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CryptoEconomic Research

DeFi Protocol Governance Report | October 2022 | Week 4

This week Aave makes precautionary risk parameter updates, Sythnetix votes to maximize capital efficiency, and more!
by Laurence Smith, Cameron ODonnellNovember 2, 2022
DeFi protocol Governance Report
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On-chain Vote: Risk Parameter Updates for Aave V2 ETH

Created: October 20th, 2022

Passed: Yes
508K AAVE For,

What does it do: Updates parameters on six (6) Aave V2 assets: 

  • Balancer
    • Pause Borrowing
  • DPI
    • Pause Borrowing
  • REN
    • Pause Borrowing
  • BAT
    • Changes LT from 80% to 70%
    • Changes LTV from 75% to 65%
  • CVX
    • Changes LT from 60% to 45%
    • Changes LTV from 45% to 35%
  • ZRX
    • Changes LT from 75% to 65%
    • Changes LTV from 65% to 55%

Why: Under current market conditions, these parameter changes for Aave are precautionary measures that mitigate lending risk for users.

Takeaway: Aave continues to modify Risk Parameters to match market conditions and protocol demand. 

Synthetix Banner

Proposal: Raising the target c-ratio to 400%

Created: October 26th, 2022

Passed: Not yet but looking likely,
4 SNC-SC For,
0 Against

What does it do: Adjusts the target collateral ratio risk parameter for Ethereum and Optimism markets from 350% to 400%. 

Why: The tweak aims to optimise risk and capital efficiency on Synthetix, based on recommendations from Gauntlet, whose methodology you can find here. Modelling showed that an increase in the collateral ratio to this level decreased insolvencies by 28% and liquidations by 86%. 

Takeaway: SCCP-232 lowered the collateral ratio from 400% to 350% temporarily, and it was intended to return to 400% two weeks after SIP-252 was implemented (due 4th November). Due to the insolvency risk this change is being pushed for sooner. 

Proposal: Pay DAOs from inflation

Created: October 26th, 2022

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

What does it do: Changes the way the DAO’s monthly stipend is paid. If passed, it will be paid using inflation rather than from the Treasury Council’s assets. If passed, inflation payments will start from the first week of November. 

Why: The change hopes to increase self-sufficiency for the DAO, specifically with regards to the operating costs, and to help align stakeholders as the Treasury Council currently manages 47k SNX each month as DAO stipends. This gives the Treasury Council more influence relative to other councils and reduces protocol autonomy. 

Takeaway: Increased efficiency and decentralisation of influence is the order of the day.  

Proposal: [RCC-3] October 1, 2022 – October 31, 2022 Budget Request

Created: October 17th, 2022

Passed: Yes,
64M LDO For,
11k Against

What does it do:  Provides funding for the Resourcing and Recompensation Committee (RCC) (details of the RCC and its responsibilities can be found here). This is the final period for RCC funding, with the committees being funded from a holistic perspective by the Core Contributors Provisional Budget going forward. Total funds to be provided are 50k LDO.

Why: The 50k LDO is larger than previous budgets. The budget covers overdue LDO compensation for September, in addition to October compensation, and the following:

  • Higher marketing expenses than usual
  • Audit and bug bounties from LEGO to RCC
  • GCP and Github funding
  • Operating expenses contingency funding

Takeaway: This is the final RCC budget request before Lido moves to a continuous funding model on November 1st 2022. 

  • Sushiswap
  • Uniswap
  • Compound
  • Maker

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