The Tally Newsletter

Share this post
The Tally Newsletter, Issue 62
newsletter.tally.xyz

The Tally Newsletter, Issue 62

January 28, 2022

Nate Parton
Jan 28
Share this post
The Tally Newsletter, Issue 62
newsletter.tally.xyz

Welcome back for issue 62 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 controversy surrounding the Wonderland crypto project and ripple effects throughout the DAO ecosystem.


Wonderland Treasury Manager Exposed as Former Fraudster

TL;DR: The exposure of Wonderland’s treasury manager Sifu’s history caused a run on the related MIM stablecoin that had secondary impacts across the ecosystem.

This past week proved the crypto space is stranger than fiction, with top defi projects embroiled in a scandal over anonymous contributor Sifu that is spiraling into a possible bank run. The controversy has centered on the Wonderland project where Sifu was a treasury manager, but has also impacted other projects run by founder Daniele Sestagalli and certain related protocols. 

Twitter avatar for @zachxbtzachxbt.eth @zachxbt
1/ This needs to be shared @0xSifu is the Co-founder of QuadrigaCX, Michael Patryn. If you are unfamiliar that is the Canadian exchange that collapsed in 2019 after the founder Gerald Cotten disappeared with $169m I have confirmed this with Daniele over messages.
Image
Image

January 27th 2022

2,265 Retweets8,164 Likes

The panic started on Wednesday, when it was revealed that Sifu was convicted fraudster Michael Patryn, who is well known within the crypto space for their connection to the Quadriga exchange exit scam. Wonderland and MIM founder Daniele initially supported Patryn before backing away later under pressure.

Twitter avatar for @danielesestaDaniele never asks to DM @danielesesta
1/ Today allegations about our team member @0xSifu will circulate. I want everyone to know that I was aware of this and decided that the past of an individual doesn’t determine their future. I choose to value the time we spent together without knowing his past more than anything.

January 27th 2022

290 Retweets2,408 Likes

This news broke just days after both Patryn and Daniele allowed personal borrowing positions against their project tokens to be liquidated, raising suspicions they were intentionally cashing out before negative market reactions.

Twitter avatar for @FreddieRaynoldsFreddieRaynolds @FreddieRaynolds
Leveraged $TIME $wMEMO position of the founder @danielesesta is in the process of getting liquidated. So far about $3M out of $20M has been liquidated as @Wonderland_fi has again failed to defend the backing price. Not sure if they will liquidate 100%.
liquidated.fyi/address/0x5DD5…
Image

January 25th 2022

101 Retweets509 Likes
Twitter avatar for @aliceontheweb3alcestis @aliceontheweb3
@FreddieRaynolds @danielesesta @Wonderland_fi Borrow MIM against your illiquid TIME to realise the majority of the market value. Sell the MIM for USDT and cash out via Bitfinex. Get liquidated for plausible deniability. Solid gameplan.

January 25th 2022

56 Retweets438 Likes

While Patryn only has direct multisig membership within the Wonderland treasury, with a governance vote in process to remove him, he is also involved in Daniele’s other projects which helped kick off a panic among MIM stablecoin holders. Sales and withdrawals left the primary Curve liquidity pool heavily unbalanced, with large holders unable to exit without significant losses.

Source: Curve Finance

Certain other stablecoin swap projects also faced disruption, with the Avalanche based Platypus hastily delisting MIM to protect deposits.

Twitter avatar for @PlatypusdefiPlatypus 🔺 @Platypusdefi
Due to recent events, the Platypus team has decided to delist MIM from our protocol to rebalance our liquidity pool. This is due to extreme imbalancing of the pools with diverging coverage ratios caused by users net swapping MIM for the other 3 stablecoins. 1/

January 27th 2022

72 Retweets491 Likes

While MIM is a fully collateralized, debt backed stablecoin similar to Maker’s DAI, it faces certain weaknesses that may make it tough to return to peg. Unlike with Maker’s vaults, Abracadabra’s borrowing facilities are set up with immutable parameters, meaning it’s impossible to raise borrowing rates to incentivize repayment. This leaves Abracadabra without any direct levers to help reduce supply, other than curtailing new MIM issuance.

Twitter avatar for @FreddieRaynoldsFreddieRaynolds @FreddieRaynolds
"Parameters in the cauldrons can't be changed once deployed" If "interest rate" can't be changed in active cauldrons I retract my prior statements about $MIM being unlikely to permanently depeg. @MIM_Spell can you confirm whether interest rate is an unchangeable parameter?

Lucianken @Lucianken

@FreddieRaynolds @wilburforce_ just quote me when you share it lol. This just needs an UI, which some degens made a long time ago and got banned for it ;) https://t.co/lqkAAfn8vI

January 27th 2022

2 Retweets18 Likes

The stresses on MIM have laid bare some of the compounding risks within the highly integrated defi ecosystem. While it has no direct involvement with Patryn, the Terra ecosystem faced difficulties, with significant collateral usage (over $1 billion of UST collateral at peak) and shared liquidity pools (hundreds of millions in MIM-UST pool on Curve) partially transmitting the depeg event from MIM to UST. While UST has regained its peg, the extra market stress may have contributed to current downtime on Terra’s ETHAnchor lending integration. 

Twitter avatar for @MIM_Spell🧙🏼‍♂️ @MIM_Spell
🧙🏼‍♂️! We have noticed that EthAnchor is currently down, this is affecting our $UST Cauldron. Bridging of funds are temporarily paused. We have been in contact with @terra_money and @anchor_protocol who have given us a timeline of 10 hours to fix the issue at hand.

January 28th 2022

61 Retweets589 Likes

With Wonderland trading below the fair value of treasury assets, there is also a possibility that a dissolution proposal would release additional reserves of MIM onto the market, putting further pressure on the peg. 

Twitter avatar for @dcfgodDCF GOD @dcfgod
glad we're moving past this any other option is high risk IMO, I don't think defi can let this go bad given dangers of interpretations from the rest of the world
Image

January 28th 2022

6 Retweets59 Likes
Twitter avatar for @NourHaridynour @NourHaridy
Wonderland doesn’t have to be dissolved. It can instead turn into a DAO where holders have full on-chain control I’ll make a proposal to Wonderland community to use Inverse DAO’s code and assistance in order to become an on-chain DAO governed by its holders and not by a multisig

nour @NourHaridy

Someone should invent a decentralized technology that allows holders to autonomously govern their own funds without a trusted multisig in control Call it an on-chain decentralized autonomous organization, or something https://t.co/ntqW1tE7x4

January 27th 2022

22 Retweets228 Likes

The concerns about anonymous project contributors apply to many other projects, and could lead to a wholesale reassessment of the needs for decentralized governance and treasury management. Assuming dissolution is ruled out, any successor Wonderland team would face an uphill battle to regain trust and guarantee safety of funds. And other similarly situated projects including OlympusDAO (with a primarily anonymous set of multisig signers) may also face pressure to improve security with direct control by token holders. 

Crucially, higher security doesn’t need to come at the expense of agility; projects like Fei demonstrate how funds can be split between full DAO control (Fei uses a Compound/OZ style governor contract and timelock) and less restrictive operation accounts (such as Fei’s community multisig responsible for rewards and ops spending). This allows for safely storing the majority of funds, and reducing the amount of trust token holders must place in core contributors. 


In Brief: 

Tally News

  • The Tally team will be at EthDenver from Feb 17 through Feb 20. We look forward to seeing you there!

  • Our DAO Challenges report is now available! Check it out here

  • Candle and Silo are among several new projects listed on the Tally voting and governance app

Cosmos Ecosystem

  • Several protocols receive suspicious funding requests, stress testing communities’ treasury management:

Twitter avatar for @GoldenStaking⚵ Golden Ratio Staking | Validator ⚛ @GoldenStaking
So this tweet is egregious slander towards elite validators, but we do need to talk about Prop 134 on $OSMO @osmosiszone because there is missing context outside of these services. I'm going to vote "No w/Veto" for now and here is why... 🧵

iDontLikeTw!tter @F_ckTw1tter

I am watching everyone voting Yes on prop 134 $OSMO and making sure I never delegate to them. @nodes_smart @BlockNgine @JoeAbbey @swiss_staking etc. What the fuck is this bullshit? 7500 $OSMO to random Russian speakers, is this a joke?

January 28th 2022

15 Retweets41 Likes
  • Osmosis and Sifchain exchange projects face conflict over bridge strategy:

Twitter avatar for @sifchainSifchain @sifchain
The bigger credible neutrality issue is the @osmosis team stating it would block ETH from Sifchain in its website UI regardless of how the proposal ends (though there are other Osmosis UIs)

January 28th 2022

4 Retweets29 Likes

EVM Ecosystems

  • Fei Protocol releases details on Turbo, a new product to expand Fei issuance and liquidity while offering returns to :

Twitter avatar for @feiprotocolFei Protocol @feiprotocol
Turbo combines @RariCapital's robust lending platform Fuse with Fei Protocol’s liquidity engine 1️⃣+1️⃣= 3️⃣ Now, DAOs and degens can make any asset productive

January 28th 2022

1 Retweet7 Likes
  • Binance lending project Qubit taunted by hacker after $80 million exploit:

Twitter avatar for @napgenernapgener 0xBearMarket @napgener
LOL. kudos
Image

Tony Cox @tonycoxphoto

@web3isgreat Turns out the "maximum bounty" is eighty million dollars.

January 28th 2022

1 Retweet12 Likes
  • Trading firm mgnr takes fire for extractive farming practices on Maple Finance:

Twitter avatar for @CryptoCatVCCryptoCat-beta @CryptoCatVC
mgnr.io took millions of uncollateralised $USDC from Maple.finance, used those millions to farm $MPL and dump on MPL holders. This was done, over months, either without Maple noticing, or with their blessing. mgnr.io ❤ Maple.financetl;dr: mgnr.io took millions of uncollateralised USDC from Maple.finance, used those millions to farm MPL and dump on MPL holders. This was…cryptocatvc.medium.com

January 28th 2022

32 Retweets244 Likes

Thanks for joining us for Tally Newsletter issue 62. 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

Share
Share this post
The Tally Newsletter, Issue 62
newsletter.tally.xyz
TopNewCommunity

No posts

Ready for more?

© 2022 Tally
Privacy ∙ Terms ∙ Collection notice
Publish on Substack Get the app
Substack is the home for great writing