💥MakerDAO vote wars
Also, read about the Ethereum rewards post-merge, VCs due diligence process, and how to prepare for a crypto winter.
🧶 DeFi Recap
Members of MakerDAO are startled by its audacious governance proposals
The bear market drama continued with Three Arrows' significant losses due to holding sizable investments in Terra's bankrupt UST stablecoin, Grayscale Bitcoin Trust, and Lido's staked ether. However, this does not end here.
Recently MakerDAO, one of DeFi's most illustrious and venerable lending protocols, hosted the most participated/contentious vote in the history of DAO governance, the Ratification Poll for Adding Lending Oversight Core Unit (LOVE-001).
According to the proposer, Lucas Prosperi, the goal of the proposal was to “develop an independent Lending Oversight unit (LOVE) that would have provided second opinions to $MKR holders on complex lending collateral, as well as process auditing and strategic oversight.”
In short, the proposal to formalize the LOVE unit was impacted by LOVE’s first assignment: the review of a loan request by Monetalis. The LOVE team had signaled conflict of interest concerns in the loan request by Monetalis, a start-up composed of, apparently, many large $MKR holders including Nikolai, one of Maker’s founders. After a few delegating votes were shifted around (and Nikolai hot takes), the LOVE proposal was defeated.
Being one of the LOVE defenders, Hasu is now proposing a series of governance changes to MakerDAO that I think should be on the radar for anyone working on a DAO today.
Governance model discussions are starting to surface as one of the main focuses of DeFi research. In upcoming newsletter additions, we’ll make sure to cover governance discussions. If you’re interested in having this information delivered straight to your inbox, don’t forget to subscribe!
🎯 The Sector Pulse
Crypto market sentiment through Scalara’s indices.
📈 DeFi Pulse Index (DPI): $83.12 (+20.76%)
📈 MATIC 2x Flexible Leverage Index (MATIC2X-FLI-P) - $4.96 (+54%)
💲PONY Index (PONY) - $1.12
👉 After last week's launch of the PONY Index token, the PONY / USDC pool has reached $1.5 million TVL on Uniswap!
🐼 Getting Ready for the Merge
What sort of Ethereum REWARDS can you expect after The Merge?
Many of you are curious about what will happen to Ethereum REWARDS once the transition from PoW to PoS is complete. Understanding the source of the rewards is crucial since "money does not grow on trees." 🌲
Here's what you can expect and including a breakdown of where such rewards will be coming from. In the case of Ethereum, you can get the following types of rewards (Please note: this is not an official classification):
a) Consensus Rewards: These rewards are awarded to Beacon Chain validators for carrying out various tasks such as participating in consensus, attesting blocks, etc. Remember that until the Shanghai fork, these incentives will remain "live" in the Beacon Chain and cannot be redeemed. These rewards are further categorized into:
Attestation rewards: This is a small reward gained each epoch (6ish minutes), currently paid around $1620 annually or $135 monthly.
Block proposals: When the validator suggests a block, they earn points—the less chance to propose, the more active the validators. Currently, it stands 6–7 times annually.
Participating in sync committees: Only 512 validators can earn this at a time, and it is rotated once each day. Currently, validators can earn up to $0.1 per epoch.
Whistleblowing: You can whistleblow someone misbehaving to the network and get a little reward of 0.0625 Eth if your validator notices them.
b) Execution Rewards: These benefits will be made available following The Merge. Because validators will act as new miners, they'll receive the tips that users pay when sending transactions. Read more here!
c) Maximal extractable value (MEV) Rewards: This added benefit necessitates further work rather than a reward that is "per se'' included in the protocol. Since validators will be the ones submitting blocks, they will have the ability to rearrange transactions and so gain value. In addition, because it is challenging to reorder transactions, a solo staker may seek to sell their blockspace ordering on a public market. Remember, flashbots are doing a fantastic job reducing the unfavorable externalities that MEV introduces to Ethereum.
In addition to the above, you may also get paid for decreasing ETH’s supply🔥. The BASE FEE paid by users' transactions is burned after EIP1559 was implemented in the London Hard Fork. ETH becomes deflationary as a result, increasing the value of your ETH wallets depending on the amount. Not really a reward, though.
Mainnet-shadow-fork-8 merges July 5.
Ethereum difficulty bomb delayed until mid-September.
Sepolia testnet releases:
The approaches by Vitalik to cap validator set size to support a configurable minimum balance.
🧠 Upskilling During a Down Market
The most significant benefit of blockchain for those interested in finance is that it has allowed an unregulated retail investment market to unleash its full force. Moreover, the next generation of investors comes from distinctly more institutional backgrounds (see tweet below) as money continues to stream into crypto markets.
So if you are looking to raise venture capital (VC) for your start-up, here are key points to keep in mind while seeking VC funding:
Focus on an ample opportunity and be clear about your vision.
Go after trends and hit them just in time (not too early, not too late).
Explain what you understand better than other players in the market.
Remember, entrepreneurship is all about "solving a real problem." So, be clear on what issue you are targeting at and how you will solve it.
Clarify how your business/product/service will grow. That said, ensure that you have a clear roadmap.
Don't forget that your background, experience, and sincerity towards your business matter too.
“One of the ways you convey the operational excellency is in the quality of the plan.”- Marc Andreessen
🤣 Can you relate?
Do you also struggle explaining your role in the crypto world, for instance, as an Ethereum owner? Well, you are not the only one; I think that we are all in the same boat. But, the irony is that a few years later, we will be reaping the benefits of this technology while others may have started or are still thinking of entering into the crypto world.
Regardless, I see cryptocurrencies as additional assets to diversify the investment portfolio and blockchain technology as a tool to revolutionize the financial system.
🤝 Sharing is Caring: The PONY Index is a collection of stablecoin yield farming, omni-chain, low-risk vault tokens. The token PONY is a single interest-bearing token that is designed to increase yields and produce passive income.
So, What do you think of The Pony Index ($PONY)? Drop your views here!
🗓️ Planning for the Long-term
Preparing for a crypto winter? Avoid FOMO and have a plan!
This is basically a meme by now, but bear markets are indeed for building. In fact, the #buidl meme that started during the last bear market captures very well the ethos of the Ethereum community as opposed to just #Hodling.
Here are some of the things that you can do to #buidl & enhance your skills in the space:
Find a protocol DAO to contribute to.
DAOs are refreshing experiments in human coordination and governance. Head to your favorite DAO’s governance forum, express your opinion, contribute to the discussion & make your voice heard. Since DAOs are usually very meritocratic, if your contribution moves the needle, you will be appreciated by the community and it could be the path that leads to a longer-term job or engagement.
Research & share DeFi Strategies
Combining & composing with DeFi Protocols can yield new interesting strategies that haven't been yet figured out. Check out the documentation of protocols like Yearn or Beefy and learn how to combine multiple protocols into DeFi strategies that pay off.
Analyze on-chain data to extract Alpha
Check out Defi Pulse to analyze new emerging trends in DeFi. The next bull market’s Uniswap, Aave, & Compound seeds are being sown right now, and it is worth to stay on the lookout for serious teams that are focused on delivering. After all, on-chain data does not lie!
Build your own dApp
It is definitely the right time to learn solidity & start dabbling with smart-contracts. Find a problem you want to solve, band with friends & create tomorrow’s winning dApps. Don’t forget that solidity engineers are still in high demand, and salaries are also on the higher end
⚖️ Key Crypto and DeFi Regulatory Updates
📖 Stories of The Week
Three Arrows files for Chapter 15 Bankruptcy
TLDR: Three Arrows Capital, a cryptocurrency hedge fund, filed for Chapter 15 bankruptcy in order to protect its US assets while a liquidation is conducted in the British Virgin Islands;
Gray Glacier upgrade is now live on the Ethereum mainnet
TLDR: The Ice Age/Difficulty Bomb's settings are altered by the Gray Glacier network update, delaying it by 700,000 blocks, or around 100 days;
Ethereum average gas fee falls down to $1.57, the lowest since 2020
TLDR: On the Ethereum blockchain, the standard transaction price decreased to 0.0015 ETH, or $1.57, which was last seen in December 2020;
Compound Labs releases code for Compound III
TLDR: The multi-chain lending protocol known as Compound III and promoted as a lending protocol that meets ample capital and provides reasonable, safe, and simple-to-manage transaction fees for consumers has officially received a fresh source code release from Compound Labs.
🔨 Plow of The Week
No matter what you've traded or where you are, TokenTax offers accounting services and is a cryptocurrency tax calculator that provides everything you need to file your crypto taxes entirely and accurately. You can view and analyze your data in one location because it synchronizes with all your wallets and accounts, removing the need for manual data entering.
👀 Alpha Leaker
💭 Closing Thoughts
Realign during ongoing crypto crisis
I always believe that there is an opportunity even in dark times and same goes with the current crypto crisis. Of course, I am not asking you to start stockpiling gold or buy a dip, but some small things like listen to the podcast you always wanted to, watch your pending movies, upskill yourself, and enjoy some family time. - @eyeguneet, Senior Content Editor
All info in this newsletter is purely educational and should only be used as research. DeFi Pulse is not offering investment advice, endorsement of any project or approach, or promising any outcome. This post is prepared using public information (which does not account for specific goals or financial situations) and links provided to third-party sites are for informational purposes. Such sites are not under the control of DeFi Pulse, so DeFi Pulse or the author are not responsible for the accuracy of the content on such third-party sites. Be careful and keep up the honest work!