The Week in Governance (Dec 6, 2023)

Noteworthy Votes

  • Aave has passed a proposal to integrate a GHO Safety Module to enhance the normal Safety Module in the Aave Protocol. This module aims to address potential risks and reduce safety incentives associated with StkAAVE and StkBPT. By introducing a stablecoin asset and targeting a liquidity pool of 9M GHO, the module strengthens the resilience of the protocol. It achieves this through a daily emission of 35 AAVE over 90 days, a slashing rate of 100%, and a 10-day cooldown period.
  • Optimism has voted to deploy its Canyon upgrade. The upgrade includes the Shapella network upgrade from Ethereum, a change to reduce base fee volatility, and some minor bug fixes. If the vote passes, Canyon will be activated on several mainnets on January 11, 2024, unless there is a critical security issue.
  • [REDACTED] has voted to allocate Dinero protocol revenue to rlBTRFLY lockers uniquely. For the Dinero protocol, 100% of revenue from fees, minus operating costs, goes to the Redacted Treasury, rlBTRFLY holders, and DAO Reserves. The allocation breakdown is as follows:
    • 42.5%: Redacted Treasury
    • 42.5%: rlBTRFLY Holders
    • 15%: DAO Reserves

Forum Thread Of The Week

Ultrasound Governance Tokens

The Synapse DAO decided to transition from direct SYN emissions on SushiSwap to Balancer gauges through Aura to improve the capital efficiency of on-chain liquidity for the SYN/ETH pair. Synapse expected the Balancer pool to increase the return on investment (ROI) compared to direct emissions—the proposal aimed to deepen pool liquidity and reduce spending by 40%. However, the initial proposal did not generate significantly higher yields or migrate liquidity as expected. The current Balancer SYN/ETH pool costs the DAO 5K SYN per day for an average daily pool volume of around $100,000, while the SushiSwap pool funded by swap fees has a higher average volume. This indicates that LPs prefer venues with higher volumes for better returns. The excess liquidity incentives on Aura lead to unnecessary token supply inflation and liquidity fragmentation across venues. Removing liquidity incentives from Balancer will improve token economics, reduce annual inflation, and utilize natural yield for on-chain liquidity.

On the surface, this is a reasonably simple proposal. It removes incentives from a barely used LP pool to reduce token emissions. The Balancer pool is emitting 5K SYN per day for liquidity incentives, or 1.8M annually. Synapse ending these emissions is a good step in reducing wasteful spending from the DAO. Reducing emissions can have a drastic effect on token supply dynamics, and as such, I wanted to highlight this proposal. Synapse is one of those solid projects cursed with high emissions. This proposal is a step in the right direction.

Honorable Mentions

  • Abracadabra Money proposes launching MIM, the Degenbox, and cauldrons on Blast.
  • Arbitrum is debating creating separate and independent Grant DAOs with a budget of 250K a piece to encourage growth and fund the development of projects on their chain.
  • Compound Finance debates reduce the USDC borrow rewards from 381 COMP per day to 100, saving the DAO $5.14M annually.
  • Osmosis is considering a proposal to merge its protocol with Umee. 
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