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CryptoEconomic Research

DeFi Protocol Governance Report | January 2023 | Week 2

Synthetixs looks into spot trading, Maker updates parameters, Lido focuses on the Polygon deployment, and more!
by Laurence Smith, Cameron ODonnellJanuary 13, 2023
DeFi Protocol Governance Report January 2022 Week 2

This image has an empty alt attribute; its file name is MMI-NL-Banner-MakerDao.png

Poll:  One-time MKR Distribution to Correct CES-001 Incentive Program Shortfall

Created: January 9, 2023

Passed: Yes,
80K MKR for

What does it do: This proposal requests a one-time distribution of 96.15 MKR to the CES auditor wallet to correct the MKR shortfall created by the previous facilitator of CES-001 during their departure and to fulfill the MKR awards for the current members of CES-001.

Why: The shortfall was created by the previous facilitator of CES, selectively accelerating payouts for certain contributors during his departure. This resulted in current contributors of CES not receiving any MKR awards. This one-time distribution is necessary to fulfill the owed awards to current contributors.

Takeaway: This proposal is a fair and necessary measure to align with the approved rewards program and ensure current contributors receive the expected awards.

Poll:  Parameter Changes Proposal – PPG-OMC-001 – 5 January 2023

Created: January 9, 2023

Passed: Yes,
93K MKR for

What does it do: The MakerDAO Open Market Committee (OMC) is proposing changes to the MakerDAO protocol to increase revenue and accruing of COMP rewards to the MakerDAO treasury.

Why: This proposal suggests reactivating the Aave D3M with a modest debt ceiling, increasing the Compound v2 D3M debt ceiling, gradually normalizing stability fees for the WSTETH-B vault type, and increasing fees on the USDP PSM to avoid growth in an exposure. Estimates indicate that these changes would lead to a roughly 525,000 DAI increase in annual revenue for the MakerDAO treasury.

Takeaway: The proposed changes consider the current market conditions and aim to increase the platform’s utilization. Additionally, the proposal suggests gradually normalizing the stability fee on the WSTETH-B vault type to reach parity with ETH-C, aiming to drive new usage. Lastly, the 525,000 DAI increase in annual revenue for the MakerDAO treasury would benefit the ecosystem.

Synthetix Banner

Proposal:  SCCP-271: Increase PerpsV2 Keeper Incentives

Created: January 11th, 2022

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

What does it do: The proposal suggests doubling the amount paid to keepers for executing delayed orders to 2 sUSD to ensure that the protocol can execute delayed orders in a timely manner to improve the overall user experience for traders.

Why: The current sUSD amount paid to keepers is exactly 1 sUSD. This amount barely covers the amount required in gas to execute an order, specifically off-chain delayed orders. Depending on network activity and the price of ETH, sometimes keepers even make a loss. The proposal aims to improve protocol decentralisation, general protocol stability, and offers a better user experience for traders by increasing the incentives for keepers.

Takeaway: The proposal aims to improve the overall user experience for traders. The proposal will be successful if it leads to an increase in the overall adoption and use of PerpsV2.

Proposal: SCCP-270: Lower Max Market Value USD – sDebtRatio

Created: January 9th, 2022

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

What does it do:  This aims to lower the maxMarketValueUSD to zero. The maxMarketValueUSD is the maximum open interest position on a given market. This will prevent new users from entering a market that is planned to be deprecated and will help to ensure that the protocol is not at risk of losses due to illiquid markets.

Why: The planned deprecation of the market is the main reason for this proposal. It is referenced to SCCP-258 and SCCP-237, which means that the last users had already exited. 

Takeaway: The proposal is currently in its voting phase. If passed, this will help the protocol to lower its risk exposure by preventing new users from entering a market that is planned to be deprecated and will help to ensure that the protocol is not at risk of losses 

Proposal: SCCP-269: Update Fees – Spot Exchanges

Created: January 9th, 2022

Passed: Not yet but looking likely,
7 SNX-SC For,
1 Against

What does it do: This proposal aims to increase the exchangeFeeRate on forex synths (sEUR,sJPY,sCHF,SAUD,sKRW and sGBP) to 15 bp from 5 bp. The exchangeFeeRate is the fee rate paid on exchanges into a given synths. It is important to note that this change does not affect atomic spot forex exchanges.

Why: The main reason for this proposal is to lean against the economic arbitrage that results from Chainlink having a high threshold for which price updates are pushed, around 20 to 30 bp, relative to the low fee of 5bp being charged. By increasing the exchangeFeeRate to 15 bp, it will be more in line with the cost of obtaining the data from Chainlink oracles, which will help to ensure that the protocol is not at a disadvantage when compared to other market participants.

Proposal: Improving the incentive structure for the Lido on Polygon team (restart)

Created: January 11th, 2022

Passed: Not yet but looking likely,
23M LDO For,
2k Against

What does it do: This proposal aims to increase the incentives for the Shard Labs team who makes Lido on Polygon from 1,000,000 LDO to 1,500,000 LDO. It proposes several changes to the incentive structure, including increasing the number of incentives in the first steps, changing the vesting conditions, and updating the steps of market share.

Why: The main reason for this proposal is that the importance of Polygon has risen relatively since the first proposal, and the deal for Polygon is different from the baseline for other networks. The proposed increase in incentives will reflect this change and help ensure that the Lido protocol can continue to grow and expand on the Polygon network.

Takeaway: This proposal is a restart of an earlier proposal that did not reach a quorum. The new proposal has received positive feedback on the Research forum and has been modified better to reflect the current situation on the Polygon network. 

Proposal: Lido on Polygon V2 upgrade (restart)

Created: January 11th, 2022

Passed: Not yet but looking likely,
23M LDO For,
5.5k Against

What does it do:  This proposal aims to upgrade the Lido on Polygon protocol, version V1 to V2. The new version makes fewer compromises, eases operator entry and exit, and provides a smoother flow for users and network participants.
It includes:

  • Rebalancing stake among validators on deposits and withdrawals, 
  • simplified logic for node operator registry, 
  • no need to transfer validator ownership to Lido’s smart contracts, 
  • Polygon staking NFT (ownership) migration for existing V1 Node Operators, 
  • finer role-based access control, gas optimizations for delegations/withdrawals and node operator controls, 
  • code refactoring for readability and maintenance, 
  • improved logging and events for analytics, 
  • small fixes and code improvements, and 
  • security audit.

Why: The main reason for this proposal is that Lido on Polygon team has been working hard to incorporate stakeholder feedback to make marked improvements in reducing both staker as well as node operator friction. This version not only brings nice-to-have features for node operators participating in the Lido on Polygon protocol, but also reduces the gas needed for depositing and withdrawing staked tokens through the Lido on Polygon protocol.

Takeaway:  It will enable the team to onboard a new set of node operators and further decentralize the Polygon network while providing options for more top-tier node operators to join the Lido family.

  • Uniswap
  • Aave
  • Compound

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