The Tally Newsletter, Issue 61
The Tally Newsletter, Issue 61
Welcome back for issue 61 of the Tally Newsletter, a publication focused on defi and DAO 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 Bribe protocol’s first foray into decentralized governance with an Aave listing proposal, along with brief updates from other key projects.
Bribe Protocol Kicks Off Aave Integration with Asset Onboarding Proposal
TL;DR: Their proposal to onboard the MIM stablecoin as a collateral asset demonstrates both the value proposition and risks of vote bribery.
The trend towards monetizing governance influence continued this past week with Bribe Protocol’s first foray into Aave governance. While they’ve previously announced plans for an Aave integration, the concept became more concrete with their proposal to onboard the MIM stablecoin as a proof of concept for their influence mechanism.
The MIM stablecoin is issued by Abracadabra, which is nominally governed by SPELL token holders but largely controlled by a small core team. It has gained huge adoption through adept usage of the bribery mechanisms built for the Curve and Convex ecosystems, making it a natural fit to engage with Bribe Protocol. But with this new push targeting a lending protocol rather than exchange, it’s worth considering how the context could be different from Abracadabra’s previous influence campaigns.
Curve has several features that make it an ideal target for bribes. Voting rights require long term lockups, which can make veCRV holders less sensitive to possible negative price impacts and externalities of accepting bribes. In this circumstance, veCRV holders’ only way to monetize their stake in the short term is by selling voting rights to the highest bidder. Compare with most other projects with minimal lockups, where voters must account for potential market impacts against the value of accepting bribes.
Additionally, exchange protocols like Curve generally don’t insure liquidity providers against losses, while most stablecoin and lending projects do offer such guarantees (either explicitly like Aave and MakerDAO or implicitly in the case of Compound). This makes the consequences of poor governance much more severe for lenders, while veCRV voters only risk wasting inflationary rewards.
Returning to Bribe Protocol’s proposal for listing MIM on Aave, we can begin to see the outlines of a significant challenge to the current altruistic governance paradigm.
While free riders have always benefited from participation and research of active contributors, they now have a way to extract payments directly. Bribe protocol auctions the entire voting pool to the highest bidder, which can force long term aligned investors to make competing payments to the pool to prevent votes being hijacked by external counterparties or even used in governance attacks.
Users would likely reject bribes for supporting clearly malicious proposals (eg. a proposal to steal collateral assets from the protocol), but many proposals can meet minimum standards of legitimacy while still presenting a poor risk/reward tradeoff for long term holders. Asset onboarding proposals like Bribe protocol’s MIM initiative can serve as an example of this.
MIM has decent liquidity and historic price stability, but holds significant collateralization in Terra’s UST stablecoin and other high risk assets. Abracadabra also has a series of other weaknesses including centralization of executive power within the core team and lack of safeguards against misuse of admin privileges. So while it may seem safe for passive, non-participating token holders to accept a bribe for listing MIM as collateral, this may run against Aave’s best interests in the long run.
Bribery mechanisms present serious challenges to decentralized governance, by creating a prisoner’s dilemma between token holders on accepting . Where traditional corporations can rely on legal or reputational recourse, DAO’s need to figure out cryptoeconomic incentives to support good governance and long term alignment. So while Bribe Protocol and similar projects may cause some degree of instability in governance, they could also drive new mechanism design and protocol improvements (or even contribute to these systems directly).
In Brief:
MakerDAO faces huge liquidations from market crash:
Compound holds quarterly renewal vote for Gauntlet Network risk management:
Terra project announces foundation for ecosystem funding and supporting stability of their native stablecoins:
ENS DAO votes on increased fees for registering recently expired names
Secret Network, a privacy focused smart contract platform, announces ecosystem fund to support growth of secret applications (including private DAO voting):
Fei continues executing Rari Capital merger with proposal to repay hack debt and set deadline for token conversion:
Voltz protocol begins phase 1 poll of Uniswap governance process to request use of v3 codebase:
Aave holding a series of polls about launching money markets on new L1 and L2 platforms:
Tally releases updated proposal creation tool:
Thanks for joining us for Tally Newsletter issue 61. 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