This Week in DAOs - May 20, 2021
AAVE Grants DAO, Uniswap's Fish.vote, and Yearn's YFI buyback
Designing the future of human organization > token prices.
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By the way, in case you missed it, check out the Stateless podcast episode from earlier this week:
🎙️ The Timing of Decentralizing w/ Nick Naraghi
📰 This Week’s News
AAVE Grants Launches
Today marks 10 days since the AAVE Grants DAO pilot program officially went live. It is another exciting example of ways that cryptonetworks are opening up their treasuries to their communities.
AAVE Improvement Proposal 17 - originally proposed by Shreyas Hariharan of Llama and passed on May 8th - transferred 2,809 AAVE tokens to a Gnosis multisig for the purpose of funding projects, ideas, and events that benefit Aave and its ecosystem, with a focus on empowering a wider network of community developers.
Here’s how it will work:
The Grants DAO’s budget will be approximately $1 million per quarter with an additional $250,000 set aside to fund its operations.
A committee of 8 people, 1 lead (Shreyas) and 7 reviewers (see the full list in the AIP) will administer the program, processing applications and evaluating them based on the value they add to the AAVE ecosystem.
There will be two types of grants:
Rapid Grants (<$100k) which will be under the sole purview of the AAVE Grants DAO.
Community Grants ($100k-$500k) which will require a proposal on AAVE’s governance forum for a community discussion to inform the AAVE Grants DAO’s decision.
Funds will be disbursed to potential grantees when 4 out of 7 signatures (i.e. votes from the committee) from the multi-sig authorize it. Decisions regarding how funds are disbursed (i.e. up front or milestone-based) will be made on a case-by-case basis. Grants over $500k will fall outside the committee’s scope and will require an on-chain vote from the community.
The initial committee will serve for two quarters, after which the AAVE community can vote on their renewal (and that of the Grants DAO program as a whole) via an official on-chain vote.
You can check out the AAVE Grants DAO’s Request for Proposals and learn more about how the process works on their website.
Grants DAOs are a hot new thing in crypto right now. With its Grants DAO launch, AAVE joins Uniswap and Compound as major DeFi protocols with similar programs dedicated to funding ecosystem activity. These programs represent the operationalization of the new era of open source development pioneered by cryptonetworks, as discussed here a few weeks ago.
If you’re an individual or team looking to build in crypto, grants from these massive pools of capital are a great way to get started. Indeed, Boardroom was a recipient of a grant from Compound to integrate their Grants DAO on our platform. Hopefully, as these programs scale they will encourage more and more talent to get off the sidelines and help build the future that crypto promises.
Fish Vote
A great example of a project benefiting from a Grants DAO program is the newly-launched Fish.vote from the Uniswap ecosystem, which was funded by a $51,000 grant in UNI Grants Program Wave 3.
Modeled off Compound Autonomous Proposals, Fish.vote enables smaller UNI holders to create “crowd proposals” with the intention of garnering the 10 million delegated votes needed to submit a formal governance proposal to Uniswap.
Fish.vote provides a slick UI for UNI holders to both propose ideas and support others’. The project was led by John Palmer and Anish Agnihotri.
Uniswap governance has been relatively quiet since it launched in September 2020, with only three official proposals having been made and voted on. Tools like fish.vote make governance more accessible, which is a promising development.
There are no proposals yet but if you have an idea (and the necessary ETH to pay for the gas fees…), you can submit it here. With regards to those darn gas fees, Fish.vote is planning to raise a gas fund to subsidize proposals made through it, according to this tweet.
YFI Token Buy Back
This week, Yearn Finance, which provides a suite of decentralized finance products to its users, bought back 29.5 YFI for $1,428,000 as the price dropped along with the broader crypto market.
The Defiant covered the story well here, but we wanted to highlight a governance angle.
The ability for Yearn to buy back YFI was granted in Yearn Improvement Proposal #56, passed in January 2021.
The proposal itself was wide-ranging, enabling three things:
Replace YFI staking rewards with YFI buybacks, until further notice.
Enable YFI that’s actively being used in ways that bring benefit to Yearn to participate in Governance.
Retire the YFI governance vault (yGov).
As Owen Fernau of the Defiant noted in the article linked above, the YFI buyback program differs a bit from share buybacks in traditional finance:
Buybacks in the traditional finance world have received heavy criticism as they went from almost nonexistent prior to 1980, to constituting 54%, $2.4T, of the earnings of companies in the S&P 500 from 2003 to 2012.
There’s a difference when companies buy stock when prices are rising, than when protocols like Yearn buy their tokens on the way down, said Ceterispar1bus, an active DeFi voice on Twitter.
In the last 10 years, “most of these stock buybacks happened on the way up and a lot of exec bonuses were tied to share price,” they said in a message. “The problem with buybacks in a rising environment is that if your stock is already richly valued that money may not be best spent buying shares, but execs will always push for it if their compensation is tied to it.”
Yearn buying its token as it’s sliding shows DeFi protocols can be more efficient and quicker to act, Ceterispar1bus said.
Though Ceterispar1bus may be right that Yearn’s buybacks show that DeFi protocols are more efficient and quicker to act, the question then becomes: are they that different when it comes to executive accountability or, in this case, that of the developers who control the funds?
Digging into the debate around YIP-56 in the Yearn governance forum, several prominent community members (including @iamDCinvestor and, even, one of the proposal’s authors, Messari’s Ryan Watkins) supported adding a time cap to the proposal. This was to ensure that the changes proposed were having the effect they were intended to.
The passed proposal (see the Snapshot page here) did not end up including such a time cap.
As we’ve discussed here before, governance across decentralized/distributed organizations is brand new and best practices are still being ironed out. Time will tell whether or not time caps (or similar provisions) become standard fare for proposals like this one.
However, it seems that those in the YFI community have not re-visited this issue as a result of dissatisfaction with how the effects of YIP-56 are taking shape.
Just another thing to keep an eye on in this fascinating new world of DAO governance!
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