The Tally Newsletter, Issue 2

October 20, 2020

Welcome back for our second 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:

  • Uniswap Proposal 1

  • Compound’s new cUNI and cCOMP markets

  • MakerDAO adopting a new rate setting framework

  • KyberDAO’s first improvement proposals

  • mStable adds vote-locking

  • Aave token recovery

Uniswap Proposal 1 Ends Early

TL;DR: Uniswap proposal 1 failed to meet the minimum quorum requirement, in part due to an incorrect ending time displayed on the governance user interface.

This past week, Dharma submitted Uniswap’s first governance proposal to lower the quorum and submission requirements. While this vote initially seemed likely to pass, procedural issues and unexpected controversy stopped it in its tracks.

Each of the three leading vote holders, Dharma, Gauntlet Network, and Univalent, had signaled clear support for the proposal. Gauntlet’s voting system analysis formed the basis of Dharma’s proposed changes, while the Univalent voting delegation was created for the sole purpose of reducing governance restrictions. But between these three delegates, they were still a bit short of the 40 million UNI required to meet the existing quorum threshold. 

Support among the wider community was less clear, with a heated discussion taking place in the Uniswap forum on the pros and cons of the proposal. Certain users were concerned that lowering governance thresholds would give leading vote holders too much power within governance. There were also objections to separate parameter changes being bundled into a single proposal.

Source: Uniswap.org, October 2020

As of Sunday evening, the vote was close to succeeding, with only ~420,000 UNI needed to pass. But due to an error in the user interface, the voting period closed around 18 hours before the stated 18:00 UTC October 19 cutoff time.

Whether the vote would have succeeded with more time is unclear, but for the time being Uniswap’s existing 40 million UNI quorum and 10 million UNI proposal submission thresholds remain in effect.

Compound Money Markets Gain Voting Power

TL;DR: Compound’s new UNI and COMP markets can participate in governance votes as a block.

Compound’s two most recent market additions, UNI and COMP, also happen to be governance tokens based upon the COMP framework. The tokens natively support vote delegation, and both cUNI and cCOMP were engineered to allow the markets’ liquidity to vote in governance. 

Compound is quickly moving forward with enabling cUNI voting. Community member Arr00 proposed delegating votes to Compound’s community multisig address, and voting based upon the outcome of cUNI snapshot polls. There is less enthusiasm for voting with cCOMP, as some are concerned about the impact of block voting on Compound’s internal governance process.

Source: Twitter, October 2020

While voting capabilities are already built into the cUNI and cCOMP markets, the final decision on activating delegation rests with COMP holders. As more governance tokens are supported over time, secondary lenders may emerge as key focal points in decentralized governance.

MakerDAO Experiments with Delegating Rate Setting Authority

TL;DR: MKR holders voted to replace the existing framework of weekly interest rate polls with an executive rate-setting committee.

Last week’s MKR governance poll marked the end of the era for direct voting on MakerDAO monetary and rates policy. While MKR polling had served the community well with single collateral DAI, the proliferation of assets in multi collateral DAI made weekly votes on interest rates infeasible. 

In place of the previous direct democracy process, MKR voters have delegated rate setting authority to a community working group. This is intended to support a new approach to rate setting based on risk and competitive positioning, with the working group’s first update due later this week.

KyberDAO Considers New Improvement Proposals

TL;DR: KIP-3 and KIP-4 represent the first major changes to Kyber Network since the launch of KNC governance.

For its first several months, KyberDAO governance had only addressed network fee allocations in biweekly “BRR” votes. This eased KNC holders into the governance process, but left fairly low stakes for voting. The BRR votes have been heavily influenced by Binance, in part because KNC holders must participate in order to claim their share of network rewards - Binance had to cast the deciding votes to facilitate their KNC staking product. 

Source: Kyber.org, October 2020

This staid governance cycle has been broken up by two recent votes. KIP-3, which passed last week by a wide margin, reduced network fees from 0.2% to 0.1%. KIP-4 proposes to extend fees to all Kyber trades, including trades routed through AMMs such as Uniswap which previously had fees waived. Both proposals are intended to help Kyber cope with fierce competition in the DEX space.

Neither of these votes were dominated by Binance, indicating that their participation is mainly focused on earning voting rewards rather than vote outcomes.

mStable Forks Curve’s Governance Framework

TL;DR: mStable will adopt Curve’s token locking mechanism for assigning voting rights.

mStable recently offered some key details about its forthcoming voting system. While the MTA token itself has been trading for months, we’re now learning more about how governance works in practice.

MTA holders will gain voting power by locking their tokens into vMTA for up to 4 year periods, similar to Curve governance. The goal is to increase alignment, as gaining maximum voting power requires a long term commitment to the project token. Curve’s voting escrow may become a common governance design pattern similarly to how many projects forked the COMP token.

Beyond a shared voting architecture, Curve and mStable are also beginning to collaborate on liquidity incentives. Curve recently added support for an mUSD liquidity pool, with LPs now receiving both CRV and MTA tokens from the respective projects.

Aave Contemplates Rescue Mission for Lost Tokens

TL;DR: Community members have expressed support for helping recover lost LEND and AAVE tokens.

Earlier this month an Aave whale made a costly mistake, sending over $1 million to the token contract itself.

This is unfortunately only the most recent example of a common issue - user are unable to recover assets mistakenly sent to token contracts.

In Aave’s case, governance itself has control over the contract, giving a potential way forward for users who made this mistake. Community members have created an initial request for comment on the Aave governance forum, with several members of the core team showing support for a longer term solution to stuck tokens.

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Thanks for reading our second issue of the Tally Newsletter. We look forward to seeing you back next time!

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

Best,
Nate, Tally