About B.Protocol Governance

All you need to know about handing over the control of the protocol to the users

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B.Protocol

4 min readMar 8, 2021

B.Protocol is a backstop liquidity protocol for DeFi lending platforms. It’s a new primitive in the evolving and composable world of decentralized finance. It brings one of the most common practices in traditional finance, a backstop solution, to support the scalability of DeFi in a decentralized, stable, and secure way.

In order to make B.Protocol one of the pillars in DeFi’s lego building blocks, the team has made it clear from the start that the control over the protocol will be handed over to the hands of its users — and the time has come to push this forward.

In this post, we introduce the boundaries of the B.Protocol governance and the implications of handing over 100% of the control over the protocol to its users in one take.

The governance boundaries

Once the current timelock is over (April 26th, 2021), users of B.Protocol will be able to vote on the next admin contract of the protocol. Currently, there are separate admin contracts for the Maker integration and for the Compound one, and users will be able to vote in each of them separately, according to their mScore and cScore respectively. It is up to both communities to decide whether they prefer to remain independent or to merge under the same admin contract and governance going forward.

In any case, the admin contracts do not (and will not, ever) control user funds.

The governance does control the following pieces in the protocol —

Incentive models

The governance can decide about new distribution models of the liquidations fees among the users (the way the Jar is being distributed) and can include new incentive models for existing and new users alike. Currently, the Jars are being distributed according to each user’s Score in his/her community (MakerDAO mJar to mScore holders, and Compound cJar to cScore holders).

The new incentive models should also take into account the need for future developments and the need to attract more devs, users, and liquidators into the protocol and its growing ecosystem.

Backstop membership and incentives

Today the protocol’s backstop is combined from 3 of the top DeFi LPs, as they were introduced as part of the Genesis Backstop. The new governance can define the conditions and criteria for membership in B.Protocol’s backstop, propose new backstop members, and offer changes in the distribution model of liquidation proceeds between the backstop and the users.

The new governance could also enable a user-based backstop, where users’ funds will be used for liquidations, and incentivizes it to attract the needed liquidity.

Governance should consider that the liquidators’ participation in the backstop is not compulsory in any way and that the conditions should be made in such a way that reflects the interests of all parties involved.

It’s worth emphasizing that currently, the team has no part in the liquidations revenue and that the liquidators in the backstop act as 3rd parties in the protocol, using their own liquidity.

Governance upgrades

The new admin contract will be able to hand over its power to yet a new admin which will reflect an upgrade in the governance process itself. This will allow to upgrade and adjust the governance process over time (e.g., change the required parameters for certain changes in the protocol and its governance). However, an initial governance process and its requirements must be defined.

Community decision-making tools

The governance tools are still to be decided but it seems there are a few that already became a kind of a standard in the ecosystem like those used by the Compound community. One of these is a forum where the ideation of new BIPs (Backstop Improvement Proposals) could be posted, discussed by the community, and eventually voted through an on-chain voting system.

Going Fully Decentralized

B.Protocol governance is handed over to its users in its fullness in one take. There will be no testing periods and no gradual processes. This move will demand a high involvement of the community in order to push the project to its next levels.

The team doesn’t hold any mScore or cScore and will not be able to impact the votes of the new governance. Also, there were no mScore or cScore allocations to anyone else, as Scores are being accumulated only via the usage of the protocol (e.g., borrowing on the MakerDAO integration, or supply and/or borrow on the Compound integration). We do hope the community will do its best to handle the power it is given in a calculated, secure, and forward-thinking manner.

All are welcome to join the governance discussions on the B.Protocol Discord server here — https://discord.gg/CfJmJfkBwZ.