Wintermute DeFi Governance Digest — December 2023 | Week 1
This week’s proposals include CoW Protocol changing the way Solvers are reimbursed and Synthetix buying back and burning SNX on Base using 50% of net protocol fees; along with votes from Arbitrum to extend the duration of incentive allocation for backfunded and original STIP applicants, and MakerDAO reducing the GUSD PSM debt ceiling to 0 and increasing the Coinbase Custody debt ceiling to 1.5B DAI.
Proposals
CoW Protocol (COW)
Proposal: Solver Computed Fees & Rank by Surplus
Author: AndreaC
Summary: This proposal requests to change the current fee structure to allow solvers to directly collect a “network fee” to pay for gas costs instead of being reimbursed by the protocol.
Key Points:
- Currently, the CoW Protocol collects fees from users and then uses these fees to reimburse solvers’ gas costs.
- Solvers are also ranked according to the surplus they generate for users and are paid according to this surplus.
However, such a mechanism is inefficient for a few reasons:
- The fee for swap orders is determined at the time of the swap which does not reflect the market conditions at the time of execution
- The benefit of batching orders (in terms of gas savings) is not always correctly passed on to users
- The protocol must estimate the gas cost of orders, adding complexity
- This proposal requests to eliminate the current fee structure and allow solvers to charge their own fees instead.
- As a result, competition between solvers will guarantee that these fees will equal gas costs.
- The protocol fee that solvers charge will be collected and reimbursed back to the protocol every week. All protocol fees will be converted to COW, generating demand for the token.
Our Take: The new fee structure provides a more efficient and sensible structure directly aligning it with gas/execution costs.
Synthetix (SNX)
Proposal: SIP-345: Buyback and burn SNX on Base
Author: Cavalier
Summary: This proposal requests to use 50% of fees earned on Base to buyback and burn SNX.
Key Points:
- In an ideal world fees for SNX LPs on other chains would be distributed to stakers in the same form fees are earned in. However, due to the limitations of cross-chain communication, such a mechanism is extremely complicated.
- Therefore, a sufficient but intermediate solution would be to use a portion of these fees to buyback and burn SNX from the market across all chain deployments.
- This will be initially tested on Base where 50% of fees earned on Base (net of integrator rebates) will be used to buyback and burn SNX.
- The other 50% of net fees will be earned by the LPs, which is currently expected to be USDC.
- Synthetix will use a buyback contract based on Yearn’s YFI buyback contract.
- This contract will be funded by a Fee Collector contract that collects sUSD fees, swaps it into USDC, and send it to the buyback contract.
Our Take: Buybacks and burn models have had their fair share of criticism around their efficacy and long-term impact. We look forward to seeing if it’s different for SNX.
Votes
Synthetix (SNX)
Proposal: SIP-345: Buyback and burn SNX on Base
Status: Live.
Created: Dec 1, 2023.
Ends: Dec 13, 2023.
Leading Consensus: sYes — 5 SNX-SCT (71.43% of total votes).
Summary: This vote ratifies the enactment of a buyback and burn model for SNX on Base, where 50% of fees (net of integrator rewards) will be used to buyback and burn SNX from the market.
Arbitrum (ARB)
Proposal: Timeline Extension for STIP and Backfund Grantees
Status: Live.
Created: Dec 3, 2023.
Ends: Dec 10, 2023.
Leading Consensus: Extend deadline for both — 32M ARB (92.32% of total votes).
Summary: This vote requests to extend the deadline to hand out incentives for protocols in both STIP and the backfund proposal. If passed, the new deadline for protocols to distribute ARB to users would be March 29th, 2024.
MakerDAO (MKR)
Status: Finished.
Created: Nov 29, 2023.
Ends: Dec 20, 2023.
Leading Consensus: Yes — 80,924 MKR.
Summary: This vote implements many changes with the most notable changes being reducing the debt ceiling of the PSM-GUSD-A to 0 from 110M as it’s no longer recognised as a ‘cash stablecoin’, increasing the debt ceiling of Coinbase Custody (RWA014-A) to 1.5 billion DAI from 500 million, and lowering the stability fee on WBTC vaults by 0.07%.
