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CryptoEconomic Research

DeFi Protocol Governance Report | August 2022 | Week 1

This week we cover parameter changes for Maker and Aave, the next steps for Uniswap's fee switch, and outcomes of previous governance coverage.
by Cameron ODonnellAugust 5, 2022
DeFi Protocol Governance Report
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Proposal: HVBank Drawdown, Keeper Network Stream Re-Deployment

Created: August 4th, 2022

Passed: Yes,
94K MKR For

What does it do: Executes the following:

  • 25M DAI will be drawn down in the RWA-009 (HVBank) vault
  • Re-deploy the stream of 215K DAI to the Keep3r Keeper Network at a rate of 1K/day, as previously covered in ratified poll MIP63c4-SP4

Why: Standard executive votes of original and ratification polls.

Takeaway: Even under current market conditions, MakerDAO continues to operate with operational stability and a thorough governance process.

Greenlight Poll: MIP9 Community Poll – PANDO (PANDO Investment Grade Climate Assets)

Created: August 4th, 2022

Passed: Not Yet,
13K MKR Abstain,
42K MKR Against

What does it do: Temperature check for funding structured loans through Pando investment grade climate assets.

Why: Pando Climate Inc. (“Pando”) is offering Investment Grade solar assets to Maker. This will enable Maker to earn stable, risk-adjusted financial returns in a market currently dominated by top-tier global institutions. 

Investment Grade solar assets refers to a $220M loan against a $250M pool of rated solar loans. The Maker loan assets are contract cash flows from home PV Solar systems. The solar loan pool will be rated by a U.S. credit rating agency. In addition, Maker would be in the senior secured position, providing significant protection in any downside scenarios. 

Takeaway: Maker’s RWA strategy and focus on sustainable investments is in full swing. Whether or not this poll passes, it demonstrates movement forward with RWA and integrating with TradFi investment firms.

Poll: PPG – Open Market Committee Proposal

Created: August 1st, 2022

Passed: Yes,
101K MKR For,
3K MKR Against

What does it do: As outlined in the Community Forum, it changes the following parameters: 

  • Stability Fee – The annual percentage fee charged on the DAI generated on vaults.
    • ETH-B: Reduce stability fee to 3.75%
    • WSTETH-A: Reduce stability fee to 2.25%
    • WSTETH-B: Reduce stability fee to 0%
    • WBTC-B: Reduce stability fee to 3.75%
    • GUNIDAIUSDC1-A: Increase stability fee to 0.02%
    • GUNIDAIUSDC2-A: Increase stability fee to 0.06%
    • UNIV2DAIUSDC-A: Increase stability fee to 0.02%
  • Maximum Debt Ceiling – The maximum value for debt ceiling allowed in the given vault type.
    • GUNIDAIUSDC1-A: Increase maximum debt ceiling to 1B DAI
    • GUNIDAIUSDC2-A: Increase maximum debt ceiling to 1.25B DAI
    • MANA-A: Increase maximum debt ceiling to 17M DAI

Why: Increasing the stability fees will help to minimize risk exposure while AMM pools are under-utilized. Decreasing the stability fee will simplify reporting conducted by the protocol. 

Increasing the maximum debt ceiling allows users to maximize economic output during periods of high volume on AMMs. Decreasing the debt ceiling reduces exposure risk under current market conditions.

Updates on Prior Coverage

  • Greenlight Poll: bIBTA (Backed Finance Short-Term Bond) – Passed with 72.5K MKR

News

  • Cointelegraph: Cred Protocol unveils its first decentralized credit scores
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Temperature Check: Risk Parameter Updates for Aave V2

Created: August 4th, 2022

Passed: Not Yet,
13K AAVE For

What does it do: Adjusts the following Aave parameters:

  • Liquidation Threshold (LT) – The percentage at which a loan is defined as undercollateralized.
    • CRV LT to 64% from 65%
    • DAI LT to 85% from 80%
    • ENJ LT to 67% from 70%
    • LINK LT to 83% from 78%
  • Liquidation Bonus (LB) –  Bonuses paid to liquidators who buy discounted collateral and cover the account’s debt
    • DAI LB to 4% from 5%
    • ENJ LB to 6% from 6.5%
    • LINK LB to 7% from 6.3%

Why: Recommendations are from Gauntlet’s simulation engine, after processing the latest market and liquidity data. The risk parameters are being changed in line with the Moderate risk level the community decided on. 

Takeaway: The parameter changes should drive capital efficiency whilst maintaining protocol risk at safe levels. This also provides a future liquidation MEV opportunity.

Updates on Prior Coverage

  • Proposal: Appoint Securitize as a Whitelister to Aave Arc – Passed with 501K AAVE

 News

  • ConsenSys: Introducing GHO and Situating it in the Stablecoin Ecosystem
  • Cryptoslate: GHO Stablecoin to be launched as Aave DAO gives a 99.9% approval
  • Cointelegraph: Aave devs propose freezing Fantom integration
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Consensus Check: [Consensus Check] “Fee switch” Pilot for Three Pairs

Created: August 4th, 2022

Passed: Not Yet,
3M UNI For.

What does it do: This is the second step in Uniswap’s voting process. The Consensus Check establishes a more thorough quorum than a Temperature Check. After the design phase, it was established that a 1/10th fee would be collected through the “Fee Switch” for the following pairs:

  • DAI-ETH-0.05%
  • ETH-USDT-0.3%
  • USDC-ETH-1%

Why: The “fee switch” enables the ability for Uniswap to retain a portion of what is already being paid to liquidity providers. The retained funds can then be used to build or fund new tools for UNI token holders to leverage in growing the protocol. 

Takeaway: The community is moving forward with the Fee Switch decision. There is a lot of community activity around this proposal. As previously covered, The fee switch hasn’t been tried and tested – this change would help provide real data and give the community more time to debate on how funds accrued should be utilised.

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  • Uniswap
  • Aave
  • Compound
  • Sushiswap
  • Rari Capital

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