Wintermute DeFi Governance Digest — November 2023 | Week 1

This week’s proposals include Arbitrum activating ARB staking, Uniswap delegating UNI from the DAO’s treasury to underrepresented delegates, and Aave discussing a GHO Savings Rate and borrow discount fee; along with votes from Uniswap to invest in Ekubo Protocol, and Venus Protocol integrating with LayerZero to go omnichain.

Proposals

Arbitrum (ARB)

Proposal: Activate ARB Staking

Author: Plutus

Summary: This proposal requests to create an ARB staking mechanism that distributes ARB to token lockers based on their lock time from the DAO’s treasury.

Key Points:

• The Arbitrum DAO Treasury currently holds 3.5B ARB ($3.38B) that can be directed under the control of the DAO.
• This proposal requests to utilise a portion of the DAO’s ARB treasury to fund a 1-year staking program in an attempt to reward long-term holders, create more alignment, and trial a staking mechanism for future programs.

• The staking mechanism will allow users to stake their ARB for up to 365 days and receive a weight proportional to their lock time. Furthermore,
• Users can increase their lock time at any time and the longer a user locks the larger their weight is.
• Users can pause their locks, maintaining a continuous lock time to avoid relocking.
• Users can have independent locks.
• Users can exit their lock for a penalty between 0–60% depending on how long they have left till their unlock date. The penalty fee is shared with existing ARB stakers.
• Users will earn ARB rewards based on their proportional lock weights while retaining their ability to vote and/or delegate their voting power.
• A vote will occur to determine how much ARB will be allocated to the staking program: 100M, 125M, 150M, and 175M ARB, respectively.

Our Take: We understand the want for token utility and rewarding long-term alignment. However, we are not so sure such a program will lead to long-term ecosystem benefits.

Uniswap (UNI)

Proposal: Delegation of UNI to Active but Underrepresented Delegates

Author: Doo_StableLab

Summary: This proposal requests to improve Uniswap’s governance efficiency by delegating up to 12.5M UNI from the DAO’s treasury to active and underrepresented delegates.

Key Points:

• Currently, many of Uniswap’s top delegates by voting power have less than a 50% participation rate, with some even as low as 10% or no participation at all.
• This is counterproductive to healthy and robust governance environments where active delegates are needed with sufficient voting power to ensure voting quorums are met and malicious votes are defeated.

• This proposal requests to delegate 2.5M UNI each to 3–5 active yet underrepresented delegates based on a selection criterion.
• For applicants to be considered they must have voted on at least 90% of proposals (minus cancellations) over the last 3 months for both Snapshots and on-chain proposals. And have a delegate platform on the Uniswap forum.
• To ensure the applicant is ‘underrepresented’ they will also need to have less than 2.5M UNI voting power.
• If this proposal passes, applicants will have a 5-day period post Snapshot to post their application and be considered for delegation.

Our Take: This is a great initiative for the Uniswap DAO to improve the DAO’s governance health and encourage greater participation from underrepresented delegates. The allocated voting power should help significantly with reaching quorum.

Aave (AAVE)

Proposal: [TEMP CHECK] Community Plan for GHO Stability and Peg

Author: Gauntlet

Summary: Gauntlet introduces various ideas to help improve GHO stability and peg by generating demand for GHO through a GHO staking module that reduces borrowing costs and/or acts as a GHO Savings Rate.

Key Points:

• Since its launch GHO has struggled to maintain a $1 USD peg, preventing further adoption of the decentralized stablecoin.
• Gauntlet has identified 2 main categories of actors that affect GHO’s peg 1) GHO short-sellers and 2) GHO LP providers.

• GHO short-sellers mint GHO to market sell the stablecoin hoping that the price continues to drop and therefore, repurchase the GHO after the price drops and repay their debt to make a profit.
• GHO LPs looking to capture a yield on their minted GHO due to attractive yields end up selling 50% of their position to join a liquidity pool, causing further price pressure.
• To stop the short-seller cycle there needs to be organic demand for GHO, reducing the opportunity for GHO short-sellers as the strategy is less profitable.
• To generate demand, Gauntlet is proposing to allow users to stake GHO to reduce their borrow fees. For example, a user looking to leverage long WSTETH with WETH to capture higher staking yields can stake GHO to reduce their borrow fees for WETH, increasing the profitability of their strategy.
• Another solution proposed was to implement a GHO Savings Rate where users can stake GHO and earn interest based on liquidation fees that are captured by the Aave protocol. Currently, this is sent to the DAO’s treasury.

Our Take: Gauntlet proposes some interesting solutions that in combination could lead to organic demand for GHO. Particularly, the borrow rate discount looks promising.

Votes

Uniswap (UNI)

Proposal: [Temperature Check]: Invest in Ekubo Protocol

Status: Finished.

Created: Oct 24, 2023.

Ends: Oct 28, 2023.

Leading Consensus: Invest in Ekubo Protocol — 21M UNI (63.82% of total votes).

Summary: This vote gauges the interest of the Uniswap DAO to invest in Ekubo Protocol — a leading AMM on Starknet, written in Cairo. The investment is 3M UNI (~$12M) in exchange for 20% of the total supply of the Ekubo token that is expected to be launched within 1 month of the vote passing.

Venus Protocol (XVS)

Proposal: Venus Upgrade — Omnichain Money Markets with LayerZero Integration

Status: Finished.

Created: Oct 25, 2023.

Ends: Oct 26, 2023.

Leading Consensus: Yes, adopt LayerZero Proposal — 989k XVS (100% of total votes).

Summary: This proposal ratifies the Venus Protocol’s integration with LayerZero to bring the protocol cross-chain. Firstly, VAI and XVS will be migrated to the OFT standard, secondly, the Venus DAO will integrate a cross-chain governance module power by LayerZero, and thirdly, the Venus protocol will integrate LayerZero to allow for cross-chain borrowing.