The Tally Newsletter, Issue 1

October 13, 2020

Welcome to the inaugural issue of The Tally Newsletter, a publication focusing on all things decentralized governance. We’ll keep you updated on key proposals, procedural changes, newly launched voting systems, shifting power dynamics, and anything else you need to know to be an informed citizen.

In this issue, we cover: 

  • Snapshot and Aragon collaboration for gasless voting

  • MakerDAO’s upcoming governance system redesign

  • Aave’s genesis vote and LEND token migration

  • The first successful Compound autonomous proposal

  • Uniswap governance launch and delegation race

Let’s dive in!

Optimistic Voting with Snapshot and Aragon

TL;DR: Snapshot has partnered with Aragon to support secure, on-chain execution of gasless, off-chain votes.

Snapshot is a tool for gasless voting developed by the team behind the Balancer exchange. While Snapshot was initially released just for BAL signal polls, the open source ethos of Ethereum quickly expanded the scope of the project beyond Balancer.

Other projects such as Yam Finance and Yearn saw an opportunity to boost participation and bootstrap an engaged governance community, without the constraint of paying high transaction fees to cast votes. With a wave of projects launching over the Summer, Snapshot quickly grew from just one to dozens of supported tokens.

The main drawback of Snapshot voting is trusted proposal execution. Snapshot votes are submitted off-chain, so voters must trust a third party with admin privileges to faithfully execute their instructions. Community multisig wallets and timelock contracts implemented in response didn’t fully address risks from governance centralization.

Against this backdrop, Aragon and Snapshot have announced an initiative to bridge the gap between off chain voting and on chain proposal execution through “optimistic voting”. Instead of relying on a trusted entity, governance bodies will be able to integrate with Aragon to allow anyone to trigger proposal execution based on Snapshot vote results. 

While this collaboration is still in early stages, Balancer and Aragon have together committed $200,000 to the effort and a wide range of governance communities could stand to benefit when it becomes available.

MakerDAO’s Governance System Redesign

TL;DR: MakerDAO is planning to enable vote delegation and move from a continuous approval to proposal based voting system.

While MakerDAO has been a leader in decentralized governance for some time, recently its voting system has been running into scalability issues. The prime culprits: MakerDAO’s continuous approval voting architecture and lack of vote delegation.

Luckily, help is on the way! The Maker smart contracts team recently published an improvement proposal (MIP) for upgrading the governance system to address these drawbacks. Continuous approval voting will be removed in favor of a quorum requirement, which allows disparate proposals that would have previously been bundled together to be considered separately. And vote delegation will empower small voters to organize and participate as a block while avoiding transaction fees. 

Aave Governance Launch and LEND Token Migration

TL;DR: The first Aave governance vote has passed and token migration from LEND to AAVE has begun.

ETHLend rebranded to Aave at the beginning of the year, but until recently the LEND token had remained static and lacked any voting rights. All of this changed on October 1 when Aave’s first governance vote passed with overwhelming support. Aave Improvement Proposal (AIP) 1 authorized token migration from LEND to AAVE, as well as a new protocol insurance scheme and governance system. Over a third of the LEND token supply has already migrated to AAVE. 

Source: Aave.com, Oct 2020

Currently only the Aave core team can submit proposals, so the system is not yet fully decentralized. Nevertheless, this still represents a big move towards opening up the protocol to community input. There are no more votes scheduled yet, but activity in the Aave governance forum points to potential new asset listings in the near future!

Compound’s First Successful Autonomous proposal

TL;DR: The WBTC collateral factor was increased via Compound’s autonomous proposal process, serving as a proof of concept for future community led initiatives.

Compound governance typically requires users to have at least 1% of total voting power (100,000 COMP) to submit proposals as a means of spam prevention. Autonomous proposals allow users to initiate the process with as little as 100 COMP, with the proposal entering a full vote only after it receives enough vote delegations to pass the standard 1% submission threshold.

This month marked the first time an autonomous proposal has made it all the way through Compound governance. Beginning with a forum post on September 25, the proposal to increase WBTC’s collateral factor was able to meet the delegation threshold and pass a full governance vote within roughly a week. 

Thanks to the efforts of an independent community member, Compound users can now borrow more against their WBTC deposits. More importantly, this demonstrates that small holders can have a large impact on protocol governance.

Uniswap Governance is Heating Up

TL;DR: Both Dharma and Gauntlet Network have surpassed Uniswap’s 1% voting power threshold, with Dharma gearing up to submit Uniswap’s first proposal.

Last month, Uniswap joined the growing list of protocols to release a token and institute decentralized governance based on Compound’s proposal framework. Voters don’t gain control over the UNI treasury until October 17, but that hasn’t stopped a mad dash by protocol politicians to secure backing. 

The top 3 participants in the delegation race include Dharma, Gauntlet Network, and Univalent (a multisig voting scheme launched by Andre Cronje of Yearn Finance). While Univalent pulled out to an early lead and was the first delegate to pass the 10 million UNI proposal threshold, reputational blowback with one of Andre’s side projects caused a sharp fall in support.

Dharma and Gauntlet are currently neck and neck, with each having around 15 million UNI backing. This partially refutes earlier concerns that the 1% proposal submission threshold inherited from Compound governance would be too high of a bar for UNI holders.

Source: Dune Analytics, Oct 2020

Why should UNI holders care about the emerging governance system? Most importantly, voters will decide how the remaining ~45% of UNI supply allocated to the community treasury is distributed. Possible options include additional liquidity incentive programs or development grants.

The first disbursement of treasury funds may happen soon. Dharma published a proposal to distribute UNI to users who had interacted with Uniswap through a proxy contract (e.g. certain wallets like Dharma and Argent, or exchange aggregators such as Kyber and 1inch) and were therefore not included in the initial token airdrop. In preparation for this initiative, Dharma submitted the first governance proposal on Monday October 12 to reduce Uniswap’s minimum quorum requirements. 

And, that’s a wrap! Thanks for reading our first issue of the Tally Newsletter. We look forward to having you back for our next issue!

Anything we missed? New developments or protocols you’d like to see covered? Drop us a line at newsletter@withtally.com

Best,
Nate, Tally