Summary : As could be recently seen, the current permissionless EUL distribution system is prone to manipulation. Specific steps have to be taken to mitigate further manipulation attempts so that EUL tokens are distributed to the genuine users of the protocol. The proposal includes the requirement that only tokens present on the Coingecko-derived Euler token list at the time of the voting period start can take part in the EUL distribution system. The solution proposed is non-exhaustive, however simple to implement and if the proposal passes, the rules will be changed at the beginning of the next voting period.
Motivation : With EUL token launch, the gauges voting system has been opened to EUL holders so that anyone can stake their EUL and redirect distribution to their favourite markets. It was quickly proved that the proposed voting system has a drawback that makes it possible to redirect EUL distribution to fake tokens, created purposefully for that occasion. I still believe that the voting system makes the distribution more democratic, more likely to decentralize, and more likely to create value for lenders (through increasing interest rates) if the market for EUL distribution is free and fair.
The requirement that only tokens present on the Coingecko-derived Euler token list at the time of the voting period start can participate in the EUL distribution will make the system more robust while being easy to implement so that the rules new can be enforced at the beginning of the next voting period. The Coingecko-derived Euler token list is an open-sourced token list that contains tokens listed on Coingecko that are present on Ethereum and have liquidity against WETH on Uniswap v3. As of now, the list includes 1348 tokens of which 67 are currently listed on Euler. The list is updated daily.
I acknowledge the other proposals created by the community members. Ideas of voting participants incentivization, token supply threshold or certain oracle rank still need more discussion and/or are harder to be implemented at the moment. Hence, I propose to first vote and hopefully implement the token list requirement that should mitigate the manipulation risk the EUL distribution system is facing now, while the other proposals can be discussed and voted upon parallelly.
Only tokens present on the Coingecko-derived Euler token list at the time of the voting period start can take part in the EUL distribution.
This is a reasonable stop-gap measure to get in front of this clever manipulation. It clearly wasn’t an intended outcome of the gauge design, so it is reasonable for governance to “change the rules” to better align the mechanism with the intent.
Longer term, it would be preferable to move away from gating tokens based on Coingecko listings. Coingecko has thus far been a good actor but shouldn’t be a dependency for the smooth operation of Euler. Perhaps EUL distributions based on gauge weights could be capped at some fraction of the TVL or volume in Uniswap V3 for the asset. This approach would still allow the kind of manipulation taking place now but would make it much more expensive and economically risky to siphon any meaningful amount of EUL this way. As an example, a TVL-based cap would limit the current manipulation attempt to a negligible ~10 EUL.
listing process is less of an issue. the UI supports only the tokens that are already on the list. one can activate any market using smart contracts (those are permissionless), but the token won’t be showed in the UI. since newly activated markets are isolated by default, there’s no need to worry that malicious token gets activated. in the end, it’s the governance that promotes the assets to the higher tiers or changes the configuration (like collateral factor, borrow factor and others)
It is a fair mechanism to stop gaming the system imo.
Solidly in fantom had similar problems, which concentrated the governance rights to whales using fake tokens.
While the Coingecko list can be a good short-term solution, it means Euler will have dependencies on a centralised service (information source). I wonder if there is decentralised version of tokens list that works well enough. If not, would there be a smart way/make sense for Euler to create such a list leveraging the Uniswap pool analysis tool?
I disagree with this proposal. I dont think this solves the problem, a sufficiently motivated party can get a coingecko listing so this doesnt remove the vector. Furthermore, by approving this proposal we are enabling coingecko as a gatekeeper to the protocol. I think a proposal which enables the setup of an emergency committee to deal with these events would be more effective.
It relies on a centralized solution, and Euler was designed to not use centralized solutions and be as decentralized as possible (uses decentralized oracles, voting to add markets via a eul protocol token, etc).
I think that such gamification is normal. It just shows that token holders of other projects, such as these very famous and popular defi projects, are not yet interested in the Euler market.
To get ahead of the ELITE token in gauges, ~$150k is currently needed, which for such protocols as Uniswap, Chainlink, AAVE, 1inch is a very small part of their treasury.
Given the number of their holders, with coordinated actions, even among only tokenholders without treasury funds, this threshold would be easy overcome.
So it just goes to show that so far these protocols and their tokenholders don’t see value in the extra utility for their token in terms of using it in the Euler markets. This is fine. Gamification is done so that the parties most interested in the project at the moment receive tokens.
If one wants more mature projects to receive the EUL distribution, one must either add the value of Euler project for these projects, or explain the existing value of the Euler as a project to these completed large projects.
One of the possible logical solutions for me is to add some conditions on the liquidity of the token on the Uniswap for a possible vote for this token for EUL distribution.