MakerDAO's 5 Endgame phases, ParaSpace loses trust, Aragon treasury drama, Celsius redeeming stETH,...
Issue #40 of The State of DeFi Lending newsletter
Welcome to issue #40 of The State of DeFi Lending, a newsletter covering the highlights of lending markets in DeFi.
In this issue we cover:
MakerDAO embarks on the 5 phases of the Endgame that involve a range of new initiatives around product, governance and even its own chain.
ParaSpace’s CEO got caught in a controversy involving embezzled tokens. As a result, the protocol has seen massive outflows and taken a reputational hit.
Aragon “repurposed” its $177m-treasury in response to an alleged 51% governance attack according to the Aragon Association. Individuals involved on the other side - most prominently Arca - paint a different picture of the story. This conflict is a real-time test for decentralized governance with an unclear outcome.
Celsius is taking advantage of Lido’s recent v2 upgrade that enables withdrawals. Redemption for 428k stETH have been requested and being processed. This is the first real stress-test for Lido and the liquid staking derivatives market.
Read below for more…
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News
MakerDAO is not standing still and has seen renewed attention on the Endgame, which is supposed to usher in the next phase in MakerDAO’s evolution.
https://twitter.com/MakerDAO/status/1657019717499109376
Specifically, MakerDAO has unveiled the 5 phases of the Endgame which include: A rebrand of MKR & DAI; Enable SubDAOs; Build AI tools for governance; Governance Participation Rewards; Build Maker’s own chain
In his forum post, MakerDAO co-founder Rune summarizes the purpose of these 5 phases as follows
“Endgame will streamline and parallelize the Maker Ecosystem, launching a new unified brand identity and the flagship release of 6 new SubDAOs that can be farmed by users and that will spearhead permissionless innovation and collateral allocation. Endgame will also introduce powerful AI Tools to assist less hardcore governance participants to be on top of all details of the system and what’s happening, and a Governance Participation Rewards system that incentivizes people to participate through farming rewards. The final step of Endgame will be the deployment of a new blockchain that is tightly coupled to Ethereum while increasing the governance security of the ecosystem and implementing the full range of advanced Endgame features and tokenomics.” - Source: MakerDAO forum
In parallel to the Endgame, MakerDAO is advancing its plan to enhance DAI's real-world utility and reduce its dependence on USDC. A recent proposal in the forum (and subsequent poll) involves making Credix Finance, a decentralized lending platform for undercollateralized lending, an Arranger to fund up to $150m in senior secured loans in Latin America, largely using asset-backed financing.
This partnership targets deals yielding a 6-7% pa which could potentially generate an extra $9.75m in revenue for Maker. These revenues could be passed onto DAI holders via the Dai Savings Rate thereby further strengthening DAI’s appeal.
ParaSpace, an NFT lending protocol, is in turmoil after its CEO, Yubo Ruan, was accused of embezzlement, leading to users withdrawing over $50 million worth of NFTs.
Ruan allegedly failed to return 2,909 ETH belonging to users and is suspected of distributing nearly half of these assets to unknown addresses and exchanges.
The entire saga caused a “bank run” on ParaSpace which pushed APYs >90%.
Aragon DAO is experiencing significant turmoil over its treasury as the association has repurposed its $177m treasury into a grants program for developers working on its software.
https://twitter.com/AragonProject/status/1656028382939815937?s=20
The move was preceded by a community proposal to hand over control of the treasury to tokenholders which was initiated by a group called 'Risk Free Value Raiders' (RFV Raiders). The Aragon Association connects this group to predatory, value-extracting behaviour with struggling crypto projects like Rook, Temple DAO and others.
https://twitter.com/AragonProject/status/1656028401638023170?s=20
Aragon Association cited the risk of a 51% governance attack by RFV Raiders to take over the treasury and acted without a tokenholder vote.
https://twitter.com/AragonProject/status/1656742220400062469?s=20
The below tweet is a detailed post-mortem on all the events and acknowledges that DAO governance remains an experiment “at the speed of technology”.
https://twitter.com/AragonProject/status/1656742242768265218?s=20
Aragon explicitly called out Arca as one of the members of RFV Raiders. Arca publicly stated that…
“…Arca has had no investments in Invictus, Rook, Rome, or Temple. Additionally, the Fei Labs team proposed the dissolution themselves, and the Rook team initially proposed the spin-off ‘Incubator DAO’ themselves. These ‘RFV raiders’ pushed for the best outcome for token holders in both situations.” - Source: Blockworks article
Celsius is back on-chain, moving vast sums of staked Ether as Lido withdrawals are enabled.
In an effort to repay investors, Celsius made significant financial movements requesting withdrawals of their 428k stETH holdings in 1k batches from Lido.
https://twitter.com/Cointelegraph/status/1658842307427201029?s=20
This follows the recent system upgrade by staking platform Lido, enabling the withdrawal of ETH from stETH. The moves come amidst the ongoing legal process for Celsius' bankruptcy, with the company owing $4.7 billion to over 100,000 creditors.
Lido stETH is by far the largest ETH liquid staking derivative and Celsius redemptions will test the resilience of the protocol and market.