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CryptoEconomic Research

DeFi Protocol Governance Report | May 2022 | Week 1

Aave prepares for the veBAL wars, adds sAVAX as a collateral asset, Compound updates high-TVL cToken implementations, Sushi prepares for the future with a hunt for new leadership, and more.
by Laurence SmithMay 6, 2022
DeFi Protocol Governance Report
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Proposal: Update High-TVL cToken Implementations

Created: April 30th, 2022

Passed: Yes,
581,182 COMP For,
0 Against

What does it do: The proposal is a patch update of the cToken implementation for high TVL assets, as developed by Equilibria. This is the final patch for bringing cTokens up to the new implementation. It will also grant $350,000 worth of COMP to Equilibria for the upgrade work, in addition to 79,764.43 USDC to Compound Labs for the ChainSecurity protocol audit.

Why: The overall implementation changes have the following effects:

  • Upgrades Solidity version to 0.8.10 for cToken and related contracts. cToken upgrades were implemented separately due to the complexity of having multiple Solidity versions in the same repo.
  • Replaces SafeMath and CarefulMath in favour of Solidity 0.8’s checked math. Math errors will now automatically revert Solidity.
  • Custom errors and reverts will now replace the custom errorCode return values. Errors will be able to be dealt with in a more structured way than enum or string comparisons.

Takeaway: Equilibria’s patch is now complete and all cTokens are updated to Solidity 0.8.10, bringing the previously mentioned improvements for Solidity. 

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Proposal: Add support for sAVAX (BENQI Liquid Staking AVAX Token) on AAVE v3

Created: May 5th, 2022

Passed: Not yet but looking likely,
36K AAVE For,
81 Against

What does it do: Adds sAVAX, the liquidity staking token from BENQI protocol, as a collateral asset. sAVAX allows users to unlock liquidity whilst participating in the Avalanche network.

Why: sAVAX constantly increases in value due to the network validation reward, by listing sAVAX it allows user to unlock liquidity as a collateral for loans, and thus generating revenue for AAVE. sAVAX generated revenue will always grow due to the network validation reward. 

Takeaway: Given that sAVAX is the largest liquid staking token on Avalanche, with over 3M sAVAX in circulation with deep liquidity in AMMs, there is a big revenue opportunity here for Aave. 

Proposal: [ARC] Supply/borrow cap framework Fast track framework

Created: May 5th, 2022

Passed: Not yet but looking likely,
26K AAVE For,
1 Against

What does it do: Implements a fast track framework for Supply and Borrow caps. The proposed fast-track process is:

1. Governance thread for 24 hours

2. Snapshot with immediate vote open for 48 hours 

3. Community multisig enforcement

With the following scope and limitations:

  • Fast-track can only act on Supply and Borrow caps between a 30% to 100% modification range 
  • Requires an 80k AAVE quorum 
  • Process should take no longer than 4 days, meaning that networks with Guardian should have the Guardian prepare the signing in advance

Additionally, the proposal upgrades the USDC supply cap on AAve Avalanche V3 market by +100% to a total of $4B. 

Why: To improve Aave V3 efficiency and to enable faster updates to caps on V3 markets. 

Takeaway: Supply and Borrow cap changes will now be quicker than ever on Aave V3!

Proposal: ARC – Strategic Partnership with Balancer Part #2

Created: May 3rd, 2022

Passed: Not yet but looking likely,
94K AAVE For,
163 Against

What does it do: Acquires 100,000 BAL tokens through the deployment of a Bonding Curve contract. The BAL tokens are reserved in the Reserve Factor until more details around Aura emerge, after which the Aave community can vote on whether to deploy BAL to receive veBAL or auraBAL. The total cost will be $1,708,500, assuming a BAL price of $17. Aave is also considering a token swap for an additional 200,000 BAL tokens, which would make Aave one of eight token holders with 300,000 BAL tokens. 

Why: With the acquisition Aave will become one of the Top 30 BAL holders. If they were to acquire another 75,000 BAL (for a total of 375,000 BAL) they would be a Top 20 holders – making Aave the largest BAL holder of any Balancer partner. Tribe DAO currently hold the most BAL tokens of a Balancer partner to date with 270,00. 

Two key reasons spur the decision: (1) it gives Aave a competitive advantage over Tribe DAO, who may look to direct TVL to Rari Fuse pools using the new ERC-4626 vault (check here for more detail), and (2) it gives Aave opportunity to be an early leader in the veBAL wars. 

Takeaway: Aave are prepping for the veBAL wars – one to watch out for over the coming weeks. 

Sushi Swap

Proposal: Sushi 2.0: A Restructure For The Road Ahead [Implementation]

Created: May 4th, 2022

Passed: Not yet and it could go either way,
562K SUSHI For,
324K Against

What does it do: Three key aims: (1) retaining the current team, (2) establishing a Compensation Committee and (3) commences a leadership search. As a part of this it reserves 6m $SUSHI over a 4 year time horizon for the following use cases:

  • Current contributor allocation
  • Future hire allocation 
  • A portion of the funds to be spent on future project strategy and leadership 

Why: SUSHI is thinking ahead and wants to build a strong, accountable future for the project. 

Takeaway: It could go either way but SUSHI is looking to develop into a sustainable DAO in the long-term with a more formalised structure, whilst also keeping on current team members

Screenshot 2022 03 18 at 19 13 37
  • MakerDAO
  • Rari Capital
  • Uniswap

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