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Intro to UNION Token and DAO:

Community Controlled Credit

Published in

Union Finance

4 min readMar 22, 2022

UNION is live: 0x5dfe42eea70a3e6f93ee54ed9c321af07a85535c
Note: UNION is a non-transferable governance token thats earned by using the Union protocol; it can not be purchased or sold.

Union is an open, permission-less, credit network protocol currently live and functioning on both Ethereum MainNet and Arbitrum. Within the protocol there are parameters that need to be adjusted regularly, and smart contracts that can’t exist as fixed deployments.

Market Parameters: e.g. Setting the interest rates
Risk Parameters: e.g. Setting debt ceilings, max borrows
Expansion: e.g. supporting new assets and adapters

In order to decentralize control of these parameters, we’ve deployed a non-transferable governance token cleverly called UNION (Union token), and set the admin/owner of the Union protocol contracts to a Timelock governed by UNION holders.

Holders of UNION will be able to submit and vote on proposals. These proposals are on-chain executable bits of code.

Initial Token Allocation:

1 Billion UNION tokens have been minted at genesis.

20% to Community DAO — 200,000,000 (+ 2%/yr mint in perpetuity)
46.78% to Initial and Future Team — 466,666,666: 1yr cliff + 4yr vest
33.22% to Early Supporter s — 332,166,667: 1yr lockup + 1yr vest

Community governed Treasury and Inflation

200,000,000 Union was initially allocated to community owned contracts.

150M is in a Treasury Vester contract that will vest into the Treasury contract. [vestingBegin: 2022/12/22, vestingEnd: 2025/12/22, vestingAmount: 150M]
38.9M is in the Treasury Contract and immediately accessible by governance.
9M pre-funded the EthComptroller Contract — Also has a drip() from the treasury starting from block #13816842 at a rate of 1 UNION per block for a total amount of 20M UNION. so, the end block will be blk# 15816842
2M to a merkledrop contract — details below
100K pre-funded the ArbComptroller.

An important issue taken into account while designing the token was early participants getting an outsized share, which could result in an entrenched class of owners making decisions against the best interest of users.

To prevent this, we have implemented a set inflation of 2% per year to begin 2025/12/22. We have also implemented a distribution mechanism (“Comptroller”) where active vouchers of borrowers who do not default are rewarded more than passive stakers. The purpose of this is to shift control of the protocol to those who are actively using it, and being good stewards.

Comptroller v1 Program

We have designed an algorithmic mechanism for constantly distributing UNION to the vouchers who stake and vouch for borrowers who don’t default.

If you stake dai, you will earn a pro-rata share of the global inflation rate.
If you aren’t a member, you’ll earn 75% of the defined rate.
If you are a member, you’ll earn 100% of the defined rate. Plus a bonus 100% for each DAI that’s underwriting an active borrow.
If the address you vouch for defaults you will earn 0% for that dai while it’s in default

A Comptroller Contract has been deployed to Ethereum MainNet and the Arbitrum One Deployments.

The Treasury currently has a drip of 1 UNION per block streaming to the Eth_Comptroller, and to get people acquainted with community led governance a proposal UIP4 will be submitted later this week to set up a similar drip of 1 UNION per block to the Arb_Comptroller.

Initial Governance Parameters

4% Quorum
10M Proposal Threshold
1 Day Review Period
3 Day Voting Period
24hr Timelock

Airdrop to Kickstart Community Control

In addition to the comptroller program, in order to distribute control more widely 2,000,000 UNION have been sent to a merkledrop contract. Two groups of users are able to claim tokens from it: ”Demo Net” testers and those with a relevant ARCx Score.”

Those who participated in the“Demo Net” qualify to receive (up to 25K tokens) in the airdrop for being early supporters and they already have experience with the protocol.

+5,000 if you became a member on the polygon “Demo Net”
- 500 if you were in default at the time of snapshot
+3,141 if you had a ring NFT at the time of snapshot
+100 per the number of vouchers/vouchees you had

An important aspect of credit is knowing who to trust. Credit scores in traditional finance are a centralized method of dealing with this problem. That is why we collaborated with ARCx, who are working on developing on-chain scores based on both on-chain and off-chain data.

If your address (at the time of snapshot) had a score 10+ on Index Coop Governance Score or 93+ on the CryptoCoven Hodl Score you also qualify (details) for 2004 UNION. We chose these two communities because they both have a strong emphasis on community building over speculation. [Fun bit of history: the hackathon project that turned into Union was originally called Covens]