Protocol & Chain Governance
The Inter Protocol exists on the Agoric chain and includes multiple levels of governance. The first is composed of stakers of Agoric's BLD token, who make chain-level votes about large upgrades to Inter Protocol. The other governing entity is the Economic Committee, which is elected by the BLD stakers to make informed operational decisions around the Inter Protocol.
Stakers of Agoric's BLD token perform governance on the Inter Protocol by making proposals and voting on them at the chain level.
These proposals have the capability to cause the chain to execute code at the JavaScript level. The BLD stakers have two primary roles in governance of the Inter Protocol:
- 1.Elects (and replaces) the Economic Committee, which makes day to day operational decisions for the protocol
- 2.Agrees upon and/or signals approval for major changes to the protocol such as new collateral onboarding or contract upgrades
BLD stakers proposals operate at the Cosmos level and may be voted on by validators in the active set and any BLD staker through their Cosmos level wallet (e.g., Keplr).
The Economic Committee is an elected body which has specific, well-defined parameter-level control over contracts within the Inter Protocol. The first Economic Committee was elected on 16th September 2022 from this on-chain vote.
The Economic Committee has two primary controls over the system 1) changing Inter Protocol risk parameters, 2) contract offer pausing, and 3) execution of specific contract functions. The PSM and Vault systems instantiate new contracts for each new stablecoin or collateral type, and the EC's control expands to those new contracts.
The Econ Committee also maintains an emergency power to pause contract functions if necessary. This could be required in the case of a significant asset or bridge failure, or an ongoing exploit.
The Inter Protocol’s day to day governance is led by an elected group of representatives (the “Economic Committee” or “EC”) who take action on behalf of the BLD holders. The EC has direct control of contract parameters and also retains the ability to pause contract functions as a disaster response.
The following parameters in the PSM are controllable by the EC:
- 1.GiveMintedFee - fee on trades where user wishes to trade IST for stablecoin held by the PSM. Expressed as a percentage: (0.03 = 0.03%)
- 2.WantMintedFee - fee on trades where user wishes to trade anchor (external stablecoin) in exchange for newly minted IST
- 3.MintLimit - refers to the max amount of IST, net of burns, that can be minted by this contract
The following parameters apply to the vault system as a whole (the Vault Director contract):
- 1.MinInitialDebt - the minimum IST that a new vault must mint
- 2.ReferencedUI - a UI hash that DCF has published as a result of it clearing testing. Inter Protocol front ends may choose to reference this hash
- 3.ChargingPeriod - Not enabled for Econ Committee control upon launch
- 4.RecordingPeriod - Not enabled for Econ Committee control upon launch
The following parameters apply to each vault collateral type independently (the Vault Manager contract)
- 1.Mint Limit - the maximum IST that can be minted by this Vault Manager, net of burns. This parameter limits the IST outstanding per vault manager and is a primary risk management tool
- 2.Stability Fee - the annual fee on a user's minted IST balance, charged regularly, expressed as a percentage
- 3.Liquidation Margin - the collateralization ratio below which vaults are subject to liquidation
- 4.Liquidation Padding - the additional collateralization on top of the liquidation margin which limits how close user vault actions can to the liquidation margin
- 5.Liquidation Penalty - the fee charged upon liquidation of a vault as a percentage of the IST debt
- 6.Mint Fee - the fee on any new IST minted by a vault, charged immediately
On launch, the Economic Committee may adjust parameters for the liquidation auction as needed to ensure a healthy operation in production scenarios.
- 1.Start Frequency - how often the auction starts, in seconds
- 2.Clock Step - how frequently the auction steps down to the next lower price, in seconds
- 3.Starting Rate - the fraction, in basis points, of the collateral price at auction start time that determines the auction's first offer price
- 4.Lowest Rate - the fraction, in basis points, of the collateral price at auction start time after which the auction ends (lowest price it will sell at)
- 5.Discount Step - the size in basis points of each auction price step down
- 6.Auction Start Delay - the amount of time in seconds after the start of liquidation that the auction waits to receive vaults and other collateral before starting its first step
- 7.Price Lock Period - the current oracle price is locked to use for liquidation decisions at the start of the next auction. The Price Lock Period sets how far in advance, in seconds, the price should be locked
As a possible disaster response, Inter Protocol contracts are built with the ability to pause specific offer functions while leaving other functions running normally. Pausing contract offer functions should only be undertaken in response to extreme events and not be part of normal operations.