Wintermute DeFi Governance Digest December 2023 | Week 3

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Wintermute

5 min readDec 21, 2023

This week’s proposals include Arbitrum looking for RWAs for the treasury
diversification, Levana suggesting to make a loan swap with Osmosis, and Aave discussing the PYUSD market for v3; as well as votes from dYdX to add a new TIA market, Curve to reimburse victims of the July exploit, and Synthetix to upgrade Perps to v3.

Proposals

Arbitrum (ARB)

Proposal: Arbitrum Stable Treasury Endowment Program

Author: thedevanshmehta

Summary: The ArbitrumDAO is planning to diversify its treasury using RWAs from various on-chain protocols. This proposal could not only hedge the treasury from price movements but also create a source of sustainable yield and increase Arbitrum TVL.

Key Points:

Earning on-chain T-bills yield become much easier since this year, and protocols started to use this instrument for treasury diversification more often.
Currently, Arbitrum has a treasury consisting of 3.5B ARB ($3.9B), and the need for diversification is clear.
The exact amount of ARB from two available options (10M and 25M ARB in the case of support) will be chosen through the Snapshot and on-chain votes.
The important moment is that this ARB allocation is an investment that can be recalled by the DAO at any time.
After picking the investment size, the DAO will start voting for service providers who will share it.
Five investment managers showed interest in this program: Backed Finance, Centrifuge, Mountain Protocol, Ondo Finance, and OpenEden.

If successful, this proposal could mark the beginning of the development of the RWA sector on Arbitrum because, according to Defillama, its current TVL is sub-$100k.

Our Take: The lack of diversification created difficult situations for many projects that were trying to find a quick way to cut costs to survive until the next bull market. This proposal offers not only diversification but also aims to maintain TVL leadership.

Osmosis (OSMO)

Proposal: Proposal for Loan Swap of OSMO to Levana’s $LVN

Author: madcapslaugh

Summary: This proposal is the third in a series of proposals targeting $1M loan swaps from OSMO to project tokens. The Levana case is a bit more interesting because this DEX became a de-facto main venue for leveraged trading on Osmosis.

Key Points:

Osmosis is supporting the deployments of custom contracts on the chain thanks to the Cosmwasm module.
A perpetual futures DEX called Levana launched on Osmosis five months ago and started to break $50M in daily trading volume.
Levana also just launched its own token — LVN, on Osmosis, and to improve the liquidity is asking for a loan of $1M in OSMO.

The idea is to repay this loan in 3 months fully in LVN, thus performing a loan swap similar to the Stargaze and Axelar ones.
Basically, Osmosis will get a voting right with the launch of the Levana governance and possible part of revenue in the case of sharing.

Our Take: That’s nice to see that the framework for loan swaps has become popular, and protocols on top of Osmosis also started to use it. Better liquidity will help Levana, which showed good traction in less than a year, despite the increase in the number of competitors.

Aave (AAVE)

Proposal: [TEMP CHECK] Add PYUSD to Aave v3 Ethereum Market

Author: mv_Trident

Summary: Trident Digital is proposing to add PYUSD to Aave v3 on Ethereum to increase the utility of the PayPal stablecoin. The stablecoin recently got a Chainlink price feed, which will allow it to be integrated into more DeFi protocols.

Key Points:

One of the biggest problems for a stablecoin is gaining a userbase, since there is quite a lot of competition.
For example, in the case of PYUSD, the stablecoin has not yet become popular, so we are starting to see integrations with DeFi protocols.
The potential new market on Aave will not have the collateral property, although it wouldn’t be in isolated mode.
Trident Digital, on behalf of Paxos (the PYUSD issuer), shared that the money market will get 5–10M PYUSD for initial borrows.
Also, Trident intends to incentivize the PYUSD/GHO pool on Curve in the case of borrowing demand on Aave.

Our Take: Lack of utility and subsequent demand is pretty common for stablecoins, especially newcomers. Listing on money markets and incentivizing liquidity on Curve is not a new playbook, but PYUSD may play it better than fallen competitors.

Votes

dYdX (DYDX)

Proposal: Add New Market: TIA

Status: Live.

Created: Dec 18, 2023.

Ends: Dec 22, 2023.

Leading Consensus: YES — 37.8M DYDX (99.9% of total votes).

Summary: With this vote, the dYdX community will add the first new market since the genesis. The chosen pair is TIA-USD because of the huge interest from traders since the Celestia launch.

Curve Finance (CRV)

Proposal: Recovery for victims of pETH, alETH, msETH, CRV/ETH pool hacks

Status: Live.

Created: Dec 14, 2023.

Ends: Dec 21, 2023.

Leading Consensus: Yes — 480M veCRV (94.6% of total votes).

Summary: This vote will vest 71.7M CRV from the Curve Community Fund to reimburse victims of the Vyper reentrancy vulnerability. LPs of exploited pools could claim CRV with the 1-year linear vesting.