PowerPool meta-governance as Augmented Governance for effective protocol management
This paper is an update of Powerpool’s meta-governance vision
Just a short time ago — in late August the first paper devoted to Powerpool long-term vision was published. By the “ordinary world” standards only a short time has been passed. But, for the crypto world, this is almost an eternity. Defi and crypto made a great step forward: dust settled, and a lot of projects vanished. But, community-based protocol governance became even more important these days. Defi protocols successfully operate, serving even more liquidity than in late August.
The Powerpool itself has undergone a transformation from the lending market for governance tokens to the Power Universe.
Now Powerpool is a whole Defi ecosystem consisting of smart ETF-like Defi index — Power Index, truly decentralized cross-chain oracle — Power Oracle and Lending Market.
All these products are united around the meta-governance mission of Powerpool. An uncapped mainnet version of Power Index will be launched soon. It would probably be superfluous to say that pooled tokens would participate in meta-governance of composite protocols. So, we think it is the right time to open the next page for Powerpool meta-governance.
We named it “Augmented Governance”. Why is it an “augmented” one? It is simple.
Powerpool’s meta-governance system adds new value and level of coordination into the governance process of composite protocols.
In this article we will share our vision on a meta-governance system, developing by Powerpool and additional value that it aims to bring to Defi projects.
Lessons learned from Powerpool governance
During the last two months, Powerpool itself had very active governance and a highly-engaged community. There were six officially issued and voted proposals, one of which can be clearly identified as “pivoting” or even “controversial” one as it entirely changed the strategy of CVP token distribution. This proposal attracted the utmost attention from the CVP community: more than 75% of registered voters were cast. The community made its decision, shifting the project to a new era.
As a project team, we carefully observed the processes taking place in the community. Here are some observations we want to share with the public:
- People like to discuss stuff and vote in groups. Leaders emerged almost instantly, uniting the crowd around their ideas. So were the first Powerpool Protocol Politicians were born.
- People like to be not only voters but active project supporters (for example, providing liquidity). Many votes were cast using BPT and UniV2 LP tokens. The possibility to vote without pooling out the liquidity was implemented right after the very first proposal. It definitely was the right strategy.
- Haters and passive community members can become active project supporters and even ambassadors, once their ideas affecting long-term project strategy become reality. The community wants to support and be engaged in the project which fulfills their views.
- Truly believers helped other members to pass proposals, negatively affecting their short-term interest as it provided benefits for them in the long-term. Even in the speculative crypto market, there are many people, thinking about long-term project success even if it cuts their short-term profits
- Voting on L2 is easy, cheap, and reliable. Probably, L2 is a future for the mass adoption of governance in Defi
Powerpool’s meta-governance as Augmented Governance
Developing Powerpool we identified three key groups of users, participating in governance — Minority token holders, Majority token holders, and Protocol Politicians. The meta-governance system, which is developing in Powerpool by our team and CVP community, is aimed first of all at bringing value to these three target users’ groups. Other goals include effective GT pooling and providing convenient and low-cost opportunities to achieve social consensus, run political processes in the proper way, and finally vote on proposals.
The key components of Powerpool meta-governance system:
An effective solution for pooling huge GT liquidity.
Evidently, this solution has to bring a certain value to GT LPs and provide service to a wide audience of Defi users. In simple words, it has to have a huge TAM (Total Addressable Market) ideally covering almost all Defi users.
We found such a solution — the Power Index. It is an ETF-like Defi index, completely governed by a community offering attractive conditions for LPs to place their liquidity (low risks, good profitability, and convenient usage). For ordinary users, it offers an opportunity to operate with a curated basket of 8 major Defi assets in a single token (PIPT — Power Index Pool Token). This token has an advanced secondary market, containing a trading pair and lending market for borrowing/lending operations for PIPT users.
We define Power Index as a “Smart Index”
Such a definition was applied not only for the opportunity to entirely govern the index and shape it to the market and community needs but also to automatically adjusted LP rewards. LP rewards and APY are correlated with the liquidity of the index, as the CVP token is also included in the composition. Growing index capitalization leads to growing CVP value and LP rewards as a consequence.
To test this product in real market conditions we launched Baby Power Index — an unaudited (and therefore capped) version of Power Index. Within a week it reached a hard cap several times. During testing, the cap was gradually increased according to the demand from the community and finally collected ~$500k of liquidity, proving its efficiency to attract liquidity from the community even without any PR/marketing.
Tools for running political processes and convenient voting
There is no real governance without politics, discussions, political parties, leaders, opposition, and all this kind of stuff well-known in developed democracies. People want to discuss ideas, be engaged, choose their own leaders, and shape the future in a way according to their vision. Understanding this from the first day, we developed a wide set of tools for that:
In Powerpool community members can easily create political parties.
Now it can be done using the voting delegation option. In the near future, we would implement more complex logic, including leaderboard, permissions, mandates, and of course an option to create a personal page, logo, and private virtual lounge.
An incentive program for Power Index composite protocols, active voters, and Protocol Politicians
There is no real democracy without rewards.
People need to be incentified to actively participate in governance processes. This is especially true for Protocol Politicians' work, which is time-consuming and requires a lot of research, networking, and engagement in community activities. Taking all of it into account we developed several options to reward active community members and Protocol Politicians.
Rewarded VoteBoost option
CVP community members would have an option to lock their CVP (or any other supported token for voting, such as BPT/UniV2 LP tokens, PIPTs, PIPT-USDC LP tokens) for a specified period and get additional voting power for that. If these tokens were constantly used for voting during specified periods, it would be rewarded.
Grants for communities of Power Index composite protocols
Each Power Index composite protocol, which will be approved by the CVP community during the Power Index Composition Vote, will receive a grant of 1m CVP locked for a long time. A certain share (100k CVP) will be distributed to Protocol Politicians, and 900k remains for the protocol’s community. This grant is allocated to each composite protocol to provide leverage in Powerpool’s meta-governance votings. Additionally, it will provide an incentive for each community to participate in Powerpool meta-governance and will act as a treasure for rewarding protocol-related community members or organizations.
Protocol Politicians reward program
In Powerpool we distinguish two types of “Protocol Politician” status.
First is related to active members of other protocols, listed in Power Index which act as some kind of “diplomats” or “ambassadors”. Their mission is to establish active win-win collaboration between their native protocol and Powerpool.
It works similarly to establishing and maintaining diplomatic affairs between countries.
It is important to point out that this kind of Protocol Politicians can be elected only by their own communities (only two persons in each protocol). We decided to allocate 50k of locked and vested CVP for each of them in the form of grants to ensure their long-term engagement. We would initiate the election process and determine the lock-up and vesting schedule soon.
Another kind of Protocol Politicians' status can be received for the activity. To receive this status anyone behind Ethereum address needs to issue a proposal via Powerpool governance system and make it pass (proposal affecting future of any supported protocol, including Powerpool itself). Such Protocol Politicians would be also awarded in CVP with lock-up and vesting. The sufficient size of such a reward needs to be determined by the CVP community.
The convenient governance system reflecting community needs
For us, it is evident that people need an easy-to-use voting system, developed according to the technical features of Powerpool.
To achieve perfect usability we integrated the Powerpool governance system with Boardroom, a well-known governance dashboard. Powerpool became the second project, completely integrated with Boardroom (the first one was Compound). This integration is aimed to bring a convenient UI/UX layout for voters.
From a technical point of view, Powerpool governance was developed as a modular and flexible system. It supports different sources of votes, allowing people to vote using not only CVP tokens, but also BPT/UniV2 LP tokens, PIPT, PIPT-USDC LP tokens, and L2 networks such as xDAI and Matic. It is important to highlight L2 networks here, as they offer almost zero-cost of participation in voting with a high level of security as assets aren’t transferred to L2 in this case. Users only sign transactions on L2, according to token balance at the Ethereum mainnet. This approach was successfully tested during voting on Proposal 6 in the xDAI network.
The majority of tools and functions, mentioned above are in mainnet or pre-mainnet stages. Some tokens, pooled into Baby Power Index already can be used for meta-governance purposes (COMP and UNI), other ones need some additional integration with governance systems of corresponding protocols. For other Baby Index governance tokens, this work is in the last stages of production. Specific conditions for rewards, mentioned above for active voters and Protocol Politicians will be also determined soon and added to the Powerpool governance system.
Once the uncapped version of the Power Index will be live, the first version (v.1.0) of the Powerpool meta-governance system will be available for the CVP community to issue proposals. The community of composite protocols as well as their Protocol Politicians will receive grants, specified above, which will give them an opportunity to directly participate in Powerpool decision-making processes. We and the CVP community cannot wait to start using it and see how the meta-governance idea will evolve and positively influence the future of Defi.