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CryptoEconomic Research

DeFi Protocol Governance Report | June 2022 | Week 2

Compound continues to adjust risk parameters, Aave V2 adds GNO as collateral and integrates Pocket RPC, Maker's Starknet DAI bridge makes changes to authority, and more!
by Laurence SmithJune 10, 2022
DeFi Protocol Governance Report
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Proposal: Risk Parameter Updates for 5 Collateral Assets

Created: June 5th, 2022

Passed: Not yet and looking likely,
406,085 COMP For,
0 Against

What does it do: Updates the following five compound assets parameters:

  • cUSDC Collateral Factor from 82.5% to 84%
  • cLINK Collateral Factor from 77% to 79%
  • cSUSHI Collateral Factor from 70% to 73%
  • cAAVE Collateral Factor from 70% to 73%
  • cYFI Collateral Factor from 73% to 75%

Why: Gaunlet’s simulation engine has provided these recommendations, after analysis of the latest market and liquidity data following the crash, to ensure that risk parameters align with the Moderate risk level delegated by the community. 

Takeaway: This has been a common trend for Compound over recent weeks as it looks to be prepared for a bear market over the long-haul. 

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Proposal: ARC: Add GNO to Aave V2

Created: June 6th, 2022

Passed: Not yet but looking likely,
28K AAVE For,
10K Against

What does it do: Adds GNO, the GnosisDAO’s governance token, as collateral to Aave V2. 

Why: There has been an increase in interest from the community in using GNO to earn additional yield, without exposure to significant risk. 

Takeaway: Gnosis has a broad set of tools that are fundamental in the Web3 ecosystem. Their token allows holders to become validators and boost their rewards on the Gnosis Chain network, ensuring that it will have solid utility within the Gnosis ecosystem over time and minimising risk for Aave holders.

Proposal: Integrate Pocket RPC in Aave

Created: June 6th, 2022

Passed: Not yet but looking likely,
19K AAVE For,
2.1 Against

What does it do: Integrates Pocket Network, a decentralised RPC protocol with a network of more than 45k incentivised nodes. It will provide the service with an app stake that’s good for 25M relays, which will later ramp up depending on performance and feedback. 

Why: Aave is currently using a basket of public RPCs for servicing end user relays. They are now looking to improve this solution due to issues with stability and recurring service problems from a variety of public RPCs, particularly on mainnet ETH and Polygon.

Takeaway: By integrating Pocket they can improve the RPC service level (both latency and % uptime) and improve Aave’s decentralisation through Pocket’s decentralised infrastructure. 

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Proposal: Parameter Changes, Starknet Bridge Limit and Authority Changes, Recognized Delegate Compensation, SH-001 Budget Distribution

Created: June 8th, 2022

Passed: Yes,
85,353 MKR For,
0 Against

What does it do: Makes the following changes to the Maker Protocol:

  • A range of parameter changes: 
    • Decrease WSTETH-A Maximum Debt Ceiling from 300MM DAI to 200MM DAI
    • Decrease DIRECT-AAVEV2-DAI Maximum Debt Ceiling from 300MM DAI to 200MM DAI 
    • Decrease LINK-A Maximum Debt Ceiling from 100MM DAI to 50MM DAI
    • Increase MANA-A Maximum Debt Ceiling from 10MM DAI to 15MM DAI 
    • Decrease DIRECT-AAVEV2-DAI Target Borrow Rate from 3.5% to 2.75%
    • Increase the WSTETH-B Target Available Debt from 15MM DAI to 30MM DAI
  • Sets multiple vault types Maximum Debt Ceiling to 0
    • UNI-A
  • Authority changes and DAI bridge limit to the Starknet DAI bridge
    • Increase DAI Bridge Limit from 100K DAI to 200k DAI 
    • Provide DSChief with control over L1EscrowMom.
  • Payments to the following:
    • 78,062 DAI to eleven Recognised Delegates, as per MIP61 Recognized Delegate Compensation
    • 230K DAI transferred to the Strategic Happiness Core Unit (SH-001)
    • 540K DAI streamed to the Strategic Happiness Core Unit (SH-001)
    • 240 MKR streamed to the Strategic Happiness Core Unit (SH-001)

Why: Parameter changes have been made to lower risk to the Maker Protocol. Maximum Debt Ceiling reductions to 0 is part of the off-boarding process for assets that have a lack of demand, and as a result negative cash flow. 

Authority changes to Starknet DAI Bridge allow Maker Governance to shutdown the Starknet Bridge via an Executive Vote, without having to wait for the GSM Puase Delay

The Strategic Happiness Core Unit looks to build community, brand awareness, and to grow client relationships. Delegates are compensated for their contributions to Maker. 

Takeaway: Variety of changes here, primarily focussed on reducing risk and removing redundant vault types to create a leaner protocol. Otherwise, funding to continue growth. 

Sushi Swap

Proposal: Gauntlet x Sushi Incentive Optimization [Renewal]

Created: June 6th, 2022

Passed: Not yet and could go either way,
46K SUSHI For,
43K Against

What does it do: Renews the engagement between Gauntlet and Sushi regarding dynamic incentive optimisation for the next 12 months. The renewal will expand Gauntlet’s scope to include optimising the incentive budget and expanding optimisation efforts across chains other than Ethereum. 

Why: The engagement seeks to drive efficiency and growth through the optimisation of incentive allocation across pools on trading volume elasticity. 

Takeaway: It doesn’t look like the community is entirely sold on Gauntlet’s work so far and are unsure on extending and expanding it. However, looking at Gauntlet’s impact so far, their 612 recommendations have led to an overall reduction in incentive spending and market dynamics, whilst increasing Sushi’s ROI from 10% to 133%. This has lead to an annual revenue increase of $18.3MM – not bad for a $500K fee. 

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  • Rari Capital
  • Uniswap

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