Governance Call Recap
- Date: Feb 6th, 2025
- Time: 17:00 UTC
- Moderator: Alex from @Boardroom
- Recording Link: YouTube
Agenda
- Introduction from Luke and Sai on Increasing Governance Participation & Rewarding Voters through Simple Auction Smart Contracts
- Gauntlet Updates
- Block Analitica Updates
- Solidity Labs on OEV Revenue & Onchain Reserve Automation Contracts
- API3 on Switching Moonwell’s GLMR Market to using API3’s OEV-Enabled Data Feed
- 0xMims on VIRTUALS Core Market
- Avail Project on AVAIL Core Market
Meeting Notes:
- Alex started the call with a quick introduction. He gave an overview of the purpose of the governance calls and noted that, going forward, they will take place on the last Thursday of every month. Moonwell contributor @Luke then joined the call to discuss a forum post that he created at the end of January. It’s an idea that is acting as a follow-up to October’s “Increasing Governance Participation” proposal which required that users vote once within every 30 days to claim their staking rewards. He brought up the protocol’s status as a top revenue generator in DeFi and proposed that excess revenue could be used to reward Safety Module stakers. To implement it, they could use simple auction smart contracts which would be used to auction off excess assets (ETH, USDC, cbBTC, etc.) for WELL and used to bolster the Safety Module Ecosystem Reserve, resulting in a higher APR. He mentioned that they won’t be able to auction off 100% of the revenue today and that Gauntlet would touch more on that later. The auction contracts would start with 100% of the asset, and at the end of a two-week period, it would end up with 100% WELL. He touched on how the existing automated liquidity incentive proposals submitted every 4 weeks would take part in this system.
- Sai from Gauntlet stepped in to offer some thoughts regarding the open-ended questions that Luke brought up. They approached the revenue problem by asking “What are the maximum reserves that are required at the current market conditions, in the case of more than six sigma or the worst-case tail-end scenario?” He identified the maximum risk by looking at the borrowing power. The second part of it is the annual reserve growth, which acts like a buffer to ensure that the assets aren’t sold prematurely. The minimum required reserves is therefore found through (1) borrowing power, (2) some discount factor (aka “shortfall percentage”), and (3) the buffer. Accounting for all of the shortfall across all assets on Moonwell, the number he arrived at today is 33 million, which is a conservative starting point for the risk reserves. He mentioned that the rate of conservatism will ratchet down over the months.
- Base/Optimism/Moonbeam/Moonriver Monthly Recommendations
- Andrew came on to discuss Gauntlet’s latest monthly recommendations on risk parameters across the four Moonwell deployments.
- Base: Supply caps for wrsETH and rETH were increased. The reserve factor for DAI was increased to 100%. IR parameters were recommended to be adjusted for USDC and cbBTC.
- Optimism: Supply caps for weETH and VELO were increased. Borrow cap for WEETH was increased. Collateral factor for weETH was increased while the collateral factor for WBTC was decreased. IR parameters were recommended to be adjusted for USDC, USDT, and DAI.
- Moonbeam: Collateral factors for USDC.wh, WETH.wh, and WBTC.wh were decreased.
- Moonriver: No changes were recommended.
- Luke asked about the proposal threshold for WELL, given that raising the borrow cap could make it easier for someone to borrow WELL and create a spam proposal. Andrew mentioned that their team would look into it. The supply side has been increased by a significant amount, but the borrow side hasn’t been altered yet.
- Block Analitica Monthly Recap and Flagship USDC Vault on Optimism
- Block Analitica posted their monthly recap for Moonwell’s Flagship Vaults in late January. In the previous month, the teams launched the Moonwell Frontier cbBTC vault and the community voted to extend the WELL token reward program for another six months. In this recap, the team highlights the automated reallocations and parameter adjustments that were executed for growth and security reasons. Those adjustments included increasing the cbBTC/USDC Supply Cap for the Flagship Vaults on Morpho’s Base deployment and increasing the Supply Cap for cbETH, cbBTC, WETH, and wstETH for the USDC vault. In January, the summary notes increased borrowing demand for ETH and the resultant increase in APY on the Flagship ETH Vault. They also noted the increase in USDC demand after the Coinbase integration on January 16th.
- Coming after the successful launch of the Moonwell Flagship and Frontier Vaults on Base, Block Analitica has proposed the activation of a Flagship USDC Vault on Optimism. Some of the leading reasons behind the proposal include deepening the network liquidity for the stablecoin on OP mainnet and maintaining Moonwell’s position as a leading contributor to the Morpho ecosystem.
- Luke mentioned that, in a call with the Optimism Foundation, a large stablecoin campaign is coming to attract liquidity to L2s in the Superchain. He noted that Moonwell may have the opportunity to apply for many OP grants.
- Solidity Labs on Increasing Governance Participation and Rewarding Voters
- Elliot first mentioned that, with the addition of OEV oracles, there’s a potential to add a whole new revenue stream to the DAO. The new OEV contracts that his team developed, which wrap Chainlink oracle price updates, allow the protocol to capture a majority of the priority fees that are paid to update the price. This has been rolled out on Optimism to start, and a governance proposal is in the works to roll this system out across the Superchain. He then moved on to the topic of the onchain reserve automation contracts. In these contracts, excess protocol reserves are auctioned for WELL tokens over a set period of time. He gave an overview of the auction flow.
- Switching Moonwell’s GLMR Market to using API3’s OEV Enabled Data Feed for GLMR
- On January 28th, @dav3 from API3 - a previous guest on the Great OEV Debate governance call - created a forum discussion on potentially integrating a proof of concept alternative OEV-enabled data feed for the GLMR market on Moonbeam. He argued that onchain solutions for OEV don’t work as well on chains like Moonbeam and Moonriver where there’s the potential for private MEV to interfere. He then gave an overview of API3 and detailed the proposal for the Moonbeam market.
- 0xMims on VIRTUAL Core Market
- Earlier in January, Super Delegate 0xMims created a forum post outlining a proposal to add a Core Market to Base for the governance and utility token of Virtuals Protocol. It shortly progressed to a Snapshot signal vote, which was successful. The onchain proposal was published and passed at the end of the month, and the Core Market was activated shortly after. Luke then mentioned the results of a Coinbase AI Hackathon in San Francisco, where the team built what they think is the hottest yield seeking agent on Base, Mamo.
- Avail Project on an AVAIL Core Market
- On Friday, January 31st, a forum proposal was created outlining the addition of an AVAIL Core Market to Moonwell on Base. AVAIL is the utility token of Avail Network, a modular data availability layer. Included in the post is the market risk assessment, decentralization, smart contract risk, and other MALF factors. Ankur mentioned that, to expand the utility of the token on Base, the Avail community thinks that they should have a market on Moonwell.
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Governance Call Time Change!
Going forward, Moonwell governance calls will take place on the last Thursday of each month at 17:00 UTC. The next call will be on March 27th, 2025.