Wintermute DeFi Governance Digest — October 2023 | Week 1
This week’s proposals include 1inch capping gas fees for Resolvers and reducing Unicorn Power whitelist requirements, Uniswap Foundation requesting their remaining $62.37M in funding, Aave migrating to Aave Governance V3, and Spark Protocol introducing USDC & USDT as borrow-only markets; along with votes from dYdX to launch a $20M incentive program for V4 and Aave reducing their Safety Module incentives by 30%.
Proposals
1inch (1INCH)
Proposal: Optimizing Fusion Mode: Smart Contract-Enforced Gas Fee Limit and Lowered Unicorn Power Threshold
Author: RoundElephant
Summary: This proposal aims to reduce operational costs for Fusion Mode Resolvers by capping priority gas fees and improving competition by reducing the Unicorn Power whitelist requirement for Resolvers.
Key Points:
- Currently, Resolvers face high operational expenses, primarily due to inflated gas fees during Fusion Mode auctions as Resolvers compete with each other.
- This produces less profits for Resolvers and worse execution for Fusion Mode users.
- Furthermore, new Resolvers are deterred by the high Unicorn power requirement needed for participation.
- Therefore, this proposal requests to introduce a cap on the priority gas fee to reduce Resolver gas wars, a penalty mechanism to punish adverse Resolvers, and a decrease in the Unicorn Power threshold to increase Resolver competition.
- For blocks with baseFee < 10.6 gwei — the priorityFee is capped at 70% of the baseFee; for blocks with baseFee between 10.6 gwei and 104.1 gwei — the priorityFee is capped at 50% of the baseFee; for blocks with baseFee > 104.1 gwei — priorityFee is capped at 65% of the block’s baseFee.
- For Resolvers attempting to circumvent the new gas restrictions, they will be barred from filling Fusion Mode Orders for 1 to 365 days depending on the number of offences.
- Lastly, the Unicorn Power to become a whitelisted Resolver will be reduced to 5% from 10% of total Unicorn Power.
Our Take: The proposed changes, specifically the reduction in UP requirements, should hopefully have a large impact on inviting new Resolvers into the ecosystem.
Uniswap (UNI)
Proposal: Complete initial funding of the Uniswap Foundation
Author: Devinwalsh
Summary: This proposal requests the second portion of the Uniswap Foundation’s (UF) $74M funding proposal, transferring the remaining $62.37M to the Uniswap Foundation from the DAO’s treasury.
Key Points:
- The creation of the Uniswap Foundation (UF) was successfully proposed and created in August 2022, in which $74M funding was requested.
- The proposal requested an initial $20M to cover operational expenses for the next 2 years and grants for 1 year, with the remainder to be received once the UF has established a legal entity.
- As such, this proposal formally requests the remaining $62.37M (which includes a 10% buffer).
- The funds will be used to continue supporting growth efforts within the Uniswap ecosystem. For the remainder of 2023, the UF will look to develop the Hooks ecosystem, launch the TL;DR Fellowship in October 2023, Continue IRL delegate events, and lay the groundwork for programs in 2024.
- In 2024, the UF will focus on driving the adoption of Uniswap V4 through the development of extensive Hooks growth programs, fund POCs and iterate on mechanisms to improve the experience of key DeFi stakeholders on Uniswap and support initiatives to create and distribute protocol value to stakeholders.
Our Take: The Uniswap Foundation has had a significant impact on the Uniswap ecosystem since its inception. We support the second tranche of funds to continue their efforts moving into 2024 and believe their context and alignment within the Uniswap ecosystem is super valuable for stakeholders.
Aave (AAVE)
Proposal: Aave Governance v3 — Activation plan
Author: BGDLabs
Summary: This proposal lays out the activation plan for Aave Governance V3 — an upgraded governance architecture focused on automation, lower participation costs, and increased accessibility.
Key Points:
- Aave Governance V3 is the next iteration of Aave’s governance architecture developed by BGD Labs.
- The upgrade will introduce automation, accessibility, cross-chain communication, and lower participation costs.
- The upgrade will take approximately 21 days to complete and if successful, will fully deprecate Aave Governance V2.
Aave Governance V3 brings a myriad of changes with the most important being:
- An upgrade to the AAVE, stkAAVE, and aAAVE tokens to remove snapshots and, therefore reduce transfer gas fees of up to 75%.
- Voting will occur on a network selected by the proposer with Polygon PoS and Avalanche C-Chain as the initial voting networks.
- A new Voting Interface.
- Initially, all voting will be free for holders on Polygon and Avalanche; subsidised by the Aave DAO.
- Full cross-chain governance capability thanks to the new Aave Delivery Infrastructure (a.DI); V2 was limited to Polygon, Arbitrum, and Optimism.
- Aave Robot will fully automate the backend of Aave Governance: Snapshot of proposal and voting power, vote creation, closure, execution, and cancellation.
- Notably, all delegations will be reset after the governance upgrade.
Our Take: This is a great upgrade for Aave that improves on many inefficiencies within V2. We look forward to the full cross-chain governance support and the impact of reduced participation costs.
MakerDAO (MKR)
Proposal: Proposal to onboard USDC and USDT to SparkLend Ethereum
Author: Phoenix Labs
Summary: Phoenix Labs is proposing to onboard USDC and USDT as borrow-only markets, introduce USD e-mode for sDAI, USDC, and USDT, and increase the rETH supply cap from 20k to 60k.
Key Points:
- The onboarding of USDC and USDT as borrow-only markets will allow users to lend out their USDC and USDT at a rate slightly below the DSR without direct exposure to DAI.
- As a borrow-only market, users will not be able to use USDC and USDT as collateral to borrow against.
- The supply caps will be 60M and 30M for USDC and USDT, respectively.
- A USD e-mode for sDAI, USDC, and USDT will be enabled with an LTV of 91%, LT of 92%, and a liquidation penalty of 1%. This will allow for the easy creation of levered sDAI positions.
- Lastly, the rETH supply cap is at ~63% utilization, calling for an increase from 20k to 60k.
Our Take: We expect these changes to once again result in a significant inflow of DAI to the DSR. It is rather interesting to see USDT added as it is not currently supported by DAI’s PSM.
Votes
dYdX (DYDX)
Proposal: dYdX v4 Launch Incentives Proposal
Status: Finished.
Created: Sep 28, 2023.
Ends: Oct 2, 2023.
Leading Consensus: For — 15M DYDX (99.08% of total votes).
Summary: This proposal seeks $20M in DYDX from the dYdX Community Treasury to launch a 6-month Launch Incentives Program to be deployed on dYdX V4. The program is intended to drive significant growth and migration to V4 upon its launch by rewarding users for their activity on the new chain.
AAVE (AAVE)
Proposal: [ARFC] Treasury Management — Amend Safety Module AAVE Emissions
Status: Live.
Created: Oct 1, 2023.
Ends: Oct 4, 2023.
Leading Consensus: YAE — 108k AAVE (98.24% of total votes).
Summary: This proposal requests to reduce AAVE’s Safety Module incentives by 30% for the next 90 days. Currently, AAVE distributes 1,100 AAVE/day to the Safety Module. This vote will reduce this to 770 AAVE/day, reducing the protocol’s expenses.
