Wintermute DeFi Governance Digest — June 2023 | Week 3

This week’s proposals include Lido introducing a new referral rewards program, Paraswap expanding their social-escrow staking system to Optimism, and Stakewise introducing a new staking mechanism for their upcoming V3 product; along with votes from Balancer to introduce a fee discount for 1inch Fusion Solvers, Curve launching a wBTC market for crvUSD, and dYdX ratifying the launch of the dYdX Operations subDAO V2.

Proposals

Lido (LDO)

Proposal: Tiered Rewards Share Program: A Sustainable Approach to stETH Growth

Author: Frontalpha

Summary: This proposal introduces a new tiered referral program managed by the Rewards Share Committee in order to sustainably grow stETH.

Key Points:

• The new tiered referral program will offer a portion of the DAO’s 5% share of staking rewards to participants who stake ETH using Lido.
• The program is designed to have limited rewards pools, gradual payouts, a fixed duration, and filtering for program abuse.

Participants will go through 3 phases:

• Onboarding: Participants are assessed against eligibility criteria and voted in by the Rewards Share Committee.
• Reward-Share: Onboarded participants will be eligible for rewards share based on their stETH contribution, positive activities, disqualification activities, and unstaked ETH.
• Offboarding: Participants are offboarded when either they leave voluntarily, do not renew their participation, are disqualified by the program’s Terms and Conditions, are discontinued by a DAO vote, or the rewards pool is exhausted and not renewed.

Importantly for Onboarding,

• Participants must demonstrate a potential to drive at least 2,500 ETH to Lido over than span of 12–24 months.
• Participants must be willing to market and promote Lido equally with alternative liquid staking tokens.
• Participants must follow Lido’s Terms of Use.
• The committee has 30 days from the date of application to reject or accept an applicant.

Of the DAO’s 5% share of staking rewards, participants will receive a portion of rewards for the next 12 months based on their tier:

A participant’s rewards share is based on the net amount of non-disqualified ETH staked within a calendar month.

• ETH can be disqualified based on various activities such as: selling stETH, one-sided stETH liquidity provisioning, unstaking stETH etc.
• The committee will start with an initial rewards pool of 3,000 stETH. When the pool is depleted, the DAO will vote on whether to replenish it.

Our Take: This proposal offers a well-thought-out referral program for stETH, albeit requiring extensive work from the committee. Given Lido’s already dominant position in the Liquid Staking Token market, we expect this to be a strong proponent in driving further stETH growth.

Paraswap (PSP)

Proposal: Multichain Staking and Gas Refund Consolidation

Author: 0xYtocin

Summary: This proposal seeks to extend Paraswap’s sePSP (PSP 2.0) design to Optimism as their first step towards multichain staking. Once staking is live, users will receive their gas rebate in sePSP1 instead of PSP, aligning it with Paraswap’s ETH gas rebate program.

Key Points:

• PSP 2.0 was officially launched in January 2023 and introduced sePSP1 and sePSP2, alongside a new fee distribution, emissions strategy, and gas rebate program.
• sePSP1 represents single-sided PSP staking with 1x voting power, while, sePSP2 represents staked 80/20 PSP/ETH Balancer LP positions with 2.5x voting power.

• Currently, PSP staking has been exclusive to Ethereum Mainnet mainly due to the lack of cross-chain liquidity for PSP.
• Given Ethereum Mainnet’s high gas fees, many potential users are priced out of the current PSP staking ecosystem as their stake and potential rewards for their activities are not greater than the gas fees incurred from these activities.
• The proposed multichain model will allow users on any chain where sePSP is deployed to participate in staking and receive rewards proportion to their overall score across all chains.
• Optimism will be the first multichain expansion due to it having the highest liquidity of PSP ($1.1M) outside of Ethereum Mainnet.
• Optimism’s sePSP2 will utilise BeethovenX’s 80/20 PSP/ETH LP position and the gas rebate program will be amended to distribute rebates in sePSP1 as opposed to PSP.

Our Take: Paraswap’s Multichain expansion strategy offers a synergistic solution for gas-sensitive users. Optimism is a great first step and we look forward to watching the growth of Optimism-sePSP2.

Stakewise (SWISE)

Proposal: Updated SWISE Tokenomics via Dynamic Liquidity Provision (dLP) Staking

Author: Steel.key

Summary: This proposal builds upon the previous xSWISE proposal, keeping the same 50% net DAO revenue split for SWISE stakers. However, SWISE staking will now be an 80/20 SWISE/osETH Balancer LP position with a new emissions curve and dynamic liquidity provision.

Key Points:

• Stakewise V3’s new vault system will allow users and vault operators to insure their vault systems by staking SWISE as collateral, improving the score of their vault (See details here: xSWISE).
• A higher score for vault operators would translate to more ETH deposits as ETH stakers have higher confidence in their ETH not getting slashed.

• This new tokenomics proposal retains the xSWISE revenue share but introduces a new form of staking and incentive model.

Specifically,

• 50% of DAO net revenue is returned to stakers via a SWISE buyback model.
• DAO gross revenue comes from 5% of staking rewards earnt by osETH.
• The new staking model transitions to an 80/20 SWISE/osETH Balancer LP position (BPT) from single-staked SWISE.
• osETH holders can receive additional SWISE rewards on top of native ETH rewards through a new “dynamic liquidity provision (dLP)” mechanism, created by Radiant Capital.
• SWISE emissions for osETH holders will come from the DAO’s treasury (350M SWISE) and will follow a 7-year emissions schedule.
• However, through the dLP program, osETH holders will be required to maintain >5% value of their osETH position in staked SWISE/osETH 80/20 BPT across various V3 vaults in order to receive boosted rewards.
• This new proposal is expected to incentivize new osETH deposits, enhance SWISE/osETH liquidity on-chain, and provide attractive yields to users who insure V3 vaults.

Our Take: This is an interesting experiment by Stakewise that inherit a lot of nice positive feedback loops. If successful, we expect to see significant growth in both ETH deposits and on-chain liquidity for SWISE/osETH. However, it does open room for Convex/Aura-style platforms which could lead to insurance for poor-performing vaults, therefore, inflating their vault scores.

Votes

Balancer (BAL)

Proposal: Fee Discount for 1inch Labs Solver

Status: Live.

Created: June 16, 2023.

Ends: June 20, 2023.

Leading Consensus: Yes — 289k veBAL (100% of total votes).

Summary: This proposal allows 1inch Fusion solvers who route trades through Balancer to be eligible to receive a fee discount of up to 80%. Balancer believes this change will result in a significant increase in non-toxic flow.

Curve Finance (CRV)

Proposal: Deploy wBTC market with 200M crvUSD debt ceiling

Status: Live.

Created: June 18, 2023.

Ends: June 25, 2023.

Leading Consensus: Yes — 1.02M veCRV (100% of total votes).

Summary: Curve’s founder Michael has proposed to launch a wBTC market for crvUSD with a debt ceiling of 200M. If approved, this will allow users to deposit wBTC as collateral and borrow crvUSD.

dYdX (DYDX)

Proposal: Launch the dYdX Operations subDAO V2

Status: Finished.

Created: June 16, 2023.

Ends: June 19, 2023.

Leading Consensus: Yes — 73.7M DYDX (99.99% of total votes).

Summary: This on-chain vote ratifies the launch of dYdX Operations V2 with an 18-month mandate and $6.6M in funding. The dYdX Operations subDAO will be responsible for launching a front-end and contracting an indexer for the upcoming launch of dYdX V4.