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CryptoEconomic Research

DeFi Protocol Governance Report | June 2022 | Week 3

Maker disables the Aave DAI Direct Deposit Module, Compound looking to reduce the reserve factor for 10 assets, and Aave to pay out a bounty for identifying a fallback oracle misconfiguration.
by Laurence SmithJune 17, 2022
Governance Jun 2022 Week 3
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Proposal: Reserve Factor Decreases for 10 Assets

Created: June 12th, 2022

Passed: Not yet but not looking likely,
112K COMP For,
312K Against

What does it do: Reduces the reserve factor for the following 10 assets:

  • cETH to 15%
  • cUSDC to 3.8%
  • cWBTC2 to 15%
  • cDAI to 10%
  • cUSDT to 3.8%
  • cTUSD to 3.8%
  • cBAT to 20%
  • cZRX to 20%
  • cUNI to 20%
  • cLINK to 20%

Why: These changes are off the back of another Gauntlet recommendation. The underlying thesis behind the model in this instance is that the protocol wants to build reserves greater than insolvency losses by a small margin. In the case of these assets, the existing pool and growth rate are more than enough to cover a very server loss event, hence the optimal level of reserve factors is much lower than they currently are. 

Takeaway: With the suggested cuts the protocol can reduce the estimated annual reserve growth rate from $3.86MM to $2.33MM – allowing $1.53MM to be reallocated to suppliers and incentivising more users to lock collateral in Compound. 

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Proposal: Request for Approval. Bounty on fallback oracle misconfiguration

Created: June 14th, 2022

Passed: Not yet but looking likely,
2.2K AAVE For,
35 Against

What does it do: Requests approval for awarding the 50k USDC bounty for a security disclosure, completed by the Hacxyk team. It involved a misconfiguration of Aave v3’s fallback oracle. 

Why: Hacxyk discovered a bug whereby when an asset doesn’t have a price feed it utilises the denominated fallback oracle. The fallback oracle had a misconfiguration, which would allow anybody to set an arbitrary value, thus enabling them to force undesired behaviour price-wise.

Takeaway: Reward for hackers looking to do good.  

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Proposal: Temporarily Disable the Aave DAI Direct Deposit Module (D3M)

Created: June 15th, 2022

Passed: Yes,
125K MKR For

What does it do: Sets the Aave D3M Target Borrow Rate (bar) to 0, effectively disabling the Aave D3M until the Risk Core Unit are happy that there is no longer a risk. 

Why: Of the 200MM DAI borrowed on Aave Ethereum v2, 100MM is borrowed by Celsius and is collateralised primarily with stETH. Given the circumstances surrounding Celsius currently, there isa high risk for users borrowing stablecoins collateralised by stETH. 

Takeaway: With the market meltdown its best to be careful with who is borrowing your money. 

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  • Rari Capital
  • Uniswap
  • Sushi

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