By using this site, you agree to our use of cookies, which we use to analyse our traffic in accordance with our Privacy Policy. We also share information about your use of our site with our analytics partners.

CryptoEconomic Research

DeFi Protocol Governance Report | December 2022 | Week 1

Maker moves to remove renBTC, Aave pauses borrowing on select assets, and Synthetix updates parameters!
by Laurence Smith, Cameron ODonnellDecember 5, 2022
DeFi Protocol Governance Report
This image has an empty alt attribute; its file name is MMI-NL-Banner-MakerDao.png

Poll : Offboarding Parameters for renBTC-A – November 21, 2022

Created: November 7th, 2022

Passed: Yes
75K MKR For,

What does it do: The community can vote in this poll to express support or opposition to the implementation of the following risk parameters for offboarding renBTC-A.

Proposed offboarding parameters

Why: The industry has had many impacts around the recent market events. One potential impact is REN. Alameda & FTX played a large role in REN effectively owning the protocol and operations. This move is to mitigate any risk around these Vaults.

Takeaway: Maker and core units are exercising an appropriate level of risk management. 

Poll : Add GNO (GnosisDAO) as a new Vault Type – November 21, 2022

Created: November 7th, 2022

Passed: Yes
71K MKR For,

What does it do: This poll sets to add Gnosis as a new Vault Type within the Maker Protocol under the following parameters:

Initial Vault Parameters

  • Underlying Collateral: GNO
  • Stability Fee: 2.5%.
  • Liquidation Ratio: 350%.
  • Debt Floor (dust): 100,000 DAI.
  • Maximum Debt Ceiling (line): 5M DAI.
  • Target Available Debt (gap): 3M DAI.
  • Ceiling Increase Cooldown (ttl): 8 hours.

Liquidation Parameters

  • Auction Price Function (calc): Exponential Stair Step.
  • Price Change Multiplier (cut): 0.99.
  • Price Change Interval (step): 60 seconds.
  • Auction Price Multiplier (buf): 1.2.
  • Liquidation Penalty (chop): 13%.

Limits

  • Local Liquidation Limit (ilk.hole): 2M DAI.
  • Maximum Auction Drawdown (cusp): 0.25.
  • Maximum Auction Duration (tail): 8,400 seconds.
  • Breaker Price Tolerance (tolerance): 0.5.

Incentives

  • Proportional Kick Incentive (chip): 0.1%.
  • Flat Kick Incentive (tip): 250 DAI.

Why: Gnosis has a long-running reputation within the Ethereum & Ethereum Virtual Machine (EVM) ecosystem. While Safe has recently spun off from Gnosis, Gnosis provides a unique opportunity to engage with one of the most well-known DAOs in the space. 

Takeaway: Gnosis DAO has supported the Maker protocol and leveraged vaults for over a year. The community agrees this is a reasonable next step forward for Gnosis and Maker.

Poll : Ratification Poll for CoinShares Active Treasury Management (MIP86) – November 14, 2022

Created: November 14th, 2022

Passed: No
10.8K MKR For,

56.7 MKR Against

What does it do: Signals’ interest in moving forward with MIP86. MIP86 involves having a portion of the Peg stability modules USDCs to be managed by CoinShares. CoinShares will invest on behalf of MakerDAO the funds in various traditional financial assets.

Why: Coinshares is a leader in the fund management space and is capable of managing this amount. It aligns with Maker’s interest in earning yield through excess money in the Peg Stability Module. The community generally supported this proposal before the recent market events. 

Takeaway: The macro and internal operating environments do not support this program. The community acknowledges that there is an unknown around the web3 economy. 

Poll : Ratification Poll for OUSD Decentralized Rewards (MIP87) – November 14, 2022

Created: November 14th, 2022

Passed: No,
51K MKR Against,

25K MKR For

What does it do: Establishes support for Maker to deploy 100M of USDC to OUSD and earn continuous yield while retaining full custody. OUSD rebases and dist yield (interest, fees, incentives) directly to users in the form of additional OUSD proportionally daily.

Why: This vote by the MakerDAO Community aligns with the DAOs strategy of earning yield on excess money in the Peg Stability Module. There are risks to providing so much capital to a small protocol. The community highlighted potential risks including the web3 market, complex underlying systems, and stablecoin mechanisms. 

Takeaway: Maker is open and moving forward with finding revenue streams by leveraging excess reserves. 

This image has an empty alt attribute; its file name is aave-logo.png

On-chain Vote: Pause UNI Borrowing

Created: November 28th, 2022

Passed: Yes
567K AAVE For,

What does it do: A proposal to make parameter changes on Aave V2 UNI. The vote would temporarily pause borrowing of the UNI token.

Why: Given the current market situation, out of an abundance of caution, the proposal temporarily pauses the borrowing of UNI. Although the risk profile of UNI is lower than other assets, the community may choose to elect UNI borrowing based on risk preference.

Takeaway: The community agrees with the proposal to pause UNI borrowing. Aave has experienced stress tests over the past few weeks and is airing on the side of conservative operations.

On-chain Vote: Pause Link Borrowing

Created: November 28th, 2022

Passed: Yes
566K AAVE For,

What does it do: A proposal to make parameter changes on Aave V2 UNI. The vote would temporarily pause borrowing of the LINK token.

Why: Given the current market situation, out of an abundance of caution, the proposal temporarily pauses the borrowing of LINK. Like UNI, the risk profile of LINK is lower than other assets, the community may choose to elect based on risk preference.

Takeaway: The community agrees with the proposal to pause UNI borrowing. Aave has experienced stress tests over the past few weeks and is airing on the side of conservative operations.

Synthetix Banner

Proposal: SCCP-249: Raising the target c-ratio to 425%

Created: November 30th, 2022

Passed: Not yet and not looking likely,
0 SNX-SC For,
4 Against

What does it do:  Changes the risk parameter for the target collateral ratio on Ethereum and Optimism markets to 425%, down from 400%. 

Why: The recommendation is the output of Gauntlet’s daily simulation analysis – you can check out the results here. Gauntlet’s simulation considers a ton of data, including asset volatility, asset correlation, DEX/CEX liquidity, trading volume and more. 

This specific parameter change recommendation stems from the fact that both Optimism and Ethereum mainnet share the same debt pool. The simulation indicate a decrease in volatility and liquidity scenarios decreased by 90% and 91% respectively. 

Takeaway: Whilst the simulation may indicate the risk, it looks like the council are happy with the current risk levels and don’t believe the target collateral ratio should be so high, potentially due to implications on platform usage. 

Proposal: SCCP-254: Update ETH Exchange Fee

Created: November 30th, 20222

Passed: Not yet but looking likely,
6 SNX-SC For,
0 Against

What does it do:  Lowers the exchange FeeRate on sETH to 10 bp from 25 bp. It also increases the standard atomicExchangeFeeRate on trades to 50 bp from 40 bp. The exchange FeeRate is effectively the fe4 rate for swaps towards sETH where a fee reclamation adjustment is incorporated. 

Why: The main reason is to facilitate arbitrage between Curve pools, which have been suffering an imbalance between the components of the curve pools largely due to large atomic exchanges that have occurred. 

Takeaway: Arbitrage opportunities are soon to be available. 

  • Uniswap
  • Sushiswap
  • Compound
  • LIDO

Cryptofunds, market makers, and trading desks can interact with these DeFi protocols with MetaMask Institutional

MetaMask Institutional offers unrivaled access to the DeFi ecosystem without compromising on institution-required security, operational efficiency, or compliance requirements. We enable funds to trade, stake, borrow, lend, invest, and interact with over 17,000 DeFi protocols and applications.


Found this research useful? Connect with the ConsenSys Cryptoeconomic Research team at [email protected]

Disclaimer: ConsenSys Software Inc. is not a registered or licensed advisor or broker. This report is for general informational purposes only.  It does not constitute or contain any individual investment advice and is made without any regard to the recipient’s objectives, financial situation, or means.  It is not an offer to buy or sell, or a solicitation of any offer to buy, any token or other investment, nor is it intended to be used for marketing purposes to anyone in any jurisdiction. ConsenSys does not intend for any person or entity to rely on any facts, opinions, or ideas, and any financial or economic commentary expressed in this report may not be relied upon. ConsenSys makes no representations as to the accuracy, completeness, or timeliness of the information or opinions in this report and, along with its employees, does not assume any responsibility for any loss to any person or entity that may result from any act or omission based upon this report. This report is subject to correction, completion, and amendment without notice; however, ConsenSys has no obligation to do so.