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The Tally Newsletter, Issue 43

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The Tally Newsletter, Issue 43

August 25, 2021

monetsupply
Aug 25, 2021
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The Tally Newsletter, Issue 43

newsletter.tally.xyz

Welcome back for issue 43 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’s community enabled analytics vote

  • Controversy over EGL’s gas limit token voting mechanism

Plus brief ecosystem updates from the governance ecosystem.


Uniswap Analytics Proposal Stirs Controversy

TL;DR: Proposal 7 saw considerable opposition at the last minute due to concern over spending oversight.

Proposal 7 continues Uniswap’s history of contentious governance votes. Driven by analytics provider Flipside Crypto, the Community Enabled Analytics proposal sought up to $25 million worth of UNI tokens to bootstrap a new analyst focused grants program. Instead of directly using the tokens for grants, Flipside proposed to invest the tokens into a Uniswap v3 liquidity position to generate yield for continuous funding. 50% of the yield generated would be withheld to cover Flipside’s program management and operating costs.

The proposal initially met little resistance, sailing through two consecutive Snapshotpolls with over 99% of participating tokens voting in favor. And the initial phases of the on chain governance vote proceeded similarly, with early voters offering nearly unanimous support.

Uniswap Proposal 7

However, once the proposal reached the minimum 40 million UNI votes in favor to pass quorum, the level of engagement on the “against” side picked up considerably. This was partly catalyzed by a call to action from another prominent data platform, Dune Analytics.

Twitter avatar for @DuneAnalytics
Dune Analytics @DuneAnalytics
PSA to all $UNI holders 🚨🚨🚨 A @Uniswap governance proposal that will let @flipsidecrypto manage up to $25M in $UNI tokens and use yield to fund their own operations is about to pass in <24 hours with almost zero community attention. Please help RT. app.uniswap.org/#/vote/1/2
app.uniswap.orgUniswap InterfaceUniswap Interface
6:59 AM ∙ Aug 19, 2021
1,424Likes614Retweets

Opposition focused on a few areas. First, some considered the operating expenses going to Flipside to be excessive, representing 50% of the generated revenue (estimated to be around $90,000 per month). Dune objected to the analytics grant program focusing solely on Flipside and excluding other providers. While Flipside had mentioned grantees would be free to use other data platforms, the proposal didn’t allocate any funding for this. And there was also some concern about the sheer size of the grant and management frameworks. While spending from yield was intended to lower the long term cost of the program (through less token dilution), this involved significant investment risk from providing Uniswap liquidity as well as trust requirements for the 3 member multisig committee managing funds.

Following Dune’s widely shared objections, the “against” side took the lead. The proposal was then disrupted somewhat by a technical issue impacting the Tally voting interface, causing some “against” votes to be erroneously submitted to the governor contract as “for” votes. 

Twitter avatar for @voteWithTally
Tally @voteWithTally
We're sharing an initial incident report on the UI bug impacting voting on the recent @Uniswap community analytics proposal
medium.comIncident summary: Tally voting bugOn Thursday August 19, 2021, we discovered and fixed a bug that affected the way Tally’s app handled votes on Governor Alpha smart contracts. The bug was that ‘against’ votes on proposals were…
7:43 PM ∙ Aug 19, 2021
39Likes11Retweets

The issue was quickly resolved, and didn’t impact the vote outcome as the proposer had dropped below the required 2.5 million UNI threshold during the voting period, allowing the proposal to be cancelled. 

With the proposal shelved for the time being, Flipside is now considering their next move. Some potential changes to the proposal include a more independent oversight committee, removing yield generation and asset management from the scope, and potentially even adopting a consortium approach to data platform participation.

Twitter avatar for @DaveBalter
Dave Balter @DaveBalter
6/ The third opportunity is also the most complex: Some in the community have offered a consortium approach to analytics. One area to consider deeply is that what the community solves for today must take into account tomorrow.
8:45 PM ∙ Aug 23, 2021

It’s unclear if this proposal has a path forward, but the community continues to discuss options in the Uniswap forum.

Ethereum Gas Limit Project Stokes Disagreement Among Core Developers

TL;DR: EGL voting and incentives challenge the “rough consensus” process used for Ethereum base layer governance.

Historically, changes to the Ethereum protocol have been managed via the Ethereum Improvement Proposal (EIP) process. This relies on “rough consensus” being reached among Ethereum core developers, including network researchers and client teams. 

Changes to the network’s gas limit (determining the maximum amount of transactions that can be processed) has been handled slightly differently. Miners have been empowered to vote on changes to the gas limit with their hashpower, which gives greater flexibility to respond to spam or denial of service attacks. But they have historically followed core devs’ recommendations on safe maximum gas limits. 

This paradigm is now being challenged by the Ethereum Gas Limit (EGL) project. Depending on perspective, the project is variously considered a way to empower the community or a bribery mechanism that undermines Ethereum governance. 

It works by creating an on chain, token based voting mechanism for users to signal their preferred gas limit. Miners who vote for the gas limit proposed by token holders receive a share of EGL inflation, which they can then sell into the market to improve their profitability. 

Twitter avatar for @uriklarman
Uri Klarman | "Flashboys for DeFi" @uriklarman
wow. ETH Governance is happening. like, **now**. in its 1st vote ever, the ETH community collectively voted to keep gas limit mostly unchanged (+0.5%) 21% (!!!) of the hashpower already collected EGLs, and many others are in the process of setting up
Twitter avatar for @ETH_EGL
the 🦅EGL🦅 project @ETH_EGL
🚀ETH Gas Limit 1st vote just closed! 🚀 - tallied 30.16M gas (+0.5%) - very balanced up/down votes - 21% of hashpower collected EGLs at least once a 🧵 on voters, pools, core devs & liquidity metrics 👇 https://t.co/4BTGLD2TKO
7:13 PM ∙ Aug 20, 2021
48Likes9Retweets

In the short period since EGL launched, it has already gained significant traction with over 21% of mining hash power collecting EGL token rewards. There may be some risk of incentive misalignment though, as miners will be made obsolete when Ethereum switches to proof of stake consensus (expected in 2022) while the expanded state size from larger blocks imposes a long term cost on network participants beyond this time. 

Twitter avatar for @hasufl
Hasu @hasufl
Both this and Eden Network are direct consequences of the merge to PoS that deprecates miner revenue and shifts their incentives from long-term (cooperative) to short-term (selfish).
9:57 AM ∙ Aug 21, 2021
263Likes16Retweets

As discussions progressed, it became clear that support for EGL was largely determined by participants’ technical positioning. For example, several members of the Erigon client team (which excels at managing growth in state size) expressed their support, and suggested the existing governance process is dysfunctional and fails to accommodate technical advances.

Twitter avatar for @vorot93
Artem Vorotnikov @vorot93
@koeppelmann 2. Even _if_ we agreed that core devs are smarter here, you must consider the context. AllCoreDevs is dysfunctional, barely able to make decisions and in need of reform. Hardcoding gas limit now = setting it in stone, because we won't be able to change it with broken process.
8:30 AM ∙ Aug 22, 2021
1Like1Retweet

The development team behind EGL, bloXroute, also has a vested interest in increasing the block size, as their primary product for improving block and transaction propagation across nodes is currently not necessary due to relatively low gas limits.

Twitter avatar for @hosseeb
Haseeb Qureshi🔺 @hosseeb
Note that I'm an early backer of Bloxroute and hence of EGL. But I promise you the people working on EGL aren't evil. They might be wrong (or right!) but they're definitely doing this in good faith, and they understand all the ways in which it's not perfect, as do we.
7:25 AM ∙ Aug 23, 2021
11Likes4Retweets
Twitter avatar for @bloXrouteLabs
bloXroute Labs @bloXrouteLabs
the coolest thing ever? yes.
Twitter avatar for @uriklarman
Uri Klarman | "Flashboys for DeFi" @uriklarman
wow. ETH Governance is happening. like, **now**. in its 1st vote ever, the ETH community collectively voted to keep gas limit mostly unchanged (+0.5%) 21% (!!!) of the hashpower already collected EGLs, and many others are in the process of setting up https://t.co/DyWu3OA1Zi
7:14 PM ∙ Aug 20, 2021
6Likes3Retweets

Discussion continues on the relative benefits and risks of tokenizing aspects of Ethereum’s base layer governance. But on a more general level, this represents an important example of extrinsic incentives being overlaid on existing governance frameworks. Other mechanisms for vote renting or trustless bribery are also beginning to emerge for DAOs and application layer protocols, which can challenge some of the game theoretical assumptions underlying governance security. As these mechanisms progress, projects may need to reevaluate their voting systems to respond to adverse incentives.


In Brief:

  • Andre Cronje releases trustless Curve voting bribery mechanism:

Twitter avatar for @AndreCronjeTech
Andre Cronje @AndreCronjeTech
bribe.crv.finance 1.1.0 released; - Add bribes for DAO votes Anyone can deploy a curve gauge via the gauge factory, get the vote_id, and add bribes. Bribes only rewarded if vote passes and for voters who voted for/yes
Twitter avatar for @AntonNellCrypto
Anton Nell @AntonNellCrypto
https://t.co/WOipmCRr9o version 1.1.0 Added support for DAO voting bribes https://t.co/yzgH4O3IU4
3:11 PM ∙ Aug 25, 2021
99Likes15Retweets
  • Aave adopts broader liquidity incentive scheme:

Twitter avatar for @lemiscate
Marc '24 Billy' Zeller (3,3) 🦇🔊 @lemiscate
The @AaveAave new LM program just got enforced onchain Aave users can now earn Staked $AAVE on new assets: $LINK $MKR $xSUSHI $YFI $BAL (16.77%) 👀👀👀 $RAI $PAX The overall Ecosystem Reserve distribution has been reduced by ~9% making the LM more sustainable long term. 🤝🤝🤝
Image
9:57 AM ∙ Aug 24, 2021
165Likes30Retweets
  • Paxos renames PAX stablecoin to USDP, potentially causing confusion with Unit Protocol’s stablecoin:

Twitter avatar for @unitprotocol
Unit protocol @unitprotocol
Hey Paxos! @PaxosGlobal Heard about your plans to introduce USDP. You may be aware that Unit Protocol's stablecoin's also called USDP and has been trading for about a year. Unsure if this is intentional, or just a calamitous mistake, but thought we should let you know 😂😂😂etc
3:46 PM ∙ Aug 24, 2021
64Likes5Retweets
  • Centre switching USDC back to all cash reserve policy by end of September:

Twitter avatar for @emiliemc
Emilie Choi @emiliemc
1/ Quick update on USDC. Starting September 2021, USDC reserves will be held in cash and short-duration US government treasuries. This is the approach we want for USDC reserves.
centre.ioUSDC Reserves CompositionUSDC Reserves Composition
4:38 AM ∙ Aug 23, 2021
1,636Likes381Retweets
  • Polychain shares perspective on improving Compound governance through more focus and organization:

Twitter avatar for @JacobPPhillips
Jacob Phillips @JacobPPhillips
COMP governance has waaay too much $/resources to tolerate being disorganized — time for some summer cleaning
comp.xyzCompound governance is disorganizedCOMP community governance is not well organized. Multi-billion dollar protocols should operate better than this. While it seems like more individuals have been stepping up lately, there are bigger steps we can & need to take. I wrote this up and am curious what others think. This is my articulation…
2:22 AM ∙ Aug 18, 2021
61Likes2Retweets
  • Gitcoin and Bankless release DAO worker survey to better understand contributor experience:

Twitter avatar for @owocki
MoonShotBotWoki 🤖🚀🌕 @owocki
ATTENTION DAO FRENS As of August 2021, thousands of people are now working for DAOs. This is uncharted territory, and GitcoinDAO/Bankless DAO have banded together to begin mapping it. Fill out this survey about working for a DAO + earn this sweet POAP👇 forms.gle/FSg5dQEcPZYTjY…
Image
5:33 PM ∙ Aug 24, 2021
142Likes71Retweets

Thanks for joining us for issue 43 of the 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

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