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The Tally Newsletter, Issue 56

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The Tally Newsletter, Issue 56

December 17, 2021

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Dec 17, 2021
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The Tally Newsletter, Issue 56

newsletter.tally.xyz

Welcome back for issue 56 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:

  • Compound Voting on Competing Audit Proposals

  • Aave Community Selects Business License for Aave v3

Plus brief updates from the wider ecosystem.


Compound’s Competing Audit Proposals Are Up for Final Voting

TL;DR: Compound benefits from strong proposals from the three organizations, but the current governance process may not be well suited for competing proposals.

Following last month’s vote on OpenZeppelin’s auditing proposal, which was rejected at the last minute based on interest from competitors, Compound is again considering auditing service providers in the DAO ecosystem’s first competitive B2D (business to DAO) contracting process. 

Twitter avatar for @rleshner
Robert Leshner @rleshner
This is a monumental step for DAOs and the future of work: Three companies are competing in the open for the chance to provide services to, and get paid millions of dollars by, a DeFi protocol. Whoever wins, the Compound protocol & community is in great hands.
Twitter avatar for @compoundfinance
Compound Labs @compoundfinance
Proposals 075, 076, & 077 are competing #B2DAO proposals submitted by @chain_security, @OpenZeppelin, and @trailofbits to provide audit & security services to the Compound protocol. Voting begins in 2 days. Discussion: https://t.co/ai0Krlk2uQ https://t.co/MUaLxqnbRH
11:42 PM ∙ Dec 13, 2021
96Likes12Retweets

While Compound has contracted with outside organizations before (for example Gauntlet’s risk management program), previous vendors have been unopposed which left governance with a relatively simple yes or no decision. The current batch of votes involve separate organizations with different offerings and cost structures, which creates a significantly more complex choice for voters. 

Twitter avatar for @_jamico
Jeff Amico @_jamico
To conduct a competitive RFP for a service like auditing is challenging under any circumstances. To do it fully out in the open and subject to community input is another matter entirely.
10:49 PM ∙ Dec 15, 2021

As DAO’s begin to contract more with outside service providers, it could become very difficult for individual voters to make informed decisions. But the alternative option of leaving contracting to a centralized committee or core team risks creating a non-competitive environment with higher costs and possibility of self-dealing. 

Competitive bidding also raises important issues about the Compound Governor framework; namely Compound style governance is not well suited for multiple choice proposals. Each compound proposal allows for yes, no, and abstain votes, and includes a single set of executable instructions (eg funds transfers). With no ability for proposals to directly count against each other, there’s a possibility that COMP voters could inadvertently approve multiple competing proposals with overlapping budgets and deliverables.

Source: Tally

In this case, it looks like OpenZeppelin’s resubmitted proposal is out to an early lead, having already received 900,000 votes (over twice the minimum 400,000 quorum of votes required to pass a proposal). Relatively close coordination between large Compound voters and investors may have helped avoid disorderly approval of multiple vendors. But this case still points to the need for more sophisticated DAO contract tendering processes. 

Aave Votes for Business License for Aave v3 Codebase

TL;DR: Similar to Uniswap v3, a business license will restrict copied projects for several years before transitioning to open source.

Aave is gearing up to launch the v3 upgrade of their core protocol. Some of the top features of Aave v3 include:

  • Efficiency mode: allowing much better capital efficiency while borrowing and lending similar assets such as stablecoins

  • Isolation mode: limits borrowing capacity for risky collaterals, which allows for onboarding more long tail assets

  • Exposure ceilings: similar to MakerDAO’s debt ceilings, limits total market exposure to selected assets to reduce tail risks

Altogether, these upgrades help address one of the most glaring shortcomings of defi money markets - traditionally money markets are only as strong as the weakest asset accepted as collateral. We’ve seen this with the recent Cream Finance hack, here an issue within a single collateral asset led to marketwide insolvency. Considering this important advantage, we could expect an array of forked/copied projects to emerge using the Aave v3 codebase if it was immediately released under an open source license.

The Aave community had been voting on license options via a Snapshot poll, with a business license considered against open source options of MIT or AGPL license. The MIT license option took an early lead, but in the end the business license option prevailed with strong support from defiactivist.eth, one of the largest AAVE token holders.

Twitter avatar for @lemiscate
marczeller.eth @lemiscate
- the very large voter that turned the fate of the vote represented less than half of total Business vote. His stack represents slightly more than 1% of the supply. A lot of people voted, but a whole lot didn't.
10:38 AM ∙ Dec 14, 2021
17Likes1Retweet

While some commentators were upset about the restrictive license choice, and outsize influence of a single large voter, participation took place in a gasless voting environment so any holders should have been free to participate if they favored a fully free and open source license.

Details are still being determined in a forum discussion, but it is expected that the business license would work similarly to Uniswap’s v3 license; reuse would be restricted for a period of 2-3 years, but governance would be able to grant exceptions to the license on a case by case basis. And the source code would be available for review from day 1, which allows for security review and responsible disclosures which are an important benefit of open source projects.


In Brief: 

  • Crypto asset manager Bitwise launches NFT index fund:

Twitter avatar for @Matt_Hougan
Matt Hougan @Matt_Hougan
1/ Today we’re launching the Bitwise Blue-Chip NFT Index Fund, the world’s 1st NFT index fund. NFTs are a historic movement, and just getting started. The fund holds the 10 most valuable NFT collections: CryptoPunks, Bored Apes, Fidenza, etc. A thread w more details —
Image
2:35 PM ∙ Dec 16, 2021
1,374Likes335Retweets
  • Ethereum Foundation announces huge funding allocations to client teams:

Twitter avatar for @AyaMiyagotchi
Aya Miyaguchi @AyaMiyagotchi
1/We strongly believe that a diverse set of clients is essential to Ethereum's health and decentralization. To ensure that client teams have a long term incentive to maintain the network, the @ethereum Foundation has launched the Client Incentive Program
blog.ethereum.orgAnnouncing the Client Incentive ProgramA diverse set of clients is key to the Ethereum network’s health and decentralization. Diversity ensures that innovation continues at the base layer of the protocol, that the network is resilient in the face of potential attacks or bugs, and that a broad set of participants are engaged in debating..…
7:17 AM ∙ Dec 14, 2021
1,325Likes297Retweets
  • Myanmar’s democratic government in exile recognizes USDT as official currency:

Twitter avatar for @crypto
Bloomberg Crypto @crypto
A parallel government in Myanmar led by Aung San Suu Kyi's supporters recognizes Tether as an official currency for local use
trib.alBloomberg - Are you a robot?
10:28 AM ∙ Dec 13, 2021
613Likes158Retweets
  • Fei and Rari proposals for merger reach final ratification stage:

Twitter avatar for @jai_bhavnani
Jai Bhavnani @jai_bhavnani
The Fei-Rari Merger has officially entered on-chain governance. This merge promises to bring together the Rari and Tribe communities to create one super-powered DAO. This proposal is history being made.
withtally.comProposal 9 for Rari governanceSee the votes on Rari proposal 9
7:49 PM ∙ Dec 16, 2021
87Likes12Retweets

Thanks for joining us for Tally Newsletter issue 56. 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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