Wintermute DeFi Governance Digest — May 2023 | Week 5

This week’s proposals include 1inch discontinuing the DAO’s collection of swap surplus, MakerDAO increasing the DAI Savings Rate to 3.33%, and the dYdX Operations subDAO requesting $6.6M in funding; along with votes to deploy Uniswap V3 on Linea and Base, Balancer launching cross-chain boosts, and Stargate deprecating their Fantom pools.

Proposals

1inch (1INCH)

Proposal: Discontinue Swap Surplus Collection

Author: RoundElephant

Summary: This proposal requests to discontinue the collection of swap surplus/positive slippage from trades. Instead, this will be given back to users on 1inch.

Key Points:

• Swap surplus or positive slippage occurs when a trade returns more tokens than what was guaranteed by the protocol due to a token pair’s rate changing positively at the time of the trade.
• This surplus in tokens is kept by the protocol and is currently directed to the 1inch treasury and referrals to the platform at an 80/20 split, respectively.

• This phenomenon does not occur with every trade, leading to an inconsistent revenue stream for the DAO and hurting the overall UX on the platform.
• Therefore, this proposal requests to route all swap surpluses back to users on the platform to promote a better user experience and begin focusing on more sustainable revenue sources like their Fusion Mode.

Our Take: Returning positive slippage back to users is a great way for 1inch to improve its user experience and continue to solidify its dominance as a DEX aggregator.

MakerDAO (MKR)

Proposal: Increase DAI Savings Rate to 3.33% (Stability Parameter Changes)

Author: Rema

Summary: MakerDAO’s risk core unit has proposed to increase the DAI Savings Rate (DSR) to 3.33% from 1% as part of their Stability Scope. As a result, MakerDAO vaults have received a large bump to their Stability Fee making it more expensive to borrow DAI.

Key Points:

• After the passing of a recent governance proposal, MIP104: Stability Scope Bounded Mutable Alignment Artifact amendments redefined parameter settings and introduced a new parameter called Base Rate.
• Base Rate is constructed from a Yield Collateral Yield Benchmark and a Stability Collateral Yiled Benchmark, which is now used to determine the Stability Fee of Native Vaults and Direct Deposit Modules (DDMs).
• Specifically, Base Rate = Yield Collateral Yield Benchmark — 0.5%) * 0.8 + Stability Collateral Yield Benchmark * 0.1
• Where, Yield Collateral Yield Benchmark = 3-month USD Government Treasury Bill yield and Stability Collateral Yield Benchmark = average yield earned on all Cash Stablecoins.
• Cash Stablecoins are defined in two ways as 1) an ordinary stablecoin token USDC, USDP, GUSD. Or 2), either (i) a technically secure DeFi token that can be instantly converted to one of the ordinary stablecoins above and (ii) a custody solution that can be converted into the ordinary stablecoin within 30 minutes.

• With the latest 3-Month T-bill (May 19) yield at 5.29% and the average yield earned on all Cash Stablecoins at 0.97%, this implies a Base Rate of 3.93%.
• Therefore, the proposed Dai Savings Rate (DSR) is set to increase to 3.33% (Base Rate — 0.6%).
• Which increases the Stability Fee (SF) on several vaults:

Our Take: The change to benchmark DSR to T-Bills and average revenue earned by Maker is an interesting experiment. It will be interesting to watch the demand dynamics between Maker Vaults and DAI as borrowing DAI becomes more expensive.

dYdX (DYDX)

Proposal: dYdX Operations subDAO V2

Authors: Callen_Wintermute, Joanna

Summary: This proposal requests $6.6M USD in funding to extend the operation and mandate of the dYdX Operations subDAO for the next 18 months.

Key Points:

• With the initial term for the dYdX Operations subDAO (“DOT 1.0”) expiring on June 19, 2023, Trustees (Joanna & Callen) of the dYdX Operations Trust (“DOT) are requesting $6.6M in funding for the next phase of the Operations subDAO.
• The next phase will run for 18 months and will be critical in preparing the dYdX DAO for the launch of dYdX V4 mainnet.

The mandate for the next phase includes:

• Recruiting an Operations Lead, a Technical Project Lead, and a Site Reliability Engineer to scale the Ops subDAO and to provide technical support to prepare the dYdX DAO for the future.
• Identify an indexer operator and contribute to deploying an indexer in the potential future version of the dYdX protocol.
• Deploying open-source software and running a version of the iOS app, Android app, and website (browser) front-ends for the potential future version of the dYdX protocol.
• Engaging a third-party auditor to assess DOT’s finances and performance.
• Increasing the number of trustees on DOT’s multisig from a 2 of 3, to a 3 of 5.

The previous term (“DOT 1.0”) spearheaded by Reverie was responsible for:

• Establishing the dYdX Operations Trust
• Opening fiat bank accounts for the Operations Trust to handle payments.
• The hiring and management of external legal staff.
• Creation of dydx.forum and the DAO’s migration from Commonwealth to Discourse.
• Building a DAO Playbook for launching new dYdX subDAOs.

Our Take: dYdX is at a critical point in its transition to full decentralization for both the protocol and the DAO. Given the significant responsibility of the DAO in V4, it’s important to establish a strong foundation of contributors that are responsible for key infrastructure before the launch of Mainnet.

Votes

Balancer (BAL)

Proposal: Enable LayerZero Cross Chain Boosts

Status: Live.

Created: May 26th, 2023.

Ends: May 30th, 2023.

Leading Consensus: Yes, let’s do it — 95k veBAL (99.41% of total votes).

Summary: This proposal ratifies the deployment of Cross Chain Boosts on Balancer using LayerZero. veBAL holders will now be able to receive boosted rewards on Gnosis, Polygon, Arbitrum, and Optimism.

Uniswap (UNI)

Proposal: [Temperature Check] Deploy Uniswap V3 on Base

Status: Live.

Created: May 26th, 2023.

Ends: May 31st, 2023.

Leading Consensus: Yes — 6.4M UNI (99.98% of total votes).

Summary: This proposal is a temperature check to gauge the community’s interest in deploying Uniswap V3 on Coinbase’s L2 — Base.

Proposal: Deploy UniswapV3 on Linea

Status: Live.

Created: May 26th, 2023.

Ends: May 31st, 2023.

Leading Consensus: Yes — 2.5M UNI (99.95% of votes).

Summary: This proposal requests to deploy Uniswap V3 on Linea — a zkEVM Chain developed by ConsenSys. If approved, Uniswap will benefit from integration with MetaMask Swaps.

Stargate (STG)

Proposal: Fantom Pool Windup

Status: Live.

Created: May 27th, 2023.

Ends: May 31st, 2023.

Leading Consensus: Yes — 4.5M veSTG (94.12% of total votes).

Summary: This proposal requests to deprecate Fantom Pools on Stargate due to Multichain’s unexpected closure of certain bridging services and the uncertainty of anyUSDC.