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CryptoEconomic Research

DeFi Protocol Governance Report | August 2022 | Week 4

This week Maker sets a target budget, Aave updates risk parameters, Lido looks to engage a head of legal, and more!
by Laurence Smith, Cameron ODonnellAugust 26, 2022
DeFi protocol Governance Report
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Signal Request Poll: Target Spend Level – August 22, 2022

Created: August 22nd, 2022

Passed: Yes – Option 15M DAI,
46K MKR for 15M DAI,
17K MKR for No change 
14K MKR for 17M DAI

What does it do: Proposes an operational target budget for the next six months. This poll has the following eight options

  1. Abstain 
  2. No change 
  3. 15M DAI 
  4. 15.5M DAI
  5. 16M DAI
  6. 16.5M DAI
  7. 17M DAI
  8. 17.5M DAI

Why: A signal request and a subsequent poll are used to establish a quorum. For this Poll, the community is deciding the operating budget from eight options to establish the target DAO & Core Unit operating budget. 

Takeaway: Maker is planning for a six-month budget through effective operating governance.

Executive Votel: HVBank (RWA-009) Drawdown

Created: August 23rd, 2022

Passed: Yes,
77K MKR for,

What does it do: This executive vote allows HVBank to draw down the previously approved amount of 25M DAI.

Why: As outlined in this governance poll, the onboarding of HVBank was successful and DAI drawdowns can begin on the approved 100M DAI debt ceiling.

Takeaway: Maker worked through HVBank’s onboarding issues and can move forward executing their RWA strategy.

Updates on Prior Coverage

 News

  • Blockworks: MakerDAO Opens 100M DAO Loan to Huntingdon Valley Bank
  • CoinDesk: Rune Details How MakerDAO Is Navigating Tornado Sanctions
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Proposal: Risk Parameter Updates for Aave V2

Created: August 22nd, 2022

Passed: Not yet but looking likely,
390K 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.

Proposal: Add LUSD to Aave V2

Created: August 25th, 2022

Passed: Not yet but looking likely,
167K AAVE for,

What does it do: introduces the use of LUSD as collateral on Aave V2.

Why: LUSD is a stablecoin minted directly by the protocol users by opening a Trove on the liquidity platform and depositing ETH as collateral. Loans are interest-free, with a 0.5% base initiation fee. LUSD will only be added as a borrowable asset (0% LTV) to ensure the safest onboarding possible.

Takeaway: Aave continues to identify and stay ahead of collateral options deployed across multiple blockchains.

Aave Request for Comment (ARC): Aave DAO Stance on Ethereum POW Fork

Created: August 23rd, 2022

Passed: Yes,
91K AAVE for,

What does it do: This ARC requests that the Aave DAO make a commitment to favor the Ethereum Mainnet operating the Proof of Stake consensus above any fork of Ethereum that operates on another type of consensus mechanism.

Why: As measured by TVL, the Aave protocol is one of the largest DeFi apps in the world and is integral to hundreds of dApps and experiences. This proposal hopes to establish a unified position for the upcoming Ethereum merge.

Takeaway: Aave is signaling to stakeholders and the DeFi ecosystem where it stands concerning the Ethereum merge.

Updates on Prior Coverage

 News

  • CoinTelegraph Aave Calls on members to commit to the Ethereum PoS chain
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Proposal: Compound Oracle Upgrade v3

Created: August 24th, 2022

Passed: Not yet but looking likely,
105K COMP For,

What does it do: Upgrade the protocol’s chainlink oracle contract from Uniswap V2 to V3. 

Why: According to the governance forum post, COMP liquidity is continuing to migrate from Uniswap V2 to V3. Compound was waiting to update their oracle until Chainlink Labs successfully deployed updates on Uniswap V3. Now that the Chainlink oracle contract is updated, Compound can migrate their oracle.

Takeaway: The Oracle upgrade allows Compound to integrate with Uniswap V3. This will provide more accurate data and cost-efficient platform integrated transactions. 

Synthetix Banner

Proposal: Unpause Futures Markets – DebtRatio ,DOGE & BNB

Created: August 18th, 2022

Passed: Yes,
7 SNX For,
0 Against

What does it do: Unpauses the DebtRatio, DOGE and BNB markets, whilst also setting a range of parameters for the DOGE and BNB markets, as can be found here

Why: The DebtRatio tracks the degree that a stakers’ debt changes relative to their initial debt and is a key aspect of Synthetix’s futures market. Unpausing the DebtRatio, along with DOGE and BNB markets, opens up more revenue generating opportunities for the protocol and allows its users to reengage with these areas of the futures market. 

Takeaway: These markets are back open for business, with parameters set to ensure sustainability. 

Lido banner

Proposal: Vote to engage a Head of Legal & General Counsel

Created: August 16th, 2022

Passed: Not yet but looking likely,
64M LDO For,
572 Against

What does it do: If the proposal passes the Lido will onboard a DAO-vetted Head of Legal & General Counsel. The roll will pay $20,833.33 per month in DAI from the Lido DAO and token options paid in LDO (vested over three years). 

Why: The legal landscape in crypto has evolved and the scope of Lido’s projects has grown. This role will help ensure that Lido avoids legal pitfalls and establishes a strong operational strategy in the long-term. Additionally, it will help the business to react quickly to any legal complications, as well as significantly reducing the cost of ad hoc legal support. 

Takeaway: Lido is leveling up and taking legal seriously with this addition to the team. 

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Updates on Prior Coverage

 News

Screenshot 2022 03 18 at 19 13 37
  • Sushiswap
  • Rari Capital

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