DAOs: MakerDAO receives collateral application from US-based bank, Lido sees surge in demand driven by Aave collateral usage, Balancer’s veBAL governance system kicks off, Gnosis’s GIP-27 is live, Idle’s IIP-20 is active, Colony announces DAO Club, and more!
Biweekly report on decentralized autonomous organizations vol.22, 20th March — 2d April
TL;DR
- MakerDAO receives a collateral application from a US-based bank. All 9 March ratification polls that entered the monthly cycle passed. New MKR vesting streams and compensations executive proposal is live
- Lido’s expanding lead in Ethereum liquid staking via Aave integration
- Aave’s on-chain vote to optimize the rate curve for ETH & improve revenue generation for the protocol was successful. Llama proposed a treasury swap with Balancer
- Colony announced DAO Club — a new community initiative that brings together active DAO builders, Web3 entrepreneurs, and innovators
- Balancer is now using the veModel, veBAL activation proposal approved. The community considering DAO multisig signer replacements
- BadgerDAO’s BIPs 86 & 88 passed. Following the successful passing of BIP 87, 5% of CVX voting power was used to vote for the Badger/wBTC pool. A treasury policy BIP is on the forum for feedback
- Another MolochDAO grants round is brewing. Proposal submission starts April 4th
- Compound proposals 091, 093, 094 failed, 090 & 092 executed, 095 is live
- The Idle community votes on IIP-20. The proposal will activate the Gauges model resulting in adding meta-governance features to IDLE token
- Gnosis’s GIP-27: Gnosis Guild treasury allocation proposal is live. GIPs 24 & 28 passed, and GIP-33 is on the forum
- Bancor to release the Bancor 3 code repository in the first week of April. BIP 16–21 going live soon
- Nexus Mutual completed the single largest treasury deposit into Bancor. While the immunefi matching bug bounty program renewal proposal is live on the snapshot for voting
- mStable MCCP 18 & MCCP 19 passed
- The Uniswap community votes to authorize the deployment of Uniswap V3 to Moonbeam
- PoolTogether PTIP-65 & 67 passed. Deposit Delegator is live
- API3 will deploy Beacon data feeds to Avalanche. ESG Enterprise deploys Airnode to their API, bringing ESG risk management data to smart contracts
- Synthetix’s SCCP-175, 176 & 177 are live on the snapshot. Voting in the Synthetix Council elections open till April 5th
- The Yam community votes on YIP-106: Deposit 50% of treasury ETH in Yearn stETH vault
- PieDAO’s [PIP-73] BTC++ Health-Check is live
- Gitcoin grants round 13 ended. Over 4.6M will be distributed to public goods as part of the round
- Bridge protocol Stargate Finance launches, with initial token auction fully purchased by Alameda Research in a single transaction
- Juno core team members and community rally around compromise proposal, removing Juno whale’s voting power while negotiations continue
- Solana based stablecoin project Cash is exploited, with hacker’s return of funds for all users with <100,000 balance creating difficult conundrum for project maintainers
- Georgetown professor offers framework for crypto-native disclosures
- Teller begins offering unsecured stablecoin loans to Singapore residents using traditional credit scoring
- Larry Ellison’s SailGP and Near Protocol to create a DAO for sports team ownership
- Lemonade is working with Avalanche, Chainlink on weather insurance for farmers
- Active proposals: Aave, Compound, Curve, GnosisDAO, Index Coop, Idle, Nexus Mutual, LidoDAO, Synthetix, PieDAO, Uniswap, Yam Finance
- New & ongoing discussions: Balancer, GitcoinDAO, mStable, MakerDAO, Yearn Finance, BancorDAO, Akropolis, PoolTogether, API3, KyberDAO, Kleros, Badger DAO
- And more!
Overview
Blockchain technology is already radically transforming the financial system. However, properties such as trustlessness and immutability aren’t only useful in monetary applications. Another potential application is governance. Blockchains could enable entirely new types of organizations that can run autonomously without the need for coordination by a central entity.
“Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the blockchain.” — Vitalik Buterin
DAO stands for “decentralized autonomous organization” and can be described as an open-source blockchain protocol governed by a set of rules, created by its elected members, that automatically execute certain actions without the need for intermediaries.
In simple terms, a DAO is an organization that is governed by computer code and programs. As such, it has the ability to function autonomously, without the need for a central authority.
Like how DeFi is programmable money and how NFTs are programmable media, DAOs are programmable organizations of people.
DAOs Ecosystem Statistics
Top DAOs
Like two weeks ago, the rating is headed by Uniswap and BitDAO.
Global stats
Leading DAOs
Frameworks
Aragon
Recent blog posts
- How to Start a Play-to-Earn Guild (from your Bedroom) | F8 Guild: Delve into the world of Play-to-Earn (P2E) and GameFi. Learn how F8 Guild is revolutionizing gaming by self-organizing as an Aragon Client DAO.
- How to Start a Research Organization (from your Bedroom) | VitaDAO: A look at how to start a laboratory-based research organization like VitaDAO.
How we DAO — Aragon Network — Head of Ecosystem — Ivan Fartunov:
The Commons Stack
Commons Stack Review: Sprint 35:
The DAOist CDMX: Griff talks about goal to create micro-economies:
Tribute Labs (OpenLaw)
Aaron Wright: DAO’s-Decentralized Autonomous Organizations:
Governance
Aave
Recent blog posts
- An on-chain vote to optimize the rate curve for ETH & improve revenue generation for the protocol was successful.
- Llama proposed a treasury swap with Balancer that would see Aave acquire 300,000 BAL.
- Read about the potential of portals.
Active proposals
Closed proposals
- Add MAI to Aave V3 on Polygon, Fantom, and Avalanche
- Should six (6) total risk parameters across five (5) Aave V2 assets be updated?
On-chain votes:
New and ongoing discussions
- Aave <> Bored Ghosts Developing (BGD)
- Proposal: Add Support for stMATIC (Lido)
- ARC: Governance Framework For Alternative Chain Proposals
- ARC: Governance process for RWA Market
- Avalanche Market — add sAVAX to Aave v3, raise LTV of AVAX
- ARC: Adding Multi-Collateral DAI to the Aave ARC Market
- Stop the AAVE Migration and recover 4% of the AAVE supply
Latest governance topics on governance forum.
Akropolis
Recent blog posts
There were no active proposals these weeks.
Latest governance topics on governance forum.
API3 DAO
Recent blog posts
- dAPIs: APIs for dApps
- Silta will be Using Beacons to Provide Price Reference Data to Loan Pools
- Announcing the ETHDenver 2022 API3 Bounty Winners
API3 DAO Tracker: API3 DAO currently involves 5,014 members participated in 26 votings.
New and ongoing discussions
- API3 Core Technical Team Report, March 2022
- [SC] API3 Events — Remainder of 2022
- Desktop package for DAO Dashboard
- dAPIs: APIs for dApps
- Demo Dapp: Escrow Contract Marketplace for Hedging & Wagering
Latest governance topics on governance forum.
Community Call — March 24th:
API3 Spotlight: Leeway Tech Introduction:
Badger DAO
Closed proposals
- BIP 88. Emissions: Q2 2022
- BIP 86. Change and ratify Badger Council Membership
- BIP 87. bveCVX restructure
New and ongoing discussions: Badger Discord
To read more about the different proposals and take part in the decision, check out the governance forum.
Behind the Scenes of the Huge Upgrade to our Locked CVX Vault:
Degen DD: How to Assess the Risk of New DeFi Protocols:
Balancer
Recent blog posts and news
Closed proposals
- Polygon: Authorize Batch Relayer V2 for USD+ Boosted Pool
- Hand Over Swap Fee and Amplification Factor Control to the BalancerDAO
- Symmetric Friendly Fork
- veBAL Activation
- BalancerDAO Compensation Evolution
- Delegate Treasury subDAO the Power to Invest Protocol Fees
- Hexagon Friendly Fork Proposal
New and ongoing discussions
- [Proposal] DAO Multisig Signer Replacements
- Introducing veBAL tokenomics
- Symmetric Balancer Friendly Fork Proposal
- [Proposal] Fund BalancerDAO for Q2 2022
- Proposal: Hand Over Swap Fee and Amplification Factor Control to the Balancer DAO
- veBAL Activation Proposal
Latest governance topics on governance forum.
veBAL-BALbattles and Bribes:
Bancor
Closed proposals
- Increase the trading liquidity limit in the MFG pool from 50k BNT to 100k BNT
- Increase the trading liquidity limit in the LQTY pool from 150k BNT to 300k BNT
New and ongoing discussions
- BIP15: Proposing Bancor 3
- BIP17: Bancor 3 Initial Whitelist, BNT Funding Limits, and Swap Fees
- BIP21: DAO Multisig Intervention Policy
- BIP20: Quorum and Supermajority Requirements
- BIP18: Proposed Bancor 3 Liquidity Mining Program
- BIP16: Bancor 3 Beta Release
To read more about the different proposals and take part in the decision, check out the forum.
Bancor Community Call — — March 21, 2022:
Compound
Active proposals
- 096 Update Low-TVL cToken Implementations pending
- 095 OpenZeppelin Security Partnership — 2022 Q2 Adjustment V2 active
Closed proposals
- 094 OpenZeppelin Security Partnership — 2022 Q2 Adjustment canceled
- 093 Contribute funding to the Nomic Foundation canceled
- 092 COMP Rewards Adjustments — Kickstart Rewards: Step One executed
- 091 PROPOSAL: Should Compound governance contribute funding to the Nomic Founda…canceled
- 090 Risk Parameter Updates for ZRX, MKR, and SUSHI
New and ongoing discussions
- COMP Reward Adjustments v2
- Certora Formal Verification Proposal
- Risk Parameter Updates 2022–03–29
- PROPOSAL: Should Compound governance contribute funding to the Nomic Foundation?
- Compound Grants Program — Lessons and Next Steps
Latest governance topics on governance forum.
Curve
Active snapshot proposals
New and ongoing discussions
- Proposal to add Tri-CRV to the Gauge Controller
- Proposal to raise A parameter on USDN pool to 250
- Proposal to add a sUSD<>3CRV Gauge on Optimism
- vETH/ETH pool — Bifrost Finance <> Curve
- Curve X OnePiece [Automated System Operations]
- Proposal to add Tri-CRV to the Gauge Controller
- Proposal to subsidize Concentrator’s harvesting transaction cost via Fundraising Gauge (Harvest-for-All)
To read more about the different proposals and take part in the decision, check out the forum. Vote here.
Gitcoin
Recent blog posts
Closed proposals
New and ongoing discussions
- Partnership & Mutual Grant with Wonder
- Proof Of Impact
- Grants Policy Update: Projects with Tokens
- Data Science @ Gitcoin DAO
- Treasury Diversification Part II — Welcoming Strategic Partners
- [Proposal] Ratify the Results of Grants Round 13 and Formally Request the Community Multisig Holders to Payout Matching Allocations
To read more about the different proposals and take part in the decision, check out the governance forum.
Gitcoin Grants Round 13 Finale Event:
DAOVibes Call March 30 2022:
Radical Markets with Glen Weyl | Green Pill #7:
Gnosis
Active proposals
Closed proposals
- GIP-28: Allow locked and staked GNO to vote
- GIP-24: 1st phase 50K GNO Incentives Program for Gnosis Chain as proposed in GIP-16
New and ongoing discussions
- GIP-29: Spin-off safeDAO and Launch SAFE Token
- GIP-31: Should Gnosis Chain perform a Hardfork to upgrade the token contract vulnerable to the reentrancy attack?
- Should we burn 68% of the total GNO Supply?
- Should GnosisDAO support a Balancer Friendly Fork on Gnosis Chain or work towards bringing Balancer to Gnosis Chain?
- Should Gnosis Help Reimburse Some of The Lost Funds on Agave
Find out the latest GnosisDAO proposals here.
Idle
Active proposals
- IIP-20: Activate Idle Gauges, Transfer 50k IDLE from ecosystem fund for Uniswap v3
- [Temperature Check] Initial Gauges & Whitelisting process
Closed proposals
New and ongoing discussions
- [IIP-20] — $IDLE Gauges Activation
- [Gauges] — Initial Gauges batch & Whitelisting process
- Leagues Coordinators: making Leagues framework lean
To read more about the different proposals and take part in the decision, check out the governance forum.
Idle DAO — Community Call M1–22 (03/31/21):
Index Coop
Active proposals
- IIP-145: DG — Launch the Layer 2 Index (LAYER2)
- IIP-138: MVI Revised Fee Split and Streaming Fee Increase [Second Submission]
- IIP-144: DG — Launch the Basis Trading product suite (BASIS-ETH et al)
- [AAVE-undefined] Optimizing ETH rates
- [Compound-95] OpenZeppelin Security Partnership — 2022 Q2 Adjustment V2
- [Compound-93] Contribute funding to the Nomic Foundation
- [Balancer] — Polygon: Authorize Batch Relayer V2 for USD+ Boosted Poollification Factor Control to the BalancerDAO
- [Balancer] — Hand Over Swap Fee and Amplification Factor Control to the BalancerDAO
- [Balancer] — Symmetric Friendly Fork
- [Balancer] — veBAL Activation
- [Balancer] — Hexagon Friendly Fork Proposal
- [Uniswap] Should Uniswap governance contribute funding to the Nomic Foundation?
- [Uniswap] Gnosis Chain Deployment
Closed proposals
- IIP-142: Transfer USDC from Treasury to the Investment Account
- IIP-141: DG — Launch the Interest Compounding ETH index ($icETH)
- IIP-139 — Season 1 Budget Approval
- [Compound-91] Should Compound governance contribute funding to the Nomic Fo
- [Compound-90] Risk Parameter Updates for ZRX, MKR, and SUSHI
New and ongoing discussions
- IIP-145: DG — Launch the Layer 2 Index (LAYER2)
- IIP-120: DG — Launch Forefront Social Token Index ($SOCIAL)
- Governance House
- IIP-138: MVI Revised Fee Split and Streaming Fee Increase
- A Framework for Index Council Candidate Vetting
Find latest Index Coop proposals here.
To read more about the different proposals and take part in the decision, check out the governance forum.
What is Metagovernance? DeFi’s Sleeping Giant:
Kleros
There were no active KIPs these weeks.
To read more about the different proposals and take part in the decision, check out the governance forum.
Kleros 2.0 Demo:
KyberDAO
Recent blog posts
- WE’RE THRILLED TO ANNOUNCE OUR NEW WINNERS FOR 2ND GIVEAWAY!!
- THE WINNERS OF OUR $200 KNC AIRDROP ARE HERE!!
- KyberSwap is heading to AVAX Summit 2022!
There were no active proposals these weeks.
Find out all proposals here. Check them out on GitHub.
Lido
Recent blog posts
Active proposals
- Refund money spent on deposits on Ethereum to the dev team
- Fund the depositor bot in Ethereum
- Top Up LEGO Treasury Wallet w/ 300,000 LDO
Closed proposals
- Top Up LEGO Treasury Wallet with 300,000 LDO
- Proposal to form Lido Referral Program committee [Ethereum]
- Vote to engage a Head of Marketing & Community for Lido
New and ongoing discussions
- Lido on Solana — Proposed Transition from Chorus One to P2P
- Referral Program Whitelisting [Ethereum]
- RFC: Allocate treasury assets to Univ3 wstETH<>WETH pair to foster Compound listing
- [reWARDS] March 22’ Budget
- Compensating security assessment costs for Lido-on-X projects
To read more about the different proposals and take part in the decision, check out the governance forum.
MakerDAO
Closed Polls (4 Polls Ended Mar 31)
- Short Ratification Poll for SPF ETHAmsterdam Event (MIP55c3-SP3)
- Initial Parameters for StarkNet Simple DAI Bridge
- Short Ratification Poll for MIP62 Amendments (MIP4c3-SP2)
- Investigate Implementation of a Notional Finance D3M
Closed Polls (9 Polls Ended Mar 28)
- Ratification Poll for Declaration of Intent — Invest in Short-Term Bonds (MIP13c3-SP12)
- Ratification Poll for Facilitators Offboarding (MDS-001) (MIP41c5-SP5)
- Ratification Poll for GovAlpha Budget 2022–23 (MIP40c3-SP59)
- Ratification Poll for Modify Core Unit Budget — Real-World Finance (RWF-001) (MIP40c3-SP61)
- Ratification Poll for Modify GovAlpha Core Unit MKR Budget (MIP40c3-SP60)
- Ratification Poll for Onboard-Amend Keeper Network — Gelato Network (MIP63c4-SP3)
- Ratification Poll for Onboard-Amend Keeper Network — Keep3r Network (MIP63c4-SP2)
- Ratification Poll for Rapid Payment for Small Bug Bounties (MIP64, MIP40c3-SP42 Amendment) (MIP4c2-SP17)
- Ratification Poll for Recognized Delegate Compensation (MIP61)
Executive
New and ongoing discussions
- MIP39c2-SP32: Adding Events Core Unit (EVENTS-001)
- MIP65: Project Clydesdale: Monetalis Arrangement I: Liquid Bond Strategy & Execution
- MIP40c3-SP64: Add Data Insights Core Unit Budget
- MIP40c3-SP67: Modify Core Unit Budget — Strategic Happiness (SH-001)
- MIP63c4-SP3: Gelato Network Clarification
Read more about the different proposals and take part in the decision.
Governance Portal, Governance Forum
Governance and Risk | Ep. 184:
Issue Discussion Call # 5 | Budget Modification Process:
The Bullish Case for MKR | Sam MacPherson, Niklas Kunkel & monetsupply.eth:
mStable
Recent blog posts
- mStable Governance Updates — 28 March 2022
- mStable x Gro — mStable mUSD now live in Gro
- mStable Protocol Updates — UX and integration improvements, Save unwrapper and more
- mStable Process Quality Score rated 93% from DeFiSafety
Closed proposals
- MCCP 19: Disable automated collection of fees for Mainnet Save Redemptions
- MCCP 18: Add Idle Finance dial for 3pool PYT
- TDP 36: DTOP Liquidation
New and ongoing discussions
- [Discussion] Balancer Bribes for MTA Pools
- [Discussion] Consolidating the GrantsDAO with the Community subDAO
- TDP 38: Addendum to Pre-approve BPT Locking & Voting for veBAL
To read more about the different proposals and take part in the decision, check out the governance forum.
Road to v2 Community Call Session 2 — mStable:
mStable: Behind the Scenes — The Avalanche Summit:
Nexus Mutual
Active proposals
Discussions
Vote on governance proposals to decide the future of the protocol here.
To read more about the different proposals and take part in the decision, check out the governance forum.
Pie DAO
Recent blog posts
Active proposals
Closed proposals
New and ongoing discussions
- [Discussion] PieDAO x Jarvis for currencies pies on Polygon
- NFT Index Creation (Updated PFP Index proposal)
- BTC++ Health-check
- [PIP-71] YPIE Health-Check
To read more about the different proposals and take part in the decision, check out the governance forum.
PoolTogether
Recent blog posts
- PoolTogether Community Podcast #14 — Matthew Wright from Argent
- PoolTogether Community Podcast #13 — Kris Kay
Closed proposals
New and ongoing discussions
- PTIP-67 Move 400k PTaUSDC to Prize Reserves
- PTIP-66: Prize Adjustment #3
- On PTIP participation
- PTIP-65: Treasury Working Group Second Quarter Renewal
To read more about the different proposals and take part in the decision, check out the governance forum.
Synthetix
Recent blog topics and news
Active proposals
Closed proposals
- SIP-222: Update exchange fee system
- SIP-223: DYDXPERP
- SIP-219: APECOIN PERP
- SIP-221: Lower Collateralization Ratio
- SCCP-174: Update Base Fees
- SCCP-173: Update Base Fees (Final Update)
- SCCP-173: Update Base Fees (Update)
- SIP-216: Add Indian Rupee Synth
- SIP-215: Add Ukrainian Hrvnia Synth
- SIP-221: Lower Collateralization Ratio
- SIP-198: Update To Atomic Exchange Function
- SIP-207: V3GM Election Module (Revote)
- SIP-80: Synthetic Futures
- SCCP-171: Increase `BaseFee` on AVAX to 35 bp from 25 bp
To read more about the different proposals and take part in the decision, check out the governance forum.
Uniswap
Active proposals
Closed proposals
- Temperature Check — Should Uniswap v3 be deployed to Gnosis Chain?
- Consensus Check — Should Uniswap add the 1bp fee tier to Polygon?
- Temp Check — Should Uniswap add the 1bp fee tier to Polygon?
- Governance Proposal — Should Uniswap governance contribute funding to the Nomic Foundation?
- [Consensus Check] Should we deploy Uniswap V3 on Celo?
New and ongoing discussions
- Polygon 1bp Fee Tier
- Deploy Uniswap V3 to Polygon PoS Chain
- [Temperature Check] Deploy Uniswap V3 on Moonbeam
- Temperature Check — Should Uniswap v3 be deployed to Gnosis Chain?
- Consensus Check — Uniswap x Celo: Green Pool for Treasury Proposal
To read more about the different proposals and take part in the decision, check out the governance forum.
Yam Finance
Active proposals
New and ongoing discussions
- YIP-xxx: Use Coordinape to compensate contributors, incentivize participation and manage resources
- YIP-106: Invest Yam Treasury ETH into Yearn.Finance Curve stETH pool
- YIP: Multipart Yam Treasury Rehabilitation Proposal
Check out the latest YIPs discussions here.
Yearn Finance
Recent blog posts
There were no active proposals these weeks.
Check out the latest YIPs discussions here.
MISC
Lido Sees Surge in Demand Driven by Aave Collateral Usage
The recent addition of stETH to the Aave money market has enabled leveraged staking strategies that have widened Lido’s lead in total staked Ether.
While Lido has long been a market leader within the Ethereum staking space, recent integrations with the Aave lending market have turbocharged adoption and deposit volumes. This has had the effect of widening Lido’s lead in total Ether staked (even exceeding top centralized exchanges such as Kraken and Coinbase), while also significantly increasing systemic leverage and raising key questions about validator centralization. We dig into the recent market moves and potential impacts below.
Aave listing: stETH was initially added to the Aave v2 protocol on Ethereum mainnet at the end of February. This followed roughly several months of discussion in the Aave governance forum, as well as development work to allow the proposed market to conform with stETH’s non-standard rebasing mechanism.
stETH was listed with a 75% liquidation threshold, which was likely optimized to mitigate price risk of users supplying stETH as collateral to borrow stablecoins. But in the following weeks, we’ve begun to see a different preferred trade take prominence: supplying stETH collateral, borrowing ETH (at a lower rate), and then staking the borrowed ETH back into stETH to increase the total yield earned.
Leveraged ETH staking: With maximum permitted borrowing of up to 70% of collateral value, defi users quickly realized they could potentially earn as much as 3x staking rewards by continuously borrowing ETH from Aave and resupplying stETH. While initial usage was limited, over the past week these positions have exploded and total stETH deposits on Aave now total over $1 billion.
There are also several structured products that are competing to capture this market demand, while abstracting away position management and reducing transaction costs required to establish this position. Galleon DAO and Beverage Finance (two micro-cap asset management protocols) were the first to capitalize with their recently launched ETHMAXY leveraged index product (targetting 3.09x leverage of stETH vs ETH). Larger competitor Index Coop is also planning to release a similar product in the near future. This huge inflow has helped push up ETH borrowing and lending rates on Aave, from a previous equilibrium of near 0% to around 2.5% for borrowing and 0.4% for depositing ETH. This has reduced maximum expected returns of leveraged ETH staking positions from as high as 12% at launch to current rates of around 7% (still nearly double the 4% base return offered by Lido).
Changing Aave market dynamics and defi risks: This marked increase in ETH borrowing activity could represent a windfall for the Aave protocol in a few ways. First, Aave captures 10% of all interest paid on ETH borrowing positions via their reserve factor. While this is primarily charged to help cover potential loan losses if underwater positions can’t be effectively liquidated, any excess reserves can be captured by the Aave protocol and used for governance approved initiatives (eg. buybacks, investments, payroll, etc). In addition, interest earned on ETH collateral helps offset the cost of borrowing other assets from the protocol, effectively subsidizing usage across the rest of Aave’s markets. With ETH serving as Aave’s most important collateral asset (primarily supporting users borrowing stablecoins), this source of intrinsic yield could help the protocol wean itself off of liquidity incentives without adversely impacting utilization.
However, this tailwind comes with significant tradeoffs. At $1 billion in stETH collateral and growing, Aave is already exposed to potentially fatal levels of systemic risk if Lido were to be compromised via a hack or governance attack. This could cause contagion across Aave’s other markets, as defaulted ETH loans would impact the true value of aETH used as collateral for a large part of Aave’s loan book. And even a less severe loss, such as a moderate slashing even on Lido’s validators, could lead to market dislocation with forced selling of stETH causing its value to fall far below 1:1 parity with ETH.
As one of the largest depositors in the Aave market via the DAI direct deposit module, Maker would also face systemic levels of risk from this sort of contagion and default playing out (in addition to the $100 million in direct Lido exposure Maker holds through stETH and steCRV collateralized vault types). Both the benefits and risks of the stETH integration are likely to be accentuated with a new governance proposal pushed forward by the team at Instadapp (which offers Aave leverage integrations through their smart contract wallet infrastructure). The proposal would adjust the ETH borrowing rate curve (which determines borrow rates as a function of utilization, or percent of the market’s assets currently being borrowed), lowering interest rates to support higher efficiency. Assuming this proposal is adopted and the ETH market reaches equilibrium around the target rate of 70% utilization and 3% borrowing rates.
Consensus and base layer centralization risks: While it has been largely absent from the above discussions, Lido’s dominance in liquid staking is beginning to cause concern about Ethereum base layer decentralization and consensus stability. While Lido bills itself as a decentralized liquid staking protocol, it still has several points of weakness. Key parts of the protocol including screening acceptable validators is performed via the Lido DAO, which is in turn controlled by LDO token holders. The LDO token has an extremely concentrated distribution, centered very heavily on founders and seed investors, with participation from additional investors later but relatively low free float on the open market.
The validator set has been widened and continues to expand over time, but currently all of Lido’s ETH stake is distributed across only a few dozen professional validators. Certain competitors, particularly Rocket Pool, support less concentrated validator distributions by allowing permissionless entry into the validator set secured by economic incentives, rather than DAO review and participant reputation.
As Lido’s market share grows, it may become more difficult for competitors to break in and gain integrations considering stETH’s immense liquidity network effects. While Rocketpool’s struggles are arguably made worse by their refusal to offer any protocol funded liquidity incentives, the Aave lending integration may help stETH separate further from competitors (users can earn nearly 2x returns through leverage, without relying on Lido funded incentives).
In a market that seems to heavily favor incumbents over challengers, the best strategy for addressing base layer centralization may be focusing on protocol improvements to Lido itself. This also serves as an interesting example of transmission of centralization risk between different layers of the crypto tech stack, with application layer decisions made by DAOs significantly influencing base layer consensus.
Sushiswap Releases Trident AMM Protocol on Polygon
After facing long delays, Sushiswap’s Trident AMM should give the project a much needed boost and introduce greater competition into the decentralized exchange landscape.
When it was originally announced last summer, Sushiswap’s Trident exchange protocol gained significant attention and was lauded as a serious competitor to Uniswap v3. But this excitement dissipated quickly, with collapsing price of the SUSHI token, several high profile departures from the core team, and an unsuccessful takeover bid from the Arca hedge fund and Abracadabra stablecoin project all causing upheaval. As recently as this month, many were wondering if the project would even ship at all.
The Sushi team has allayed these concerns with a preview launch of their AMM framework on Polygon. Initially, this deployment will only support an upgraded and standardized version of the classic Uniswap v2 style liquidity pool; two assets per pool each weighted with 50% of liquidity, and the traditional X*Y=K formula for determining swap pricing. But over time, Sushiswap plans to add at least 3 additional pool types: concentrated liquidity (similar to Uniswap v3), stableswaps (similar to Curve), and index pools (similar to Balancer).
With all pool types linked under a single contract interface and UI, Sushiswap should be able to offer a strong value proposition for integrators, liquidity providers, and DAOs, while also reducing lead time required for the developers to spin up new pool types in the future. So while trident is shipping months later than expected, it should still give Sushiswap an important boost in the heavily saturated DEX industry.
- Women-Led DAO Tackles (Lack of) Gender Diversity in Crypto: H.E.R. DAO organized a “Hacker House” at the Avalanche Summit in Barcelona last week, funding 25 women developers to attend.
- Larry Ellison’s SailGP and Near Protocol to Create a DAO for Sports Team Ownership: Members of the decentralized autonomous organization will be able to determine athlete selection, team management and team strategy.
- Lemonade Is Working With Avalanche, Chainlink on Weather Insurance for Farmers: A newly formed DAO backed by the Lemonade Foundation will roll out permissionless weather insurance to African farmers later this year.
- Junowhale rejects community compromise proposal, suggesting to maintain status quo where they continue to hold governance power and earn staking rewards:
- Solana based stablecoin project Cash is exploited, with hacker’s return of funds for all users with <$100,000 balance creating difficult conundrum for project maintainers:
- Bridge protocol Stargate Finance launches, with initial token auction fully purchased by Alameda Research in a single transaction:
- Teller begins offering unsecured stablecoin loans to Singapore residents using traditional credit scoring:
- Juno core team members and community rally around compromise proposal, removing Juno whale’s voting power while negotiations continue:
- Georgetown professor offers framework for crypto-native disclosures:
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