Wintermute DeFi Governance Digest — August 2023 | Week 4

This week’s proposals include Raft introducing an R Savings Module, Uniswap deploying V2 across all chains with a V3 deployment, and Yearn Finance launching V3; along with votes from Synthetix to deploy V3 on Base, a Uniswap temperature check to deploy V3 on Scroll, and Aave adding sDAI as collateral on V3 Ethereum Mainnet.

Proposals

Raft (R)

Proposal: Introduction of the R Savings Module

Author: David

Summary: This proposal introduces an R Savings Module with the aim of addressing the current imbalances in R liquidity pools, causing R to deviate from its intended $1 peg.

Key Points:

• R is a stablecoin that can be minted against popular ETH LSTs such as wstETH, stETH, and rETH.
• Currently, R’s largest liquidity pool’s composition is heavily skewed towards R causing the price to deviate from its intended $1 peg, i.e., 69%/31% R/DAI.

• To help increase the utility and therefore demand for R to help restore its peg, an R Savings Module is proposed.

The R Savings Module will have a:

• Fixed APR — Users who stake R in the Savings Module will earn a fixed APR paid in R that is subsidized by fees generated by the protocol.
• Staking Capacity — A maximum amount of 6 million R will be allowed to be deposited into the Savings Module.
• Cross-chain Compatibility — The contract will be compatible with future cross-chain deployments.
• It’s expected that the minimum APR on the R Savings Module will be set in the 5–10% range, exceeding most alternative stablecoin yield options.
• The R Savings Module is expected to induce buying pressure leading to peg restoration. Furthermore, a Peg Stability Module will be launched in the future allowing users to mint R against sDAI, helping protect R from exceeding its $1 peg.
• This proposal also requests to increase the one-time borrow fees of R to 1% from 0.50% to counteract increased borrowing activity from higher R prices.

Our Take: Introducing a competitive savings module for R will likely increase the demand for the token as seen by MakerDAO’s EDSR, achieving its intended purpose.

Uniswap (UNI)

Proposal: Deploy Uniswap V2 on all chains with V3

Author: eek637

Summary: This proposal requests to deploy Uniswap V2 on all chains with a V3 deployment, capitalizing on liquidity demands for v2-style AMMs.

Key Points:

• Currently, the only recognized canonical deployment of Uniswap V2 is on Ethereum Mainnet.
• V2’s GPL License has led the protocol to be forked over 465 times across multiple chains, making it the most forked protocol in DeFi.

• Unfortunately, some of these forks were malicious, leading to hacks that resulted in users losing their funds.
• The increasing number of V2 forks on new chains also identifies sustained demand for the traditional full-range AMM.
• Integrating V2 alongside V3 on multiple chains will improve execution quality for users thanks to Uniswap’s Universal Router.
• Therefore, this proposal requests to deploy recognized canonical deployments on all networks that have a Uniswap V3 deployment.
• This will provide users with a predictable and battle-tested V2 Dex that is controlled by Uniswap Governance; allowing Uniswap to begin capturing market share.

Our Take: Having a recognized canonical deployment of Uni V2 with proper governance controls will provide users more stability and safety whether their preference be V3 or V2.

Yearn Finance (YFI)

Proposal: Launch V3

Author: Schlagatron

Summary: This proposal requests to launch V3 — a fully open, easy-to-deploy, and permissionless vault system infrastructure.

Key Points:

• V3 attempts to commoditize Yearn V2 Vaults by making it super easy for anyone to manage, deploy, and write strategies for V3 vaults.
• In V3, Vaults and Strategies are fully stand-alone ERC4626-compliant vaults.
• Specifically, V3 Vaults allocate debt between multiple different Strategies, and Strategies can consist of any ERC4626 Vault (e.g., other Yearn Vaults, sfrxETH) whose purpose is typically to earn yield on an underlying asset.

• This architecture allows any vault to deploy capital to many strategies as well as accept capital from many different vaults including non-vault sources like direct deposits from users.
• By having fully compliant ERC4626 Strategy Vaults, a strategy is instantly standardized allowing it to interact with many protocols across DeFi. This reduces complexity, vault accounting, and gas costs.

Other than improved composability, V3 will introduce numerous benefits such as:

• Decentralization: V3 introduces “Roles”. Each permissioned function has its own role that can be controlled by an EOA, multisig, smart contract, or any combination of these.
• Customization: Roles and periphery add-ons such as “Accountants” allow the base contract to remain immutable and secure, while management can continue to iterate.
• Efficiency: Debt updates and profit reporting have been redesigned to improve capital efficiency and reduce gas costs.
• Profit Locking: Allows users to continuously earn yield slowly over time rather than after specific post-harvest intervals.
• V3 Strategies will come with strategy templates to make writing strategies simple and only require the implementation of 3 functions and 1 accounting variable.

V3 Periphery contracts will help improve customization by allowing for the implementation of:

• Accountants — allowing vaults to charge fees.
• 4626 Router — making integration with any V3 vault or strategy as easy as possible.
• Custom Registries — Any protocol, UI, team, etc. can deploy and manage its own registry to track on-chain vaults and strategies they work with.
• Swappers — Strategists can set their preferred method of managing token swaps.
• V3 will also come with a “Protocol Fee” that will earn revenue for the Yearn DAO no matter who runs a vault or strategy.
• The “Protocol Fee” will be a tax on fees charged by Accountants and is controlled by Yearn Governance.
• Currently, all V3 contracts have been deployed on multiple chains, however, the initial growth efforts will be focused towards Polygon.

Our Take: V3 is a significant deployment for Yearn and it will be very interesting to watch its adoption over time. Given there is a large focus on ease of use, we expect portfolio management-type protocols to leverage Yearn’s V3 infrastructure stack instead of building out their own.

Votes

Synthetix (SNX)

Proposal: SIP-336: Deploy Synthetix V3 Core on Base

Status: Finished.

Created: August 14, 2023.

Ends: August 20, 2023.

Leading Consensus: sYES — 8 SNX-SCT (100% of total votes).

Summary: This vote ratifies the deployment of Synthetix V3 Core System on Base. Given Base is built on the OP stack it is compatible with the current V3 contracts that are deployed on Optimism.

Uniswap (UNI)

Proposal: [Temperature Check] Deploy Uniswap V3 on Scroll

Status: Finished.

Created: August 15, 2023.

Ends: August 20, 2023.

Leading Consensus: Yes — 28M UNI (100% of total votes).

Summary: This vote requests to deploy a recognized canonical deployment of Uniswap V3 on Scroll. Uniswap V3 was deployed to Scroll’s testnet, and the Uniswap router has already processed over 1.8M transactions there.

Aave (AAVE)

Proposal: [ARFC] sDAI Aave V3 Onboarding

Status: Finished.

Created: August 17, 2023.

Ends: August 20, 2023.

Leading Consensus: YAE 398k AAVE (82.85% of total votes).

Summary: This vote requests to onboard sDAI as a collateral-only asset on Aave V3 Ethereum. This will allow users to deposit interest-bearing DAI and borrow GHO or other available assets.