Ouroboros Governance Review #5: Synthetix integrator fee share, Aragon DAO sues Association, PancakeSwap's veCAKE
We first released this article on 5 Dec'23 to Ouroboros Lifetime Access Pass (OLAP) holders who get early access to our writings.
Welcome to Ouroboros Governance Review where we share interesting governance actions and their respective implications. This week, we will be covering:
Synthetix voting on a 20% fee share with v3 perp integrators
Aragon DAO suing the the Aragon Foundation
PancakeSwap release of veCAKE
None of the following is financial advice.
Governance Action #1: Synthetix DAO 20% fee share with v3 perp integrators
Governance Proposal: The Synthetix council has passed a vote proposed by Kwenta's Burt Rock to share 20% of base fees (in sUSD) from Perps v3 with integrators. For the Base Perps v3 deployment, the base fee earned will be in USDC.
Previously, fees were paid via a tiered system to integrators (Kwenta / Polynomial) ranging from 5-10% depending on the amount of monthly fees generated for Synthetix (10% for <$1m fees, 7.5% for $1m-$5m, 5% for >$5m fees).
Implications: Fee sharing stepping up from 5-10% to 20% should result in a significant integrator revenue increase. Kwenta is currently the only proxy with a token; Polynomial and Rage Trade have no token while Infinex has not launched.
Under the new structure, we expect to see Kwenta's fee share from Synthetix to more than double, based on Sep-Nov'23 volumes and fees, which we think is naturally good for the token.
While fees are higher, fee share transmission to tokenholders remains uncertain - Kwenta currently only issues inflationary staking rewards to tokenholders. That said, there have been discussions around the distribution of incentives from Synthetix to Kwenta stakers which we think will be positive for the token if realized. There is roughly $76.2m worth of KWENTA staked (at KWENTA = $180). If we take Nov'23 annualized fees, this would translate to ~6.8% APY.
Governance Action #2: Aragon DAO conflict with the Aragon Association
Context: The Aragon Association announced on 2 Nov'23 it was shuttering ANT, allowing tokenholders to redeem 95% of its RFV or at 0.0025376 ETH / ANT. While a good portion of the RFV can be realized by the tokenholders, the Association had planned to retain $11m for "obligations".
On top of this, the Association will claim any unclaimed portion of the funds. A forum post estimated 27% of backed supply was not migrated from prior versions (Aragon was founded in 2016) and implied this could be dead supply. Another 21% was also automatically migrated by centralized exchanges in 2020, which could be made up by a significant proportion of dead supply.
This implies around 30% to 40% of supply could go unclaimed and the Association can keep $69m to $88m (including the $11m). The existing claim rate is just 39% and users have until 2 Nov' 24 to redeem their ANT for ETH.
Governance Proposal: The Aragon DAO has approved 2 proposals against the Aragon Association - the first vote takes legal action against the Association while the second vote grants 300k USDC to Patagon Management to take legal action against the Association. Patagon Management is a prop trading company who has engaged in similar legal action before. Support reached 100% and 63% in the holder votes respectively though the votes are currently unaccessible.
Implications: If the legal action against the Association is successful, the case will set a precedent against "DAO grifting" where teams of failed projects draw high salaries from project treasuries even though development has slowed significantly / stopped. This should disincentivize the act given potential legal repercussions.
Govenance Action #3: Introduction of veCAKE and gauge voting for PancakeSwap
Governance Proposal: PancakeSwap recently passed a vote to create vote-escrowed CAKE (veCAKE) tokens. CAKE holders can lock their CAKE to receive veCAKE where they can vote for pools to receive additional rewards. Key details:
Frequency: Voting will occur every 2 weeks
Voting power: More voting power is awarded for longer lockups, with a max lockup of 4 years
Chains: veCAKE holders are able to vote on farms on Ethereum, Arbitrum and BNB chain
Delegation: veCAKE holders can also delegate voting rights to external protocols to earn them rewards
StakeDAO has also released a liquid derivative of veCAKE called sdCAKE. Key details include:
Mintind sdCAKE: Users are able to mint sdCAKE by locking their CAKE in StakeDAO's CAKE liquid locker where CAKE will be staked for the max duration
Liquid locker benefits: This allows users to receive native veCAKE native yield and incentives while exiting with no lock period
LP options: Users can also LP CAKE/sdCAKE to earn trading fees and CAKE incentives
Implications: The proposal is significant given PancakeSwap's significant TVL (#3, behind Uniswap and Curve) and volumes (#2, behind only Uniswap, Curve is #5). We expect to see more liquid lockers being created for veCAKE and would closely watch the traction of these liquid lockers. If a clear winner emerges, we expected the associated token to perform well.
Other Governance Actions
Protocol Changes
Synthetix proposal to integrate Wormhole’s CrossChain Query to enable crosschain reads for V3
dYdX proposal to discuss on the dYdX Risk Parameter Recommendation Portal to target the recent security incident
Aave proposal to onboard sfrxETH to AAVe v3
Redacted proposal to launch Hidden Hand market for PancakeSwap on BNB Chain, Ethereum and Arbitrum initially
STFX proposal to burn 5% of their the total supply now with up to 10% in the future
Capital Deployment
Bankless DAO proposal for 1.82m ARB for 12 months to teach users about Arbitrum. This proposal consists of written content for 302k ARB, onboarding of guilds and ‘how-to’ sessions for 783k ARB. Previously, Bankless DAO had received $108k worth of Optimism grants
ApeCoin proposal to allocate funds for the development, research and management of ApeChain to be built on on Optimism as part of the Optimism Superchain Ecosystem
Cosmos proposal to approve the development of a ATOM Alignment Treasury (AAT) to set up an infrastructure solution to help bootstrap new projects and provide liquidity
Previous Ouroboros Governance Reviews
Issue #4: Arbitrum STIP Round 2 Working Group, dYdX locked staking and fee restructuring (Link)
Issue #3: Backfunding of Arbitrum's Short-Term Incentive Program, Sushi tokenomics revamp, Rocketpool tokenomics overhaul (Link)
Issue #2: ARB Staking, LayerZero / Lido wstETH OFT, Uniswap's Ekubo investment (Link)
Issue #1: Blur fee switch, ApeCoin ZK L2 powered by Polygon CDK, Sunsetting Lido on Polygon (Link)
Bankless DAO is a shameless organisation