Governance is an emerging yet critically important area in cryptocurrency based mechanism design. The Meta token aims to coordinate decentralised governance by incentivising stakeholders to act in the best interests of mStable. Meta holders are incentivised to maximise the overall growth, use and stability of mStable given:
Meta Governors must stake and participate in governance processes to earn. Optimal earnings occur when mStable grows securely: A percentage of bASSET interest, swap and redemption fees may be sent to staked Meta in compensation for their risk and work in governing the system.
System instability risks a portion (5-10%) of staked Meta liquidation and/or dilution and subsequent loss of value (see re-collateralisation).
Governance decisions will initially be determined by the core team, but will shift gradually to a community-based proposal system once mStable’s network activity achieves critical mass and sufficient decentralisation. The initial protocol contains an upgradable governance module, with the first version facilitating proposals between a closed group of participants whilst remaining visible and transparent. In future versions, the protocol is well placed to capitalise on existing DAO toolsets such as Aragon.
The proposal system will govern the parameters of and execute actions in mStable, encompassing the:
addition/removal of mASSETS;
addition/removal of bASSETS and their max weights,
addition/removal of underlying lending markets for bASSETS,
redemption and minting fees;
selection of oracles (if needed);
upgradability of system modules: Re-collateralisation and Governance;
Distribution of Meta
Robust governance includes a large and decentralised stakeholder-base. A single entity or a small group of closely aligned entities would centralize mStable and potentially create a dangerous single point of failure. It is a core project aim to ensure a broad Meta distribution so that it becomes sufficiently decentralised as soon as possible.
The mStable Public Reward Pool is our first significant step in this direction. The Public Reward Pool pays those who contribute to mStable's liquidity and utility. This has been designed in the spirit of generalized mining, whereby users are rewarded for their work in growing and contributing to the growth the mStable.
More granular information about Meta's distribution can be found on our medium page.
Once sufficiently decentralised, mStable will be controlled not by a single entity but by a global community of Meta Governors. Each system parameter will be determined by these governors.To participate in governance, users must stake Meta and vote on proposals. By staking Meta and voting, a user becomes a Meta Governor. The amount of Meta a user stakes is proportionate to that user's vote weighting.
For staking and governing, Meta Governors in future may receive a portion of mStable's revenue proportionate to their stake amount. There may also be periods where Meta tokens are also included in staking return if governors deem it to be appropriate.
Critically, participating as a Meta Governor is not risk-free: a portion of staked Meta is the first source of re-collateralization value. This means that a portion of staked Meta will be liquidated in the event of a bASSET failure, for example. Only after this liquidation, and only if required, will Meta be diluted, up to a point, in order to cover any remaining losses due to a peg loss.
Meta Governors will make all system decisions. If they make the wrong decisions, they should be the hardest hit. If they make good decisions, they should be rewarded the most. These tight incentives direct Meta revenue directly to those who have the chosen to take the most responsibility and risk in the system.