Wintermute DeFi Governance Digest January 2024 | Week 1

This week’s proposals include activation of Interchain accounts on Celestia, and allocation of remaining KNC from the Kyber Ecosystem Fund to the project team; as well as votes from Synthetix to decrease the OI cap for TRB, PancakeSwap to decrease the maximum total supply of CAKE, and GMX to deploy the BNB market on Arbitrum.

Proposals

Celestia (TIA)

Proposal: Moving toward safer and more aligned TIA liquid staking

Author: aidangs

Summary: The launch of Celestia was very successful in terms of price action, even though the projects using it have not yet switched to the mainnet. The presence of a safe LST opens the way, both in using TIA on other chains and in potential restaking. At the moment, IСAs for trustless LSTs are not enabled, the activation of these is the purpose of this proposal.

Key Points:

• The Celestia launch was one of last year’s most interesting events, as it created an unprecedented load on the infrastructure of other Cosmos chains.
• Currently, 47% of TIA participates in network security and contributes 16.3% of APR.
• The presence of LSTs would make it possible to receive such yield and, at the same time, participate in the Cosmos DeFi ecosystem or projects on top of Celestia.
• Recently, MilkyWay ($9.7M TVL) was launched, which offers milkTIA through the use of multisig address on Celestia, which requires a certain level of trust.
• On the other hand, LSTs of other Cosmos chains use ICAs — addresses that are managed through IBC, and follow the logic of liquid staking zones.
• One of these liquid staking zones is Stride ($90M TVL), which is unable to launch on Celestia and other new chains without ICAs.

• When ICAs are enabled, Stride offers to choose how the validator set for Celestia will be selected.
• In addition to using its election process with veto power for stTIA holders, there is the option of copy-staking or the ability to select a set of validators through stTIA governance.
• In the future, Stride aims to achieve even greater trust-minimization using zero-knowledge tech.

Our Take: The presence of LST opens up many opportunities, which can be especially good for modular blockchains. The current status quo with the use of multisig is far from ideal, so we expect the activation of ICAs on Celestia.

Kyber Network (KNC)

Proposal: KIP-30: Allocating remaining KNC in the Ecosystem Fund to the KyberSwap team for growth initiatives

Author: ShaneKyber

Summary: The KyberSwap team decided to give grants to the victims of their Elastic pools’ exploit, and is asking for ~$8.3M from the DAO Ecosystem Fund to decrease the financial burden.

Key Points:

• $48M was drained from LPs of KyberSwap Elastic on November 22, 2023 because of the bad math implementation.
• One month later, the KyberSwap team shared the grant program for affected parties with intentions to repay damage in USD stablecoins.
• Now, the KyberSwap team wants to take the remaining 11.8M KNC from the Ecosystem Fund to increase the KyberSwap adoption.
• Although this proposal is aimed at increasing adoption, it involves the use of tokens by the team without participation in governance procedures.
• At least for some time, the main KyberSwap focus will be its aggregator, and all liquidity protocols are on hold.

Our Take: Trying to fully cover the damage from exploits has not previously been a common occurrence, but this year, after large attacks, Curve and KyberSwap decided to cover the damage using own funds. Such programs make it possible to maintain the faith of users in exploited products.

Votes

Synthetix (SNX)

Proposal: SCCP-2072: Lower the OI cap on TRB

Status: Live.

Created: Dec 31, 2023.

Ends: Jan 4, 2024.

Leading Consensus: sYES — 6 SNX-SCT (100% of total votes).

Summary: This vote requests to lower the OI cap on TRB (Tellor) to zero after the events of December 31, where as a result of the pump and dump scheme, SNX stakers lost $2M.

PancakeSwap (CAKE)

Proposal: Proposal to Reduce CAKE Token Total Supply

Status: Finished.

Created: Dec 28, 2023.

Ends: Dec 29, 2023.

Leading Consensus: Yes, we want to lower CAKE’s token supply! — 858k CAKE (97.88% of total votes).

Summary: This proposal should decrease the maximum total supply for CAKE from 750M to 450M. Reducing the total supply is the next step in revamping the CAKE tokenomics from the hyperinflationary model.

GMX (GMX)

Proposal: Create a BNB Market on GMX V2 (Arbitrum)

Status: Finished.

Created: Dec 28, 2023.

Ends: Jan 2, 2024.

Leading Consensus: Bridged GM (LayerZero WBNB-USDC) — 556k GMX (99.3% of total votes)

Summary: The most interesting part of this vote is the choice between using a synthetic pool or a bridge pool with LayerZero. Historically, pools with coins from other networks have been synthetic, but apparently, the community is interested in working with L0.