YFD’s Novel Mechanics: Governance & Non-Custodial Claims
In addition to the components described in our previous announcement, Y-Foundry has developed a novel token-based governance system with inherent advantages over the existing snapshot system used by the majority of protocols. Benefits include: improved resistance to governance attacks, improved resistance to flash loan manipulation, vote transferability, and full on-chain auditability.
Next, a non-custodial claims system has been developed to distribute funds such that only the owner can claim it. This is essential to prevent funds from being directed to a third-party, providing a much-needed enhancement of security for vault users.
Rethinking the meta of governance
Currently, most protocols are using a snapshot-based governance model which depends on off-chain components to participate in governance. Most governance proposals are also text proposals, meaning that they do not enforce an on-chain outcome via smart contract.
These dependencies in the existing governance model mean that even if most of the protocol is on-chain, it is not trustless, and is susceptible to off-chain manipulation with the submission of false data or some party deciding arbitrarily not to respect the decision reached by voters.
Y-Foundry’s governance model is built on smart contracts, with the goal of making each vote outcome an enforceable action, e.g. the changing of an on-chain parameter, cancellation of a proposal, returning funds, escrow etc.
In addition to this, the Y-Foundry model ensures that all votes and voters are accounted for in every proposal only once. No more, and no less. This leaves no window for a massive deposit of funds to materialize a last minute surge of voting power, thereby reducing the chances of manipulation, especially with flash-loans. In the past, flash-loan attacks have taken advantage of gaps in the existing model,making away with as much as $181 million in damages.
Bringing back Non-Custodial
It is clear that individual privacy and freedom are essential and must be protected. In the past months, we’ve seen some egregious actions taken to override individual liberty, handing over control of funds to a third party. This clearly goes against the fundamental precepts of cryptocurrency, blockchain technology, and DeFi which champion self-custody and decentralization.
In designing the claims contract for use in the Y-Foundry protocol, individual liberties are balanced with the need for collective action, such as in the case of an emergency vault-stop or cancellation of a vault proposal.
With the design of the Y-Foundry claims contract for use with vaults, user-deposited funds can only be withdrawn to its originator. No one and no contracts have any privileged access to take custody of a user’s funds. These extensive measures are placed to ensure user safety, promote self-custody, and protect individual liberties.
Conclusion
Y-Foundry DAO is dedicated to building a protocol with full respect to the ideals of decentralization and transparency. These contracts are committed to be open sourced at maturation. For now, the code can be reviewed by community developers and audited as necessary.
