI supply still holding strong at 4.7 billion.
- However, the community has shared some concerns and feedback as 1) the utility of the Sky token is unclear and 2) having Sky as the name of the protocol, token, and front end creates a lot of confusion.
- Furthermore, it is now more clear than ever just how much the DeFi community loves and trusts the Maker brand and what it stands for – stability, security, and DeFi scale.
- So with all this in consideration, Rune is proposing to create separate and distinct roles for Maker and Sky – recenting the Maker brand and bringing it back into the spotlight.
- Specifically,
–> Maker = the decentralized protocol that powers USDS, DAI, and the ecosystem of StarDAOs. The only governance token for Maker is MKR.
–> Sky = solely focused on serving the needs of DeFi end users as the best and easiest place to get rewarded for saving while utilizing products and features of Maker underneath. Sky will focus on the frontend and demand-side of the USDS equation.
- With these changes, USDS would not change and continue to be backed by Maker and MKR governance.
- To understand the community’s preference there will be 3 polls:
1) Continue with Sky as the core brand
2) Recentre the Maker Brand with its original brand identity
3) Recentre the Maker Brand with a refreshed brand identity
Our Take: Sky has seen great success post launch, but we see how confusion is easily created with the lack of distinction across products and the protocol. The proposed combination by Rune while refocusing Maker at the centre tackles a large portion of concerns.
Votes
Compound Finance (COMP)
Proposal: Compound Bug Bounty Program with Immunefi
Status: Live.
Created: Oct 26, 2024.
Ends: Oct 30, 2024.
Leading Consensus: For – 80k COMP (100% of total votes).
Summary: This onchain vote ratifies a Compound Finance Immunefi program to develop the existing bug bounty program for Compound. Bug payouts will range from $1k to $1M depending on their severity and will be reviewed by OpenZeppelin, Dmitry, and Arr00.
ENS (ENS)
Proposal: [EP 5.21] [Social] Governance Security Bounty
Status: Live.
Created: Oct 24, 2024.
Ends: Oct 29, 2024.
Leading Consensus: For – 1M ENS (90% of total votes).
Summary: This proposal requests to provide a bounty of 100k USDC and 15k vested ENS tokens to Blockful for their working in preventing a potential $150M ENS DAO treasury governance attack.