PowerPool: the tool for Meta-DeFi democracy

This paper is devoted to the long-term vision of PowerPool.

2020 is definitely the year of on-chain governance. Almost every DeFi protocol launched its own governance token. The capitalization of governance tokens of Defi protocols is ~$5B now and rapidly grows. So, we all are involved in the global governance experiment right now; taking into account TVL in DeFi, it might be very costly.

All governance experiments lead to two identical results: Voters’ Apathy and ownership of voting by whales. The fact is big bags play a crucial role in the governance of decentralized systems, significantly influencing decision making in the majority of protocols. Another fact is that a significant share of supply held by minority token-holders often doesn’t participate in votings, demonstrating Voters’ Apathy.

The reasons are the following: (1) Absence of incentive for participation (2) The stake of minority token holders cannot influence the vote as it is owned by whales (3) High gas costs, as the addition of negative motivation to the previously mentioned points.

The pieces to put together

The actual governance starts with discussions initiated by the Protocol Politicians — people, who have trust and reputation in a particular protocol. These guys propose something, Major Holders evaluate the proposal and if they are satisfied the voting will be valid. Currently, in this workflow one puzzle piece is missing — the minority token holders.

Successful Governance is a consensus between Protocol Politicians, Majority and Minority Token Holders

Gov =P+TMaj+TMin

In our vision, to establish sustainable on-chain governance, we need not only add the “missing puzzle,” but also create a meta-structure that will help develop consensus between these three main parties.

So, the meta-governance involves three main groups of actors:

Protocol Politicians — they want to promote their interests and be important players in a particular protocol, and also get profits from their approval of their governance proposals.

The Majority Token Holders — they want to support proposals, valuable for them, and also grow the value of their GT holdings.

The Minority Token Holders — they want to effortlessly get profits from holding GTs and increase their stake.

Understanding the protocol for Meta-Defi democracy

The PowerPool is a protocol, offering a convenient solution for pooling governance tokens. It allows the token holders to lend, pool, borrow governance tokens, get income from that, and accumulate governance power in protocols based on Ethereum.

It is specifically designed to align the interests of all the mentioned groups and solve issues they face in the governance process:

• For the minority token holders, PowerPool expands utility of governance tokens by adding cashflow and influence farming — an opportunity to continually grow token stake;
• For the majority token holders, PowerPool offers an opportunity to farm more influence based on the current major stake in one protocol. The majority token holder mine CVP tokens by providing liquidity, and as a result became the “major token holders” for all governance tokens, pooled in the PowerPool, thanks to CVP design:

The CVP (Concentrated Voting Power) is PowerPool Protocol’s governance token. Its most essential function is to define how to use utility functions (voting power) of GTs, accumulated in the PowerPools.

• For the Protocol Politicians, PowerPool offers a unique opportunity to issue proposals in protocol combining voting power of both Major and Minor governance token holders. It is significantly more efficient to work with already pooled tokens and active holders that pitch proposals to whales personally;

The main value proposition of PowerPool is that it not only a solution for pooling tokens and accumulating voting power under the control of CVP token holders, but also aligns the interests of all involving parties.

The PowerPool’s operates on the Meta-level (over protocols), integrating governance mechanics of various protocols into one ecosystem:

The PowerPool is a protocol-agnostic tool for establishing Meta-DeFi democracy

The Meta-DeFi democracy development roadmap

The protocol is bootstrapped via staged incentivized testnet phases (Alpha round, Beta Round and Gamma Round). But, it is the only technical side of testing which comes down to bug reporting.

Equally important part is social bootstrapping — attracting all target groups of users and learning them how to use this brand new tool. The most interesting part here is work with the Protocol Politicians, as we already collected a lot of applications from the Major and Minor GT holders.

We announce the Protocol Parlament program and Community Forum, which will be used for publishing proposals by Protocol Politicians. Who if not them will be “conductors” or “party organizers” to issue proposals on how pooled tokens will vote?

We will select the most valuable persons for the Protocol Parlament program with our community — selected Alpha and Beta round testers, Majority and Minority token holders, Influencers, and representatives of protocols.

Note, that all proposals coming from Protocol Politicians have to be supported by CVP stakes. From this moment CVP also carries social, and stake functions in addition to the previously mentioned ones.

The PowerPool tech implementation: an interoperable L2 DeFi solution

As the PowerPool operates on the Meta-level (over protocol level) it is built as an interoperable and scalable solution based on several networks. Recently we have announced technical collaborations with Matic and xDAI and successfully conducted incentivized testents on both networks.

Our vision for tech implementation of the protocol serving as a Meta-governance level for the ecosystem is the following: the protocol will operate on a set of networks (Ethereum mainnet, xDAI, Matic, Binance Chain) offering services for the different target groups of customers. For example, Matic and xDAI were chosen to solve the gas problem for the minority token holders which are one of our target groups of users.

So, what’s next?

The PowerPool’s mission is to expand the utility of governance tokens to the end-users and provide a new level of coordination of decision making in the Defi ecosystem. Now we are bootstrapping our tech (interoperable L2 Defi solution) and social mechanism (which involves Protocol Politicians + Majority token holders + Minority token holders as it was mentioned before).

In the coming days, we will launch the Beta round of the testnet. During the Beta round, all basic protocol functions will be tested by 100 selected participants in the xDAI chain. This testing round will be conducted with very limited caps — an equivalent of $300 for each participant. Such a limit is set to decrease financial risks for our testers from one side and test functions of the protocol using real assets from the other one.

Right after Beta round, our social bootstrapping campaign will go public (right now we are sorting some private applications for future liquidity provision, protocol politician role, etc).

We will be happy to have all valuable community members, researchers, token holders, and protocol representatives on board. It will improve governance mechanics in our industry, enhance the security of the protocols and what is critically important for success in this space — establish a consensus between three main groups of participants of the governance process.

This is our vision for the PowerPool — a tool for establishing meta-Defi democracy.

Stay tuned!