TL;DR
- Adjust XAI credit lines.
- Increase Ethereum fee from 10% to 25% to match the fee in effect on Arbitrum.
- Adjust SiloGovernor’s votingDelay to protect against multi-block governance attacks.
Proposal 1
XAI is currently minted by a number of crypto assets, with each asset being capped at a maximum mintable XAI. For example, USDC can mint up to 6M XAI whilst CVX can only mint 150,000 XAI.
Below is a list of all credit lines. Note that Effective Backing measures how circulating XAI is backed today.
| Silo | XAI Credit Line | % of total credit lines | Utilization | Borrowed XAI | Effective Backing |
|---|---|---|---|---|---|
| USDC | 6,000,000 | 33% | 45% | 2,700,000 | 50.54% |
| gOHM | 1,400,000 | 8% | 69% | 966,000 | 18.08% |
| wstETH | 1,000,000 | 5% | 63% | 630,000 | 11.79% |
| cbETH | 750,000 | 4% | 73% | 547,500 | 10.25% |
| USDT | 500,000 | 3% | 52% | 260,000 | 4.87% |
| CRV | 150,000 | 1% | 65% | 97,500 | 1.83% |
| YFI | 150,000 | 1% | 34% | 51,000 | 0.95% |
| LINK | 500,000 | 3% | 10% | 50,000 | 0.94% |
| FXS | 150,000 | 1% | 21% | 31,500 | 0.59% |
| CVX | 150,000 | 1% | 2% | 3,000 | 0.06% |
| BAL | 150,000 | 1% | 2% | 3,000 | 0.06% |
| WBTC | 150,000 | 1% | 1% | 1,500 | 0.03% |
| OHM | 100,000 | 1% | 1% | 1,000 | 0.02% |
| XAI-ETH | 2,750,000 | 15% | 0% | 0 | 0.00% |
| LUSD | 2,000,000 | 11% | 0% | 0 | 0.00% |
| FRAX | 1,500,000 | 8% | 0% | 0 | 0.00% |
| DAI | 500,000 | 3% | 0% | 0 | 0.00% |
| 1INCH | 150,000 | 1% | 0% | 0 | 0.00% |
| SNX | 150,000 | 1% | 0% | 0 | 0.00% |
| MKR | 150,000 | 1% | 0% | 0 | 0.00% |
| Total | 18,350,000 | 100% | 5,342,000 | 100.00% |
Rationale
$XAI credit lines are a tool to bootstrap liquidity in lending markets to allow users to access leverage on their tokens while generating revenue for the SiloDAO.
We periodically modify credit lines to optimize XAI utilization to achieve two goals: 1- Generate traction in markets measured in the number of users using markets and frequency of borrowing, 2- Increase $XAI utilization to maximize the DAO’s revenue.
When we concentrate $XAI resources in silos with the highest activity, we maintain low borrowing rates in popular markets and generate additional revenue for the DAO.
In summary, the proposal aims to:
- Increase liquidity in high activity and priority silos.
- Bootstrap initial liquidity in new Curve LP Token silos .
- Decrease idle liquidity.
- Increase DAO revenue.
- Increase exposure to Curve LP Token markets.
Changes
-
Reduce $XAI credit lines in XAI-ETH, USDC, 1INCH, MKR and SNX silos.
-
Reduce credit lines in FRAX and LUSD silos in favor of the upcoming FRAX/USDC and LUSD/3CRV Curve LP silos. gOHM silo will also have its credit line moved to the OHM silo given Olympus’ prioritization of OHM.
-
Add two credit lines to rETH and stETH/ETH Curve LP silo.
-
Increase wstETH and cbETH credit lines.
-
Increasing OHM, YFI and CRV credits lines.
-
Add credit lines to RPL and LQTY (Conditioned on projects adding full-range liquidity).
RPL and LQTY silos have seen large borrowing activities that grant them credit lines provided both projects add full-range liquidity to their deep pools on Uniswap V3. Liquidity must be provided by a team-owned Safe and placed in full-range. We are currently in discussions with the projects over the matter.
UPDATE: LQTY team has added full-range liquidity to the LQTY/ETH 0.3% Uniswap v3 pool. The team fully controls full-range liquidity.
https://zapper.xyz/account/0xf06016d822943c42e3cb7fc3a6a3b1889c1045f8/protocols/ethereum/gamma-strategies
Summary of changes to XAI credit lines:
- Burn 4,500,000 XAI in 8 silos
- Mint 4,750,000 XAI in 11 silos
| Target Silo (Name) | Event | Change | Credit line | XAI new credit line |
|---|---|---|---|---|
| XAI-ETH | Burn | -1,750,000 | 2,750,000 | 1,000,000 |
| USDC | Burn | -1,000,000 | 6,000,000 | 5,000,000 |
| 1INCH | Burn | -150,000 | 150,000 | 0 |
| MKR | Burn | -150,000 | 150,000 | 0 |
| SNX | Burn | -150,000 | 150,000 | 0 |
| gOHM | Burn | -300,000 | 1,400,000 | 1,100,000 |
| LUSD | Burn | -500,000 | 2,000,000 | 1,500,000 |
| FRAX | Burn | -500,000 | 1,500,000 | 1,000,000 |
| rETH | Mint | 1,500,000 | 0 | 1,500,000 |
| RPL | Mint | 300,000 | 0 | 300,000 |
| LQTY | Mint | 300,000 | 0 | 300,000 |
| wstETH | Mint | 500,000 | 1,000,000 | 1,500,000 |
| cbETH | Mint | 250,000 | 750,000 | 1,000,000 |
| OHM | Mint | 300,000 | 100,000 | 400,000 |
| CRV | Mint | 350,000 | 150,000 | 500,000 |
| stETH/ETH | Mint | 300,000 | 0 | 300,000 |
| LUSD/3CRV | Mint | 300,000 | 0 | 300,000 |
| FRAX/USDC | Mint | 300,000 | 0 | 300,000 |
| YFI | Mint | 350,000 | 150,000 | 500,000 |
Proposal 2
Increase protocol fees on Silo Ethereum from 10% to 25% to match that of Silo Arbitrum.
Rationale
Currently $7.4M is borrowed on Silo Ethereum, generating roughly $22K annualized to SiloDAO. With protocol fee set to 25%, we expect the revenues to increase to $55K / annually at the current borrowing volume.
Proposal 3
Increase SiloGovernor’s votingDelay from 1 block to 128 blocks. This means, an on-chain proposal becomes active, i.e. ready for voting, after 128 blocks or roughly 26 minutes.
Rationale
SiloGovernor smart contract currently sets votingDelay to 1 block or roughly 12 seconds. Given that Ethereum validators can control consecutive blocks, it is theoretically possible that a malicious validator can run a governance attack in two ways:
- Buy 10M SILO (current governance quorum) from AMMs, create a governance proposal and achieve quorum (10M votes), and then sell back the 10M SILO tokens into the AMMs at the same purchase price minus fees.
- Buy enough SILO from AMMs to help pass a governance proposal in his favor with minimal costs.
The above scenarios are not possible now given that: 1- There is enough SILO on AMMs to pass a governance proposal, 2- Over 83M tokens are already delegated and ready to vote down malicious proposals. However, we can eliminate the possibility for governance attacks by simply increasing votingDelay to 128 blocks.
Once the votingDelay has increased to 128 blocks, new proposals become active to vote on in roughly 128 blocks from creation, the duration that is impossible to control by any Ethereum validator no matter the cost they are willing to incur to undertake a governance attack.