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The Tally Newsletter, Issue 11
December 22, 2020
Welcome back for issue 11 of the Tally Newsletter, a publication focused 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.
This week, we cover:
Uniswap grants program meeting quorum
Compound Chain and governance proposals
Aave v2 governance launch with Curve listing proposal
Tornado Cash launches governance
PieDAO metagovernance is live
Uniswap Grants Proposal Gains Broad Support
TL;DR: Proposal 3 was the first Uniswap initiative to meet the 4% quorum requirement, with support from prominent delegates, investors, and metagovernance mechanisms.
Three months from launch, Uniswap governance has finally proven its ability to reach quorum. While the first two governance proposals submitted by Dharma failed due to missing the minimum 40 million vote threshold, Uniswap proposal 3 has received strong support.
Voting is still ongoing until roughly 2am UTC on Thursday, but proposal 3 is already well on its way to becoming the first successful proposal. And this is before either of the two prominent metagovernance voting blocks have their say.
Both cUNI and INDEX token holders are currently weighing in via Snapshot polls to see if their respective delegations will participate. Support has been nearly unanimous among both groups, but they may struggle to meet their internal quorum requirements (10% participation for cUNI, 5% for INDEX). Proposal 3 also marked the first participation from a mysterious 15 million UNI wallet believed to be linked to investment fund Paradigm.
Compound Announces Bridge Chain, Considers Two Improvement Proposals
TL;DR: The Compound bridge chain will rely on COMP for governance and authority, while two governance proposals will improve core money market gas efficiency.
Compound has had a busy week, with a key product announcement and two governance proposals.
Compound Chain is a mechanism to bridge liquidity between blockchains, maintained via proof of authority consensus. Validators will be selected and governed via existing Compound governance on Ethereum, so ultimate control remains in the hands of COMP token holders. Public reaction has been mixed, with some criticizing the centralization inherent in POA chains. But John Adler made a fair point that existing governance contracts are very similar to POA consensus mechanisms, with token holders serving as the validator set.
Compound Chain is still in development, but a testnet implementation is slated for launch in the first quarter of 2021. It remains to be seen if Compound’s gambit to own the entire infrastructure stack can succeed where similar efforts have failed (such as Aragon’s scrapped Aragon Chain project).
Proposal 33 removes automatic claiming of COMP tokens with cToken interactions, which will reduce gas consumption for common user transactions. This also gives governance more fine grained control over distribution on a market by market basis.
Proposal 34 deactivates the cDAI market’s integration with MakerDAO’s DAI savings rate contract. While the DSR was initially linked to earn additional risk free yield, currently this just causes additional gas usage with no benefit due to the DSR being set to 0%.
Aave v2 Governance Upgrade Goes Live
TL;DR: The Aave governance upgrade supports separate delegation of proposal and voting power.
Aave’s recently implemented v2 governance framework allows for novel modes of governance participation. While COMP based governance systems allow for delegation, token holders must grant both voting power and power to submit proposals to their delegate. This can be inefficient, as some users would be happy to vote on their own while delegating proposal power to help contributors meet proposal submission thresholds. In other cases, proposal power delegation may be wasted on non technical participants who are unable to submit proposals on their own.
Aave’s v2 governance enables separate proposal and voting power delegation, and there are already two examples of users pitching for delegation based on this division.
Julien Bouteloup of Curve Finance is leading an initiative to add CRV as a supported asset in Aave v2. Once they reach the required ~$5 million in proposal power, they will be able to submit an on chain vote, but any delegates will remain free to vote against the proposal if they find the specifics to be unacceptable.
Pseudonymous Aave community member Zer0dot has also thrown their hat in the ring as a vote delegate. While token holders would be granting voting rights, they don’t need to grant proposal capabilities which reduces the trust that must be placed in delegates. As a side benefit, users can delegate votes to contributors with little chance of meeting the proposal submission threshold, and then delegate proposal power separately to ensure their token governance rights are utilized efficiently.
Tornado Cash Launches Governance Token
TL;DR: The TORN governance token will be distributed to users of the service, extending the logic of liquidity mining to currency mixers.
Tornado Cash launched what may be Ethereum’s most dangerous governance token. While the Tornado Cash contracts are immutable and can operate indefinitely without intervention, they lack a means of evolving to continue to serve Ethereum’s privacy needs. On the other hand, human control of such a controversial system creates risk of censorship and government intervention.
In addition to a retroactive airdrop to past users, TORN tokens will also be distributed via a liquidity incentive program. Users will gain tokens by depositing funds to the Tornado Cash pool, which increases the overall anonymity set for other users. However, the system needs to go to great lengths to credit users for deposits without compromising their identity in the process.
As a point of interest, participants in Tornado Cash’s initial trusted setup ceremony will not be credited with tokens. This is likely due to difficulties connecting social profiles linked to the ceremony with Ethereum addresses.
While governance tokens have an uncertain legal footing, TORN is particularly risky due to its link with an anonymity service. Token holders may become a key pressure point for governments and entities looking to limit the system’s impact.
PieDAO Activates Metagovernance for Yearn Ecosystem Index
TL;DR: PieDAO’s new index infrastructure will allow for governance participation while generating passive income.
The impact of metagovernance, or protocols governing protocols, is growing daily. The current leader in the space, Index Coop, is currently voting in 3 active governance proposals on behalf of the Defi Pulse Index. While PieDAO’s products have traditionally been built atop of Balancer pools, which prevent active voting, their new index framework will open the door to deeper participation.
The Yearn Finance focused $YPIE will be the first product built using this new infrastructure, which is based on the Diamond standard for modular smart contracts. This will allow holders of PieDAO’s native DOUGH governance token to direct voting of underlying tokens via Snapshot polls (similar to INDEX and cUNI voting mechanisms). In addition, the index can earn income by supplying assets to lending protocols between voting periods.
It will be interesting to see how PieDAO balances utility from lending and voting, as in many governance systems they can be mutually exclusive. For example, COMP and UNI take token snapshots when proposals are first submitted, forcing users to choose between depositing assets for yield and retaining their governance rights for possible votes.
Anything we missed? New developments or protocols you’d like to see covered? Drop us a line at firstname.lastname@example.org