The Tally Newsletter, Issue 16
Welcome back for issue 16 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:
Tornado Cash considers enabling token transfers
New Loopring token model puts L2 front and center
Kyber Network pursues decentralization with v3 changes
Plus, brief updates from around the ecosystem.
Tornado Cash Prepares for First Governance Vote
TL;DR: A contributor has proposed to enable transfers for the TORN governance token.
In the few weeks since the launch of Tornado Cash’s TORN governance token, pseudonymous contributor Rezan has proven the impact of focused action. Having taken the initiative to launch the Tornado Cash forum, they have now formulated the first TORN governance proposal.
TORN tokens were initially made to be non-transferable. This has become an emergent trend among new governance protocols, with the likes of B.Protocol and Inverse Finance also choosing to forgo transferability.
One potential benefit is reduced regulatory risks for the creators or sponsors, as transfer restrictions guarantee that the issued tokens won’t have monetary value. If independent contributors then use decentralized governance to enable transfers, the sponsors could disavow responsibility.
Beyond regulatory arbitrage, non-transferable tokens also have potential for better aligning users. They enforces a long (or potentially perpetual) time horizon for holders making governance decisions, which could result in better decision making. On the flip side this could be counterproductive, as voters don’t have immediate value at risk (token price declining) to disincentivize bad decisions.
For the Tornado Cash community, these philosophical questions may be largely beside the point as TORN holders get a clear payoff from being able to sell their airdropped tokens. But before this initiative can move forward, a whale holder with more than 1,000 tokens in a single address will be needed to sponsor the proposal.
We’ll be watching closely to see if a community that is anonymous by design can rally to pass their first proposal, without the social signalling and back channel communications that typically underpin protocol governance.
Loopring Adopts Updated Token Model
TL;DR: Loopring’s new revenue system will distribute payouts on their zkrollup L2, and favor active users over passive token holders.
For a layer 2 platform priding itself on gas efficiency and ease of use, it was anachronistic that Loopring’s previous staking mechanism was both cumbersome and expensive. Users had to pay substantial gas fees to deposit and withdraw tokens, and funds were locked for 90 days from when they were deposited or claimed as rewards.
With Loopring’s v3.6 upgrade now live in production, the old staking mechanism is being retired in favor of direct payouts on layer 2.
In addition to dogfooding adoption of their L2 solution, the revised token model also has potential to incentivize more valuable contributions. The previous staking system’s lock mechanism was effective in curtailing circulating token supply, but this ultimately offered little value to Loopring other than temporary price support for LRC.
Going forward, protocol fees will be distributed directly on L2 and split between liquidity providers, insurers, and the DAO treasury. The initial split will favor liquidity providers with 80% of protocol fees, which will help bootstrap liquidity by redirecting earnings from LRC holders back to users.
LRC holders will no longer be rewarded for simply holding their tokens, but will instead have several ways to earn through providing value to the network. Holders can earn a share of 10% of protocol fees by staking their LRC to insure users against technical risk. And half of the 80% revenue allocation to liquidity providers will be reserved for LRC trading pairs, giving holders another incentive to put their tokens to use.
Future decisions about fee rates and revenue allocation will be made by Loopring DAO, which will initially be using Snapshot to manage voting. The current Loopring zkrollup architecture can’t support all governance responsibilities, so token reward distributions and other key functions will continue to rely on the Loopring team.
Kyber Network Announces v3 Upgrade
TL;DR: The network upgrade will place KyberDAO at the center of future decision making.
Kyber Network’s last substantial upgrade, in mid 2020, saw the launch of the KyberDAO as an initial governance mechanism for KNC holders. While Kyber was able to build substantial participation through their voting incentive payouts, what they have gained in breadth was not matched with depth.
As an example, to date KyberDAO has not created a governance forum or other key infrastructure that helps community members craft proposals. And the vast majority of proposals have comprised either periodic fee allocation votes or asset listings suggested by the core team.
In addition to substantial changes to the liquidity protocol itself, Kyber’s latest update puts much greater emphasis on decentralized governance and community leadership.
A core part of the transition is moving Kyber from a single product towards a multi faceted liquidity protocol. With many more potential projects to invest in, it’s imperative that KNC holders can help set the direction for future growth.
The Kyber team’s announcement post also hints at voters’ responsibility for determining user incentives. Taken together with the proposed migration to a new KNC token contract, it seems likely that the core token economics of deflationary supply through partial fee burning will be reassessed. With competing exchange platforms such as Balancer and Sushiswap embracing inflationary economics to bootstrap liquidity and network effects, Kyber may have no choice but to follow suit.
As a final note, Binance currently controls over 40% of KyberDAO voting power, and has shown strong preference for maintaining the status quo with respect to token economics. Potential impacts to their KNC staking product may be a key factor in the proposal’s ultimate support from voters.
In brief:
Swerve struggles to corral multisig signers:
Enzyme Finance (formerly Melon) launches their updated asset management platform:
Sushiswap revenue mechanism is exploited for 81 ETH:
Opium Network derivatives platform launches governance token:
Keep takes first steps towards decentralized governance with community multisig:
0x Protocol v4 approved by ZRX voters:
MakerDAO’s new Uniswap LP vaults reach capacity in hours:
Thanks for joining us for this week’s Tally Newsletter! Be sure to check out the Tally governance app, and join us on Discord for the latest updates!
Anything we missed? New developments or protocols you’d like to see covered? Drop us a line at newsletter@withtally.com
Best,
Nate, Tally