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CryptoEconomic Research

DeFi Protocol Governance Report | March 2022 | Week 3

Compound lowers proposal threshold, Aave looks to update risk parameters, and more!
by Laurence SmithMarch 18, 2022
DeFi Protocol governance report
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Compound

Proposal: Lower Proposal Threshold to 25K COMP

Created: March 11th, 2022

Passed: Yes,

  • 917,350 COMP For
  • 175,917 COMP Against 

What does it do: Reduces Compound’s proposal threshold to 25K.

Why: Based off of community feedback and various issues with the current threshold, Compound are looking to reduce it to 25K. With the new threshold it enables 17 additional EOAs to propose, allowing for more community members to participate in governance and reduce the barrier to entry for delegates. 

Takeaway: The threshold has been lowered – we expect Compound community engagement to be on the rise. 

Proposal: Risk Parameter Updates for ZRX, MKR, and SUSHI

Created: March 14th, 2022

Passed: Yes,

  • 272,613 COMP For
  • 0 Against 

What does it do: Adjusts the following 3 parameters for 3 Compound assets:

  • Set cZRX collateral factor to 65% (up from 60%)
  • Set cMKR collateral factor to 65% (up from 60%)
  • Set cSUSHI collateral factor to 65% (up from 60%)

Why: The changes look to maintain the overall risk tolerance of the protocol when making risk trade-offs between specific assets. These recommendations are driven by three core metrics: insolvencies, liquidations, and borrow usage. Overall, the parameter changes look to optimise these metrics. 

Takeaway: It’s looking likely that these assets’ parameters will be amended in the hope of optimising the objective function. 

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Aave

Proposal: Should six (6) total risk parameters across five (5) Aave V2 assets be updated?

Created: March 18th, 2022

Passed: Not yet but looking likely,

  • 210 AAVE For
  • 0.029 Against 

What does it do: Batch update to the following risk parameters so that they align with the Moderate risk level, as decided by the Aave community:

  • Aave Loan to Value to 62.5% (from 60%)
  • DPI Liquidation Bonus to 7.5% (from 8.5%)
  • ENJ Liquidation Bonus to 6.5% (from 7.5%)
  • FEI Loan to Value to 65% (from 60%)
  • FEI Liquidation Threshold to 75% (from 70%)
  • MANA Loan to Value to 61.5% (from 65%)

Why: The risk parameters have been adjusted in order to drive increases in capital efficiency, whilst keeping protocol risk at safe levels. 

Takeaway: The changes should minimise risk and drive capital efficiency. Similar to the change on Compound, these changes are driven by an optimisation function that looks to balance insolvencies, liquidations, and borrow usage. 

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Uniswap

Proposal: Should we deploy Uniswap V3 on Celo?

Created: March 15th, 2022

Passed: Not yet but looking likely,

  • 7.5M UNI For
  • 8.3k Against 

What does it do: Launches Uniswap V3 on Celo to launch “Green Asset” Liquidity Pools, and to provide Uniswap access to smartphone users globally (~6B). Celo is a mobile-first, carbon-negative, EVM-compatible layer 1 blockchain. 

Why: More specifically, launching on the Celo platform will provide the following:

  • A $10MM financial incentive to Uniswap users, in addition to grant funding from the Celo Foundation to motivate the use of Uniswap as a financial building block 
  • Expose Uniswap V3 to the 6B smartphone users globally 
  • Create green asset liqudiity pools backed by natural capital assets, such as tokenised carbon credits
  • Use Uniswap to rebalance the Celo Reserve with nature backed assets, instead of using centralised exchanges
  • Promote future green use cases on Uniswap

Takeaway: Celo are looking to partner with Uniswap to build the foundation for the proliferation of natural capital assets across Web3. 

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  • SushiSwap
  • MakerDAO
  • Rari Capital

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