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Blockchain Explained

DeFi Governance Updates for May 2021

Currently, governance drives changes in most of the major DeFi protocols. This article covers the significant changes to DeFi protocols in May 2021.
by Mattison AsherJune 8, 2021
Copy of Q1 DeFi Regulations

Currently, governance drives changes in most of the major DeFi protocols. Token holders vote on proposals, which range from propositions on how a protocol should allocate its treasury funds to more specific details, like changing a collateral factor for an asset on Compound Finance which determines how much a user can borrow when posting that asset as collateral. Users can clearly see major upcoming changes in DeFi protocols through following the governance updates.

Through this article, you will become better acquainted with the most significant changes to DeFi protocols for the month of May. Large token holders are incentivized to track these changes, as they affect the underlying protocol’s fundamentals, and thus their potential value. Smaller holders can campaign on certain protocol changes and encourage others to delegate their voting power towards them. Political parties, such as Penguin Party, are even beginning to form.

Furthermore, users who are interested in feature changes will be able to see what changes are in the pipeline for the protocol, as many updates must be voted upon in the governance process. Active users can actually influence what features are included in the future of the protocol. 

With that being said, here is a summary of the top governance changes by protocol for the past month:

Synthetix

Out of any protocol, Synthetix by far has the most active governance. Every week, there are always multiple updates changing the various parameters tied to minting synthetic assets based on posted collateral. Furthermore, Synthetix often changes the fees associated with issuing synthetic assets on the protocol. Finally, Synthetix manually approves new assets that users can create synthetic versions of, such as US stock indexes, via the governance process.

Below are the top changes:

Aave

While Synthetix offers one of the most active governance systems in all of DeFi, Aave’s governance typically deals with bigger proposals, such as updating their native insurance system in case there is a shortfall event, which is called the Aave Safety Module

Below are the top changes this past month:

Uniswap

Similar to Aave, Uniswap also does not have an incredibly active governance process. This lack of robust governance could stem from the fact a vote requires 40 million UNI backing it to pass, and that a user must have 10 million UNI to submit a proposal.

Regardless, Uniswap did have governance votes regarding deploying Uniswap v3 on Arbitrum and funding a political defense of DeFi. Arbitrum is a leading L2 scaling solution, and thus users should see a significant reduction in the gas fees they pay when utilizing Desiwap on Arbitrum. A group of Harvard Law students proposed the defense fund, which effectively seeks funds from the Uniswap treasury to fund activities devoted to educating and lobbying US lawmakers on the potential of Unsiwap and encourage them not to take any regulatory action that hampers innovation.

Below are the top changes this past month:

Yearn

Like Aave and Uniswap, Yearn does not have a very active governance presence, though this past month the protocol saw significant changes to their governance process. Additionally, Yearn set parameters for what teams should decide how to distribute airdrops Yearn strategies generated. Finally, Yearn proposed a change to their Multisig Signers and also passed a new governance structure for the protocol. Multsig signers are akin to a board of trustees for the protocol. They are not managing the day to day operations, but do have to approve the major decisions. 

Below are the top changes this past month:

Compound

Compound, like Synthetix, also has an incredibly active governance process. Their big updates include moving to a new governance smart contract that iteratively updates, support for new assets such as LINK, and an increase in the amount of days users have to review a proposal prior to voting/how long they have to actually vote on a proposal.

Below are the top changes this past month:

SushiSwap

SushiSwap, like most of the other DeFi protocols, does not have active governance. That being, SushiSwap did vote to allocate resources to a hackathon that will support their new margin lending product, Kashi Lending. Additionally, SushiSwap voted to add liquidity mining incentives to their product builds on side chains such as Polygon and xDAI.

Below are the top changes this past month: